Houston, TX – U.S. Physical Therapy, Inc. (NYSE: USPH), a national operator of outpatient physical therapy clinics, recently reported results for the quarter and six months ended June 30, 2016.
USPH’s net income attributable to common shareholders from operations prior to revaluation of redeemable non-controlling interests, net of tax (“operating results”) increased 12.2% to $7.1 million for the second quarter of 2016 as compared to $6.3 million for the second quarter of 2015. Diluted earnings per share from operating results were $0.57 in the recent quarter as compared to $0.51 in the comparable 2015 period. The second quarter of 2016 was the most profitable quarter in the Company’s history.
USPH’s operating results for the first six months of 2016 increased 18.4% to $12.4 million as compared to $10.5 million in the first six months of 2015. Diluted earnings per share from operating results were $0.99 in the first half of 2016 as compared to $0.85 in the comparable 2015 period.
Second Quarter 2016 Compared to Second Quarter 2015
Net revenues increased $7.1 million or 8.6% from $83.3 million in the second quarter of 2015 to $90.4 million in the second quarter of 2016, due to an increase in total patient visits of 8.1% from 776,900 to 840,000 and an increase in the average net revenue per visit to $105.27 from $104.85. Net revenues from new clinics opened or acquired in the 12 months prior to June 30, 2016 was $5.5 million.
Total clinic operating costs were $67.4 million, or 74.5% of net revenues, in the second quarter of 2016, as compared to $62.1 million, or 74.6% of net revenues, in the 2015 period. Of the $5.3 million expense increase $4.3 million was attributable to operating costs of new clinics opened or acquired in the 12 months prior to June 30, 2016. Total clinic salaries and related costs, including those from new clinics, were 54.0% of net revenues in the recent quarter versus 53.3% in the 2015 period. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were 19.4% for the recent quarter versus 20.0% in the 2015 period. The provision for doubtful accounts as a percentage of net revenues was 1.1% for the 2016 and 1.3% in the 2015 periods.
The gross margin for the second quarter of 2016 increased 9.1% to $23.0 million, or 25.5% of revenue, as compared to $21.1 million, or 25.4% of revenue, for the 2015 second quarter.
Corporate office costs were $8.0 million in the second quarter of 2016 compared to $7.6 million in the 2015 second quarter. Corporate office costs were 8.9% of net revenues for the 2016 quarter compared to 9.1% of net revenues for the 2015 period.
Operating income for the second quarter of 2016 increased 11.0% to $15.0 million compared to $13.5 million in the 2015 second quarter.
Interest expense was $0.3 million in the second quarter of 2016 and $0.2 million in the second quarter of 2015.
The provision for income taxes for the 2016 period was $4.7 million and for the 2015 period was $4.2 million. The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interest was 39.8% in the 2016 second quarter and 40.0% in the 2015 second quarter.
Net income attributable to non-controlling interests was $3.0 million in the recent quarter as compared to $2.8 million in the year earlier period.
Operating results attributable to common shareholders for the three months ended June 30, 2016 increased 12.2% to $7.1 million versus $6.3 million for the 2015 period. Diluted earnings per share from operating results were $0.57 for the 2016 period and $0.51 for the 2015 period.
Same store visits increased 2.1% for de novo and acquired clinics open for one year or more and same store revenue increased 1.5% as the average net rate per visit decreased by $0.69 or 0.7%.
First Six Months 2016 Compared to First Six Months 2015
Net revenues increased 10.5% from $160.5 million in the first six months of 2015 to $177.3 million in the first six months quarter of 2016, due to an increase in total patient visits of 10.6% from 1,489,700 to 1,648,700 and offset by a decrease in the average net revenue per visit to $105.25 from $105.56. Net revenues from new clinics opened or acquired in the past 12 months was $8.7 million.
Total clinic operating costs were $133.8 million, or 75.4% of net revenues, in the first six months of 2016, as compared to $122.5 million, or 76.3% of net revenues, in the 2015 period. Of the $11.3 million expense increase $7.0 million was attributable to operating costs of new clinics opened or acquired in the past 12 months. Total clinic salaries and related costs, including those from new clinics, were 54.5% of net revenues for both the 2016 and 2015 periods. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were 19.8% for the 2016 first six months versus 20.6% in the 2015 period. The provision for
doubtful accounts as a percentage of net revenues was 1.2% for the 2016 and 1.3% in the 2015 period.
The gross margin for the first six months of 2016 increased 14.7% to $43.6 million, or 24.6% or revenue, as compared to $38.0 million, or 23.7% of revenue, for the 2015 period.
Corporate office costs were $17.0 million in the first six months of 2016 compared to $15.3 million in the 2015 period. Corporate office costs were 9.6% of net revenues for the 2016 first six months compared to 9.5% of net revenues for the 2015 period.
Operating income for the first six months of 2016 rose 16.7% to $26.5 million compared to $22.7 million in the 2015 first six months.
Interest expense was $0.6 million in the first six months of 2016 and $0.5 million in the first six months of 2015.
The provision for income taxes for the 2016 period was $8.2 million and for the 2015 period was $7.0 million. The provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interest was 39.8% in the 2016 first six months and 40.0% in the 2015 first six months.
Net income attributable to non-controlling interests was $5.3 million for the six months of 2016 as compared to $4.8 million in the year earlier period.
Operating results attributable to common shareholders for the six months ended June 30, 2016 rose 18.4% to $12.4 million as compared to $10.5 million for the six months ended June 30, 2015. Diluted earnings per share from operating results were $0.99 for the 2016 period and $0.85 for the 2015 period.
Same store visits increased 4.9% for de novo and acquired clinics open for one year or more and same store revenue increased 3.7% as the average net rate per visit decreased by $1.17 or 1.1%.
Other Financial Measures
In the second quarter of 2016, the Company’s Adjusted EBITDA grew by 11.2% to $15.4 million from $13.8 million in the 2015 second quarter. In the first six months of 2016, the Company’s Adjusted EBITDA grew by 16.8% to $27.8 million from $23.8 million in the 2015 first six months.
In the second quarter of 2016, operating results prior to equity-based compensation (a non-cash expense), increased by 11.3% to $7.8 million versus $7.0 million for the 2015 second quarter, and on a per share basis grew to $0.63 from $0.57. In the first six months of 2016, operating results prior to equity-based compensation, increased by 17.8% to $13.9 million versus $11.8 million for the 2015 first six months, and on a per share basis grew to $1.11 from $0.95. (See schedule on page 10.)
Management’s Comments
Chris Reading, Chief Executive Officer, said, “Our team produced a record earning’s quarter underpinned by solid visits, referrals and clinic growth. We are on a good pace thus far and expect to continue our work to produce a solid year for our shareholders while further positioning our Company for future growth and success.”
Larry McAfee, Chief Financial Officer, noted, “The Company’s debt was reduced by $10,283,000 or approximately 18% in the second quarter as net cash flow from operations remains strong.”
U.S. Physical Therapy Declares Quarterly Dividend
The third quarterly dividend of 2016 for $0.17 per share will be paid on September 2, 2016 to shareholders of record as of August 19, 2016.
Updated Management 2016 Earnings Guidance
Management currently expects the Company’s results for the year 2016 to be in the range of $23.7 million to $24.5 million for operating results and $1.90 to $1.96 in diluted earnings per share. Please note that management’s guidance range represents projected operating results from existing operations but excludes future acquisitions. The annual guidance figures may not be updated unless there is a material development that causes management to believe that operating results will be significantly outside the given range.
The complete results release is available here: U.S. Physical Therapy Second Quarter and First Half 2016 Results (PDF)
Source: US Physical Therapy