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 third quarter and nine months ended
September 30, 2022 (“2022 Third Quarter” and “2022 Nine Months,
respectively).
QUARTER HIGHLIGHTS
- Operating Results per diluted share, a non-GAAP measure
(defined below), was $0.58 for the 2022 Third Quarter. For the
three months ended September 30, 2021 (“2021 Third Quarter”),
Operating Results per diluted share was $0.78.
- Adjusted EBITDA, a non-GAAP measure (defined below), was $17.0
million for the 2022 Third Quarter and $19.6 million for the 2021
Third Quarter. See pages 15 and 16 for a discussion and
reconciliation to results according to GAAP.
- For the 2022 Third Quarter, USPH’s net income attributable to
its shareholders, a Generally Accepted Accounting Principles
(“GAAP”) measure, was $9.6 million compared to $10.0 million for
the 2021 Third Quarter. GAAP requires the Company to include a
charge for the revaluation of its redeemable non-controlling
interest, net of taxes, in its computation of earnings per diluted
share. Earnings per diluted share, on a GAAP basis, was $0.72 for
the 2022 Third Quarter as compared to $0.66 for the 2021 Third
Quarter. The 2022 Third Quarter included a change in the fair value
of a continent earn-out payment which had the effect of increasing
net income by $1.5 million, net of tax.
- Total revenue of $139.6 million for the 2022 Third Quarter was
10.9% higher than total revenue of $125.9 million for the 2021
Third Quarter.
- Net patient revenue from physical therapy operations was $116.7
million for the 2022 Third Quarter, an increase of 3.9% from $112.3
million for the 2021 Third Quarter.
- Average visits per clinic per day in the 2022 Third Quarter was
28.8, the second highest average visits per day for a third quarter
in the Company’s history, surpassed only by 29.5 average visits per
day in the third quarter of 2021. The Company lost approximately
3,500 visits due to the effects of Hurricane Ian in the last week
of September 2022.
- Total patient visits were 1,122,070 for the 2022 Third Quarter,
an increase of 2.8% from 1,091,329 for the 2021 Third Quarter.
- The net rate per patient visit was $104.01 in the 2022 Third
Quarter, a $1.08 per visit increase from $102.93 in the 2021 Third
Quarter and an $0.83 per visit increase from $103.18 for the three
months ended June 30, 2022 (“2022 Second Quarter”).
- Physical therapy total operating costs were $85.14 per visit in
the 2022 Third Quarter as compared to $79.02 per visit in the 2021
Third Quarter, an increase of 7.7%. Physical therapy salaries and
related costs were $60.99 per visit in the 2022 Third Quarter as
compared to $56.63 per visit in the Third Quarter 2021, an increase
of 7.7%. The cost increases are primarily due to continuing labor
rate pressures as well as the inflationary economic
environment.
- Industrial injury prevention (“IIP”) services revenue was an
all-time high of $20.2 million for the 2022 Third Quarter,
representing a 92.1% increase over the 2021 Third Quarter.
Excluding $6.8 million of revenue related to the November 2021 IIP
acquisition (“IIP Acquisition”), IIP services revenue increased
27.1% period over period.
- The Company completed two acquisitions in the 2022 Third
Quarter and recently announced an additional acquisition that
closed subsequent to the end of the third quarter. On August 31,
2022, the Company acquired 70% of the equity interest in a
six-clinic physical therapy practice with approximately $2.5
million in annual revenue and approximately 26,000 patient visits
per year. On September 30, 2022, the Company acquired 80% of the
equity interest in a two-clinic physical therapy practice with
approximately $2.5 million in annual revenue and approximately
17,000 patient visits per year. On October 31, the Company acquired
60% of the equity interest in a fourteen-clinic physical therapy
practice with approximately $9.2 million in annual revenue and
approximately 84,000 patient visits per year.
- The Company’s Board of Directors declared a quarterly dividend
of $0.41 per share payable on December 16, 2022, to shareholders of
record on November 21, 2022.
Management’s Comments
Chris Reading, Chief Executive Officer, said, “While our third
quarter results were impacted by higher labor and other
inflation-driven costs, volumes have remained solid, and I am
encouraged by some early progress with respect to payer contract
negotiations. On the development front, we are very excited to
continue to add exceptional practices to our partner-centric
portfolio of companies. Our industrial injury prevention business
has almost doubled from the same period a year ago and our organic
growth in that business has been considerable this year as
well.”
Carey Hendrickson, Chief Financial Officer, said, “The cost
mitigation efforts we began early in the third quarter are ongoing;
however, we expect elevated costs to continue to impact our
near-term results. With solid volumes and rates, we expect our full
year results to be within our previous guidance ranges for
Operating Results and Adjusted EBITDA, but most likely on the low
end of our ranges.”
As previously disclosed, the Company’s guidance range for
Adjusted EBITDA for the full year of 2022 is a range of $73.5
million to $75.4 million and for Operating Results is a range of
$34.4 million to $35.8 million, or $2.65 to $2.75 per share.
Third Quarter 2022 Compared to Third
Quarter 2021
- Reported total revenue for the 2022 Third Quarter was $139.6
million, an increase of 10.9% as compared to $125.9 million for the
2021 Third Quarter. See table below for a detail of reported total
revenue (in thousands):
Three Months Ended
September 30, 2022
September 30, 2021
Revenue related to Mature Clinics
$
106,485
$
106,631
Revenue related to 2022 Clinic
Additions
3,707
-
Revenue related to 2021 Clinic
Additions
6,481
4,869
Revenue from clinics sold or closed in
2022
37
762
Revenue from clinics sold or closed in
2021
-
65
Net patient revenue from physical therapy
operations
116,710
112,327
Other revenue
753
759
Revenue from physical therapy
operations
117,463
113,086
Revenue from management contracts
1,984
2,313
Revenue from industrial injury prevention
services
20,155
10,494
Total revenue
$
139,602
$
125,893
- Revenue from physical therapy operations increased $4.4
million, or 3.9%, to $117.5 million for the 2022 Third Quarter from
$113.1 million for the 2021 Third Quarter. The average net patient
revenue per visit was $104.01 for the 2022 Third Quarter as
compared to $102.93 for the 2021 Third Quarter. Total patient
visits increased 2.8% to 1,122,070 for the 2022 Third Quarter from
1,091,329 for the 2021 Third Quarter.
- Net patient revenue related to clinics opened or acquired prior
to 2021 and still in operation on September 30, 2022 (“Mature
Clinics”) decreased slightly. Visits for Mature Clinics (same
store) for the 2022 Third Quarter decreased by 1.5% as compared to
the 2021 Third Quarter while net patient revenue per visit
increased by 1.4%.
- IIP services revenue increased 92.1% to $20.2 million for the
2022 Third Quarter as compared to $10.5 million for the 2021 Third
Quarter. Excluding $6.8 million of revenue related to the IIP
Acquisition, IIP services revenue increased 27.1% in the 2022 Third
Quarter as compared to the 2021 Third Quarter.
- Total operating cost was $112.8 million for the 2022 Third
Quarter, or 80.8% of total revenue, as compared to $96.1 million,
or 76.3% of total revenue, for the 2021 Third Quarter. Operating
cost related to Mature Clinics increased by $4.3 million, or 5.2%,
for the 2022 Third Quarter compared to the 2021 Third Quarter. In
addition, operating cost related to the industrial injury
prevention services business increased by $7.9 million of which
$5.8 million related to the Company’s IIP Acquisition. See table
below for a detail of operating cost (in thousands):
Three Months Ended
September 30, 2022
September 30, 2021
Operating cost related to Mature
Clinics
$
86,177
$
81,911
Operating cost related to 2022 Clinic
Additions
3,267
-
Operating cost related to 2021 Clinic
Additions
5,366
3,748
Operating cost related to clinics sold or
closed in 2022
721
504
Operating cost related to clinics sold or
closed in 2021
-
69
Operating cost related to physical therapy
operations
95,531
86,232
Operating cost related to management
contracts
1,537
2,044
Operating cost related to industrial
injury prevention services
15,750
7,818
Total operating cost
$
112,818
$
96,094
- Total salaries and related costs, including all operations,
were 58.6% of total revenue for the 2022 Third Quarter versus 56.0%
for the 2021 Third Quarter. Rent, supplies, contract labor and
other costs as a percentage of total revenue were 21.3% for the
2022 Third Quarter versus 19.3% for the 2021 Third Quarter. The
provision for credit losses as a percentage of total revenue were
1.0% for 2022 Third Quarter and 1.1% for 2021 Third Quarter. As
previously mentioned, the Company is experiencing pressure on labor
rates and other costs due to the inflationary economic
environment.
- Gross profit for the 2022 Third Quarter was $26.8 million as
compared to $29.8 million for the 2021 Third Quarter. The gross
profit percentage was 19.2% of total revenue for the 2022 Third
Quarter as compared to 23.7% for the 2021 Third Quarter. The gross
profit percentage for the Company’s physical therapy operations was
18.7% for the 2022 Third Quarter as compared to 23.7% for the 2021
Third Quarter. The gross profit percentage on management contracts
was 22.5% for the 2022 Third Quarter as compared to 11.6% for the
2021 Third Quarter. The gross profit percentage for industrial
injury prevention services was 21.9% for the 2022 Third Quarter as
compared to 25.5% for the 2021 Third Quarter. The IIP margin in
2022 has been impacted by the lower margin profile of the Company’s
IIP Acquisition. Margins were impacted by the rise in labor rates
and expenses due to the inflationary economic environment. The
table below details the gross profit (in thousands):
Three Months Ended
September 30, 2022
September 30, 2021
Physical therapy operations
$
21,932
$
26,854
Management contracts
447
269
Industrial injury prevention services
4,405
2,676
Gross profit
$
26,784
$
29,799
- Corporate office costs were $11.9 million for the 2022 Third
Quarter compared to $12.9 million for the 2021 Third Quarter.
Corporate office costs were 8.5% of total revenue for the 2022
Third Quarter as compared to 10.2% for the 2021 Third Quarter. The
decrease was primarily due to lower estimated bonus expense in the
2022 Third Quarter than the 2021 Third Quarter.
- Operating income for the 2022 Third Quarter was $14.9 million
and $16.9 million for 2021 Third Quarter. Operating income as a
percentage of total revenue was 10.7% for the 2022 Third Quarter as
compared to 13.4% for the 2021 Third Quarter.
- During the 2022 Third Quarter, the Company revalued contingent
earn-out consideration related to an acquisition resulting in the
elimination of a $2.0 million liability previously booked.
- Through a subsidiary, the Company has a 49% joint venture
interest in a company which provides physical therapy services for
patients at hospitals. Since the Company is deemed to not have a
controlling interest in the joint venture, the Company’s investment
is accounted for using the equity method of accounting. The
investment balance of this joint venture as of September 30, 2022,
is $12.0 million. For the 2022 Third Quarter, the Company
recognized income of $0.3 million on this 49% joint venture.
- The gain on revaluation of put-right liability was $785,000 for
the 2022 Third Quarter. As part of the IIP Acquisition, the Company
agreed to the potential future purchase of a separate company under
the same ownership 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, with such right having a $2.8 million value at
September 30, 2022, as reflected on the Company’s consolidated
balance sheet in Other assets. The value of this right will
continue to be adjusted in future periods, as appropriate.
- For the 2022 Third Quarter, the interest expense on debt and
other, primarily from the Company’s $150 million term loan entered
into in June 2022, details of which were previously disclosed in
the Company’s 2022 Second Quarter filings, amounted to $2.0
million. See discussion of Other Comprehensive Income below.
Interest expense, primarily from the Company’s revolving line of
credit, was $0.3 million for the 2021 Third Quarter.
- The provision for income tax was $3.2 million for the 2022
Third Quarter and $3.8 million for the 2021 Third Quarter. The
provision for income tax as a percentage of income before taxes
less net income attributable to non-controlling interest (effective
tax rate) was 25.2% for the 2022 Third Quarter and 27.6% for the
2021 Third Quarter. The current quarter included an adjustment to
the tax provision based on revised estimates on certain
non-deductible items (see computation of 2022 Nine Month tax rate
in next section). See table below ($ in thousands):
Three Months Ended
September 30, 2022
September 30, 2021
Income before taxes
$
16,036
$
17,938
Less: net income attributable to
non-controlling interest:
Redeemable non-controlling interest -
temporary equity
(2,037
)
(2,605
)
Non-controlling interest - permanent
equity
(1,227
)
(1,509
)
$
(3,264
)
$
(4,114
)
Income before taxes less net income
attributable to non-controlling interest
$
12,772
$
13,824
Provision for income taxes
$
3,215
$
3,815
Percentage
25.2
%
27.6
%
- Net income attributable to redeemable non-controlling interest
(temporary equity) was $2.0 million for the 2022 Third Quarter and
$2.6 million for the 2021 Third Quarter. Net income attributable to
non-controlling interest (permanent equity) was $1.2 million for
the 2022 Third Quarter and $1.5 million for the 2021 Third
Quarter.
- For the 2022 Third Quarter, the Company’s net income
attributable to its shareholders was $9.6 million as compared to
$10.0 million for the 2021 Third Quarter. In accordance with GAAP,
the revaluation of redeemable non-controlling interest, net of
taxes, is not included in net income but charged directly to
retained earnings; however, the charge for this change is included
in the earnings per basic and diluted share calculation. Inclusive
of the charge for revaluation of non-controlling interest, net of
taxes, the amount is $9.4 million, or $0.72 per diluted share, for
the 2022 Third Quarter, and $8.5 million, or $0.66 per diluted
share, for the 2021 Third Quarter.
- For the 2022 Third Quarter, the Company’s Operating Results, a
non-GAAP measure, was $7.5 million, or $0.58 per diluted share as
compared to $10.0 million, or $0.78 per diluted share, for the 2021
Third Quarter. See table on page 16.
- For the 2022 Third Quarter, the Company’s Adjusted EBITDA, a
non-GAAP measure, was $17.0 million as compared to $19.6 million in
the 2021 Third Quarter. See definition, explanation and calculation
of Adjusted EBITDA, a non-GAAP measure, in the schedule on pages 15
and 16.
2022 Nine Months Compared to 2021 Nine
Months
- Reported total revenue for the 2022 Nine Months was $412.0
million, an increase of 12.8% as compared to $365.2 million for the
2021 Nine Months. See table below for a detail of reported total
revenue (in thousands):
For the Nine Months
Ended
September 30, 2022
September 30, 2021
Revenue related to Mature Clinics
$
317,514
$
314,969
Revenue related to 2022 Clinic
Additions
7,019
-
Revenue related to 2021 Clinic
Additions
18,827
7,334
Revenue from clinics sold or closed in
2022
1,084
2,058
Revenue from clinics sold or closed in
2021
-
458
Net patient revenue from physical therapy
operations
344,444
324,819
Other revenue
2,523
2,222
Revenue from physical therapy
operations
346,967
327,041
Revenue - Management contracts
6,335
7,611
Revenue - Industrial injury prevention
services
58,660
30,537
Total revenue
$
411,962
$
365,189
- Revenue from physical therapy operations increased $19.9
million, or 6.1%, to $347.0 million for the 2022 Nine Months from
$327.0 million for the 2021 Nine Months. The average net patient
revenue per visit was $103.40 for the 2022 Nine Months as compared
to $104.00 for the 2021 Nine Months. Total patient visits increased
6.7% to 3,331,143 for the 2022 Nine Months from 3,123,187 for the
2021 Nine Months.
- Net patient revenue related to Mature Clinics increased $2.5
million, or 0.8%, to $317.5 million for the 2022 Nine Months
compared to $315.0 million for the 2021 Nine Months. Visits for
Mature Clinics (same store) for the 2022 Nine Months increased 1.5%
as compared to the 2021 Nine Months. The increase in visits was
partially offset by a 0.7% reduction in the net patient revenue per
visit.
- IIP services revenue increased 92.1% to $58.7 million for the
2022 Nine Months as compared to $30.5 million for the 2021 Nine
Months. Excluding $20.5 million of revenue related to the IIP
Acquisition, IIP services revenue increased 25.0% in the 2022 Nine
Months as compared to the 2021 Nine Months.
- Total operating cost was $327.8 million for the 2022 Nine
Months, or 79.6% of total revenue, as compared to $275.2 million,
or 75.4% of total revenue, for the 2021 Nine Months. Operating cost
related to Mature Clinics increased by $15.9 million for the 2022
Nine Months compared to the 2021 Nine Months. In addition,
operating cost related to the industrial injury prevention services
business increased by $23.4 million of which $17.0 million related
to the IIP Acquisition. See table below for a detail of operating
cost (in thousands):
For the Nine Months
Ended
September 30, 2022
September 30, 2021
Operating cost related to Mature
Clinics
$
253,899
$
237,982
Operating cost related to 2022 Clinic
Additions
6,271
-
Operating cost related to 2021 Clinic
Additions
15,393
5,877
Operating cost related to clinics sold or
closed in 2022
1,233
1,733
Operating cost related to clinics sold or
closed in 2021
2
510
Operating cost - Physical therapy
operations
276,798
246,102
Operating cost - Management contracts
4,991
6,492
Operating cost - Industrial injury
prevention services
45,980
22,596
Total operating cost
$
327,769
$
275,190
- Total salaries and related costs, including all operations,
were 57.5% of total revenue for the 2022 Nine Months versus 55.6%
for the 2021 Nine Months. Rent, supplies, contract labor and other
costs as a percentage of total revenue were 21.0% for the 2022 Nine
Months versus 18.6% for the 2021 Nine Months. The provision for
credit losses as a percentage of total revenue was 1.0% for 2022
Nine Months and 1.1% for 2021 Nine Months. As previously mentioned,
the Company is experiencing pressure on labor rates and other costs
due to the inflationary economic environment.
- Gross profit for the 2022 Nine Months was $84.2 million, a
decrease of $5.8 million, or 6.5%, as compared to $90.0 million for
the 2021 Nine Months. The gross profit percentage was 20.4% of
total revenue for the 2022 Nine Months as compared to 24.6% for the
2021 Nine Months. The gross profit percentage for the Company’s
physical therapy operations was 20.2% for the 2022 Nine Months as
compared to 24.7% for the 2021 Nine Months. The gross profit
percentage on management contracts was 21.2% for the 2022 Nine
Months as compared to 14.7% for the 2021 Nine Months. The gross
profit percentage for industrial injury prevention services was
21.6% for the 2022 Nine Months as compared to 26.0% for the 2021
Nine Months. The IIP margin in 2022 has been impacted by the lower
margin profile of the Company’s IIP acquisition. The table below
details the gross profit (in thousands):
For the Nine Months
Ended
September 30, 2022
September 30, 2021
Physical therapy operations
$
70,169
$
80,939
Management contracts
1,344
1,119
Industrial injury prevention services
12,680
7,941
Gross profit
$
84,193
$
89,999
- Corporate office costs were $34.2 million for the 2022 Nine
Months compared to $35.8 million for the 2021 Nine Months.
Corporate office costs were 8.3% of total revenue for the 2022 Nine
Months as compared to 9.8% for the 2021 Nine Months. The decrease
was primarily due to lower estimated bonus expense in the 2022 Nine
Months than the 2021 Nine Months.
- Operating income for the 2022 Nine Months was $50.0 million and
$54.2 million for 2021 Nine Months. Operating income as a
percentage of total revenue was 12.1% for the 2022 Nine Months as
compared to 14.8% for the 2021 Nine Months.
- The Company revalued contingent earn-out consideration related
to an acquisition resulting in the elimination of a $2.0 million
liability previously booked.
- Through a subsidiary, the Company has a 49% joint venture
interest in a company which provides physical therapy services for
patients at hospitals. Since the Company is deemed to not have a
controlling interest in the joint venture, the Company’s investment
is accounted for using the equity method of accounting. The
investment balance of this joint venture as of September 30, 2022,
is $12.0 million. For the 2022 Nine Months, the Company recognized
income of $1.0 million on this 49% joint venture.
- Other and interest income includes $0.6 million in gain from
the sales of various clinics during the 2022 Nine Months.
- For the 2022 Nine Months, the Company recorded a gain on the
revaluation of the put-right liability of $771,000. As part of the
IIP Acquisition, the Company agreed to the potential future
purchase of a separate company under the same ownership 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, with such right having a $2.8 million
value at September 30, 2022, as reflected on the Company’s
consolidated balance sheet in Other long-term liabilities. The
value of this right will continue to be adjusted in future periods,
as appropriate.
- For the 2022 Nine Months, the interest expense on debt and
other, primarily from the $150 million term loan entered into in
June 2022, details of which were previously disclosed in the
Company’s 2022 Second Quarter filings, amounted to $3.5 million.
See discussion of Other Comprehensive Income below. Interest
expense, primarily from the Company’s revolving line of credit, was
$0.8 million for the 2021 Nine Months.
- The provision for income tax was $11.0 million for the 2022
Nine Months and $11.3 million for the 2021 Nine Months. The
provision for income tax as a percentage of income before taxes
less net income attributable to non-controlling interest (effective
tax rate) was 27.0% for both the 2022 Nine Months and the 2021 Nine
Months. See table below ($ in thousands):
For the Nine Months
Ended
September 30, 2022
September 30, 2021
Income before taxes
$
51,011
$
54,807
Less: net income attributable to
non-controlling interest:
Redeemable non-controlling interest -
temporary equity
(7,220
)
(8,669
)
Non-controlling interest - permanent
equity
(3,288
)
(4,194
)
$
(10,508
)
$
(12,863
)
Income before taxes less net income
attributable to non-controlling interest
$
40,503
$
41,944
Provision for income taxes
$
10,952
$
11,326
Percentage
27.0
%
27.0
%
- Net income attributable to redeemable non-controlling interest
(temporary equity) was $7.2 million for the 2022 Nine Months and
$8.7 million for the 2021 Nine Months. Net income attributable to
non-controlling interest (permanent equity) was $3.3 million for
the 2022 Nine Months and $4.2 million for the 2021 Nine
Months.
- For the 2022 Nine Months, the Company’s net income attributable
to its shareholders was $29.6 million for the 2022 Nine Months and
$30.6 million for 2021 Nine Months. Inclusive of the charge for
revaluation of non-controlling interest, net of taxes, the amount
is $29.4 million, or $2.27 per diluted share, for the 2022 Nine
Months, and $21.8 million, or $1.69 per diluted share, for the 2021
Nine Months. See table on page 16.
- For the 2022 Nine Months, the Company’s Operating Results, a
non-GAAP measure, was $27.5 million, or $2.12 per diluted share as
compared to $30.6 million, or $2.37 per diluted share, for the 2021
Nine Months. See table on page 16.
- For the 2022 Nine Months, the Company’s Adjusted EBITDA, a
non-GAAP measure, was $55.8 million, as compared to $56.4 million
in the 2021 Nine Months. See definition, explanation and
calculation of Adjusted EBITDA, a non-GAAP measure, in the schedule
on pages 15 and 16.
Other Comprehensive
Income
The Company entered into an interest rate swap agreement in May
2022, which has a $150 million notional value, a maturity date of
June 30, 2027, and was effective on June 30, 2022. Beginning in
July 2022, the Company pays a fixed one-month SOFR rate of interest
of 2.815%. The total interest rate in any period also includes an
applicable margin based on the Company’s consolidated leverage
ratio. Currently, the Company’s interest rate including the
applicable margin is 4.665%. Unrealized gains and losses related to
the fair value of the interest rate swap are recorded to
accumulated other comprehensive income (loss), net of tax. The fair
value of the interest rate swap at September 30, 2022, was $5.9
million, which has been included within other assets in the
accompanying Consolidated Balance Sheet. The impact of the interest
rate swap on the accompanying Consolidated Statements of
Comprehensive Income was an unrealized gain of $4.8 million, net of
tax, for the 2022 Third Quarter, and an unrealized gain of $4.4
million, net of tax, for the 2022 Nine Months.
Quarterly Dividend
The Board of Directors has declared a quarterly dividend of
$0.41 per share payable on December 16, 2022 to shareholders of
record on November 21, 2022.
Third Quarter 2022 Conference
Call
U.S. Physical Therapy's management will host a conference call
at 10:30 a.m. Eastern Time, 9:30 a.m. Central Time, on November 3,
2022, to discuss results for the Company's 2022 Third Quarter and
Nine months ended September 30, 2022. Interested parties may
participate in the call by dialing (866) 952-8559 Primary or (785)
424-1743 Alternate and entering reservation number USPHQ322
approximately 10 minutes before the call is scheduled to begin. To
listen to the live call via webcast, 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 February 3, 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;
- 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;
- 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;
- one of our acquisition agreements includes a Put Right for a
potential purchase of a company and we may or may not have the
capital necessary to satisfy this obligation;
- 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;
- availability and cost of qualified physical therapists;
- personnel productivity and hiring, training and retaining
qualified personnel;
- competitive environment in the industrial injury prevention
services business, which could result in the termination or
nonrenewal 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 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;
- maintaining clients for which we perform management 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.
In addition to the above, see Risk Factors in Item 1A of our
Annual Report on Form 10-K for the year ended December 31, 2021 and
the additional risk factors below:
Our debt and financial obligations could adversely affect our
financial condition, our ability to obtain future financing, and
our ability to operate our business.
We have outstanding debt obligations that could adversely affect
our financial condition and limit our ability to successfully
implement our business strategy. Furthermore, from time to time, we
may need additional financing to support our business and pursue
our business strategy, including strategic acquisitions. Our
ability to obtain additional financing, if and when required, will
depend on investor demand, our operating performance, the condition
of the capital markets, and other factors. We cannot assure that
additional financing will be available to us on favorable terms
when required, or at all.
Our loan agreements contain certain restrictions and
requirements that among other things:
- require us to maintain a quarterly fixed charge coverage ratio
and minimum working capital ratio;
- limit our ability to obtain additional financing in the future
for working capital, capital expenditures and acquisitions, to fund
growth or for general corporate purposes;
- limit our future ability to refinance our indebtedness on terms
acceptable to us or at all;
- limit our flexibility in planning for or reacting to changes in
our business and market conditions or in funding our strategic
growth plan; and
- impose on us financial and operational restrictions.
Our ability to meet our debt service obligations will depend on
our future performance, which will be affected by the other risk
factors described in our Annual Report on Form 10-K for the year
ended December 31, 2021 filed on March 1, 2022. If we do not
generate enough cash flow to pay our debt service obligations, we
may be required to refinance all or part of our existing debt, sell
our assets, borrow more money or raise equity. There is no
guarantee that we will be able to take any of these actions on a
timely basis, on terms satisfactory to us, or at all.
If we fail to satisfy our debt service obligations or the other
restrictions and requirements in our loan agreements, we could be
in default. Unless cured or waived, a default would permit lenders
to accelerate the maturity of the debt under the credit agreement
and to foreclose upon the collateral securing the debt.
Our outstanding loans bear interest at variable rates. In
response to the variable rates, we entered into an interest rate
swap agreement. We are exposed to certain market risks during the
ordinary course of business due to adverse changes in interest
rates. The exposure to interest rate risk primarily results from
our variable-rate borrowing. Fluctuations in interest rates can be
volatile and the Company’s risk management activities do not
eliminate these risks. In May 2022, we entered into an interest
rate swap agreement to manage these risks. While intended to reduce
the effects of fluctuations in these prices and rates, these
transactions may limit our potential gains or expose us to losses.
If our counterparties to such transactions or the sponsors fail to
honor their obligations due to financial distress, we would be
exposed to potential losses or the inability to recover anticipated
gains from these transactions.
Some of our acquisition agreements contain contingent
consideration, the value of which may impact future financial
results.
Some of our acquisition agreements include contingent earn-out
consideration, the fair value of which is estimated as of the
acquisition date based on the present value of the expected
contingent payments as determined using weighted probabilities of
possible future payments. These fair value estimates contain
unobservable inputs and estimates that could materially differ from
the actual future results. The fair value of the contingent earn
out consideration could increase or decrease, as applicable.
Changes in the fair value of contingent earn-outs will be reflected
in our results of operations in the period in which they are
recognized, the amount of which may be material and cause
volatility in our financial results.
Our business depends upon hiring, training and retaining
qualified employees.
Our workforce costs represent our largest operating expense, and
our ability to meet our labor needs while controlling labor costs
is subject to numerous external factors, including market pressures
with respect to prevailing wage rates and unemployment levels. We
compete with rehabilitation companies and other businesses for many
of our clinical and non-clinical employees, and turnover in these
positions can lead to increased training and retention costs,
particularly in a competitive labor market. We cannot be assured
that we can continue to hire, train and retain qualified employees
at current wage rates since we operate in a competitive labor
market, and there are currently significant inflationary and other
pressures on wages. If we are unable to hire, properly train and
retain qualified employees, we could experience higher employment
costs and reduced revenues, which could adversely affect our
earnings.
One of our acquisition agreements contains a Put Right
related to a potential future purchase of a majority interest in a
separate company.
One of our acquisition agreements includes a Put Right for the
potential future purchase of a majority interest in a separate
company at a purchase price which is derived based on a specified
multiple of the separate company’s historical earnings. The
exercise of the Put Right is outside of our control. In the event
the Put Right is triggered, we are required to purchase the
aforementioned equity interest at the calculated purchase price
described above. The resulting purchase price may be greater than
the fair value of such equity interests at the time, and we may or
may not have the capital necessary to satisfy such contractual
purchase obligation, in which case we could be in breach.
Many factors are beyond our control. Given these uncertainties,
you should not place undue reliance on our forward-looking
statements. Please see the other sections of this report and our
other periodic reports filed with the Securities and Exchange
Commission (the “SEC”) for more information on these factors. 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,
regardless of the reason the statement may no longer be
accurate.
About U.S. Physical Therapy,
Inc.
Founded in 1990, U.S. Physical Therapy, Inc. currently operates
629 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 40 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
CONSOLIDATED STATEMENTS OF
INCOME
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(unaudited)
Three Months Ended
For the Nine Months
Ended
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Net patient revenue
$
116,710
$
112,327
$
344,444
$
324,819
Other revenue
22,892
13,566
67,518
40,370
Net revenue
139,602
125,893
411,962
365,189
Operating cost:
Salaries and related costs
81,786
70,492
236,874
203,173
Rent, supplies, contract labor and
other
29,696
24,244
86,703
68,095
Provision for credit losses
1,336
1,358
4,192
3,922
Total operating cost
112,818
96,094
327,769
275,190
Gross profit
26,784
29,799
84,193
89,999
Corporate office costs
11,889
12,867
34,186
35,815
Operating income
14,895
16,932
50,007
54,184
Other income and expense
Resolution of a payor matter
-
1,216
-
1,216
Change in fair value of contingent
earn-out consideration
2,000
-
2,000
-
Equity in earnings of unconsolidated
affiliate
304
-
983
-
Other and interest income
65
58
790
158
Change in revaluation of put-right
liability
785
-
771
-
Interest expense - debt and other, net
(2,013
)
(268
)
(3,540
)
(751
)
Total other income and expense
1,141
1,006
1,004
623
Income before taxes
16,036
17,938
51,011
54,807
Provision for income taxes
3,215
3,815
10,952
11,326
Net income
12,821
14,123
40,059
43,481
Less: net income attributable to
non-controlling interest:
Redeemable non-controlling interest -
temporary equity
(2,037
)
(2,605
)
(7,220
)
(8,669
)
Non-controlling interest - permanent
equity
(1,227
)
(1,509
)
(3,288
)
(4,194
)
(3,264
)
(4,114
)
(10,508
)
(12,863
)
Net income attributable to USPH
shareholders
$
9,557
$
10,009
$
29,551
$
30,618
Basic and diluted earnings per share
attributable to USPH shareholders
$
0.72
$
0.66
$
2.27
$
1.69
Shares used in computation - basic and
diluted
13,001
12,909
12,979
12,894
Dividends declared per common share
$
0.41
$
0.38
$
1.23
$
1.08
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(unaudited)
Three Months Ended
For the Nine Months
Ended
September 30, 2022
September 30, 2021
September 30, 2022
September 30, 2021
Net income
$
12,821
$
14,123
$
40,059
$
43,481
Other comprehensive loss
Unrealized gain on cash flow hedge
6,473
-
5,942
-
Tax effect at statutory rate (federal and
state) of 25.55%
(1,654
)
-
(1,518
)
-
Comprehensive income
$
17,640
$
14,123
$
44,483
$
43,481
Comprehensive income attributable to
non-controlling interest
(3,264
)
(4,114
)
(10,508
)
(12,863
)
Comprehensive income attributable to USPH
shareholders
$
14,376
$
10,009
$
33,975
$
30,618
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEET
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
September 30, 2022
December 31, 2021
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$
37,914
$
28,567
Patient accounts receivable, less
allowance for credit losses of $2,964 and $2,768, respectively
49,747
46,272
Accounts receivable - other
19,146
16,144
Other current assets
6,085
4,183
Total current assets
112,892
95,166
Fixed assets:
Furniture and equipment
62,006
58,743
Leasehold improvements
41,961
39,194
Fixed assets, gross
103,967
97,937
Less accumulated depreciation and
amortization
78,960
74,958
Fixed assets, net
25,007
22,979
Operating lease right-of-use assets
100,967
96,427
Investment in unconsolidated affiliate
11,978
12,215
Goodwill
449,548
434,679
Other identifiable intangible assets,
net
93,697
86,382
Other assets
5,619
1,578
Total assets
$
799,708
$
749,426
LIABILITIES, REDEEMABLE
NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND
NON-CONTROLLING INTEREST
Current liabilities:
Accounts payable - trade
$
4,471
$
3,268
Accounts payable - due to seller of
acquired business
3,203
3,203
Accrued expenses
33,784
45,705
Current portion of operating lease
liabilities
32,540
30,475
Current portion of term loan and notes
payable
7,490
830
Total current liabilities
81,488
83,481
Notes payable, net of current portion
2,912
3,587
Revolving line of credit
-
114,000
Term Loan, net of current portion and
deferred financing costs
143,778
-
Deferred taxes
23,838
14,385
Operating lease liabilities, net of
current portion
76,907
74,185
Other long-term liabilities
4,026
7,345
Total liabilities
332,949
296,983
Redeemable non-controlling interest -
temporary equity
148,155
155,262
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,
15,216,326 and 15,126,160 shares issued,
respectively
152
151
Additional paid-in capital
108,515
102,688
Accumulated other comprehensive gain
4,424
-
Retained earnings
235,683
224,395
Treasury stock at cost, 2,214,737
shares
(31,628
)
(31,628
)
Total USPH shareholders’ equity
317,146
295,606
Non-controlling interest - permanent
equity
1,458
1,575
Total USPH shareholders' equity and
non-controlling interest - permanent equity
318,604
297,181
Total liabilities, redeemable
non-controlling interest,
USPH shareholders' equity and
non-controlling interest - permanent equity
$
799,708
$
749,426
U. S. PHYSICAL THERAPY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(unaudited)
Nine Months Ended
September 30, 2022
September 30, 2021
OPERATING ACTIVITIES
Net income including non-controlling
interest and earnings from unconsolidated affiliates, net
$
40,059
$
43,481
Adjustments to reconcile net income
including non-controlling interest to net cash provided by
operating activities:
Depreciation and amortization
10,950
8,519
Provision for credit losses
4,192
3,922
Equity-based awards compensation
expense
5,462
6,280
Deferred income taxes
6,077
1,292
Change in revaluation of put-right
liability
(771
)
-
Change in fair value of contingent
earn-out consideration
(2,000
)
-
(Gain) loss on sale of clinics and fixed
assets
(643
)
113
Earnings in unconsolidated affiliate
(983
)
-
Unrealized gain on cash flow hedge
(5,942
)
-
Changes in operating assets and
liabilities:
Increase in patient accounts
receivable
(7,585
)
(7,513
)
(Increase) decrease in accounts receivable
- other
(4,551
)
(738
)
(Decrease) increase in other assets
1,669
(195
)
(Decrease) Increase in accounts payable
and accrued expenses
(4,568
)
4,529
(Decrease) increase in other long-term
liabilities
(128
)
811
Net cash provided by operating
activities
41,238
60,501
INVESTING ACTIVITIES
Purchase of fixed assets
(7,290
)
(5,996
)
Purchase of majority interest in
businesses, net of cash acquired
(18,573
)
(22,589
)
Purchase of redeemable non-controlling
interest, temporary equity
(14,096
)
(14,916
)
Purchase of non-controlling interest,
permanent equity
(280
)
(1,093
)
Proceeds on sales of partnership interest,
clinics and fixed assets
740
136
Distributions from unconsolidated
affiliate
1,220
-
Sale of non-controlling interest -
permanent
-
131
Proceeds on sales of redeemable
non-controlling interest-temporary
401
69
Net cash used in investing activities
(37,878
)
(44,258
)
FINANCING ACTIVITIES
Distributions to non-controlling interest,
permanent and temporary equity
(11,760
)
(14,330
)
Cash dividends paid to shareholders
(15,990
)
(13,934
)
Proceeds from revolving line of credit
61,000
193,000
Proceeds from term loan
150,000
-
Payments on revolving line of credit
(175,000
)
(176,000
)
Principal payments on notes payable
(496
)
(4,662
)
(Payment) receipt of Medicare Accelerated
and Advance Funds
-
(14,054
)
Payment of deferred financing costs
(1,779
)
-
Other
12
7
Net cash used in financing activities
5,987
(29,973
)
Net decrease in cash and cash
equivalents
9,347
(13,730
)
Cash and cash equivalents - beginning of
period
28,567
32,918
Cash and cash equivalents - end of
period
$
37,914
$
19,188
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Income taxes
$
7,529
$
10,777
Interest paid
$
2,159
$
1,195
Non-cash investing and financing
transactions during the period:
Purchase of businesses - seller financing
portion
$
824
$
1,800
Notes payable related to purchase of
redeemable non-controlling interest, temporary equity
$
1,074
$
1,302
Notes payable related to purchase of
non-controlling interest, permanent equity
$
576
$
-
Notes receivable related to sale of
partnership interest - redeemable non-controlling interest
$
1,580
$
914
U. S. PHYSICAL THERAPY, INC. AND
SUBSIDIARIES OPERATING RESULTS AND ADJUSTED EBITDA
(IN THOUSANDS, EXCEPT PER SHARE DATA) (unaudited)
The following tables provide detail 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.
Operating Results, a non-GAAP measure, equals net income
attributable to USPH shareholders per the consolidated statements
of income less the change in the revaluation of the put-right
liability and the change in the fair value of a contingent earn-out
payment. In accordance with GAAP, the revaluation of redeemable
non-controlling interest, net of tax, is included in the earnings
per basic and diluted share calculation, although it is not
included in net income but charged directly to retained
earnings.
Adjusted EBITDA is defined as net income attributable to USPH
shareholders before interest income, interest expense, taxes,
depreciation, amortization, gain on revaluation of put-right
liability, equity-based awards compensation expense, change in the
fair value of a contingent earn-out payment and related portion 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.
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 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
2022 PERIODS COMPARED TO 2021
PERIODS
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
*
2022
2021
*
Computation of earnings per share - USPH
shareholders:
Net income attributable to USPH
shareholders
$
9,557
$
10,009
$
29,551
$
30,618
Charges to retained earnings:
Revaluation of redeemable non-controlling
interest
(196
)
(2,070
)
(193
)
(11,889
)
Tax effect at statutory rate (federal and
state) of 25.55%
50
529
49
3,038
$
9,411
$
8,468
$
29,407
$
21,767
Earnings per share (basic and diluted)
$
0.72
$
0.66
$
2.27
$
1.69
Adjustments:
Change in value of contingency payment
(2,000
)
-
(2,000
)
-
Change in revaluation of put-right
liability
(785
)
-
(771
)
-
Revaluation of redeemable non-controlling
interest
196
2,070
193
11,889
Tax effect at statutory rate (federal and
state)
661
(529
)
659
(3,037
)
Operating Results (a non-GAAP measure)
$
7,483
$
10,009
$
27,488
$
30,619
Basic and diluted Operating Results per
share (a non-GAAP measure)
$
0.58
$
0.78
$
2.12
$
2.37
Shares used in computation - basic and
diluted
13,001
12,909
12,979
12,894
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
*
2022
2021
*
Net income attributable to USPH
shareholders
$
9,557
$
10,009
$
29,551
$
30,618
Adjustments:
Depreciation and amortization
3,652
3,036
10,950
8,520
Change in value of contingency payment
(2,000
)
-
(2,000
)
-
Other and interest income
(65
)
(58
)
(790
)
(158
)
Change in revaluation of put-right
liability
(785
)
-
(771
)
-
Interest expense - debt and other, net
2,013
268
3,540
751
Provision for income taxes
3,215
3,815
10,952
11,326
Equity-based awards compensation
expense
1,802
2,875
5,462
6,280
Allocation to non-controlling
interests
(402
)
(317
)
(1,099
)
(919
)
Adjusted EBITDA (a non-GAAP measure)
$
16,987
$
19,628
$
55,795
$
56,418
* Revised to conform to current year
presentation.
U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES
RECAP OF PHYSICAL THERAPY
OPERATIONS
CLINIC COUNT
Date
Number of Clinics
March 31, 2021
564
June 30, 2021
575
September 30, 2021
579
December 31, 2021
591
March 31, 2022
601
June 30, 2022
608
September 30, 2022
614
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221102006016/en/
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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