Houston, TX – U.S. Physical Therapy, Inc. (NYSE: USPH), a national operator of outpatient physical therapy clinics, recently reported results for the quarter and nine months ended September 30, 2016.
USPH’s net revenues in the third quarter of 2016 increased 5.1% to $88.3 million from $84.0 million in the third quarter of 2015. Income before taxes including non-controlling interests was $11.8 million as compared to $11.7 million in the comparable 2015 period. Due primarily to a higher estimated accrued tax rate of 39.8% for the recent quarter as compared to 38.6% in the third quarter of 2015, the income attributable to common shareholders from operations prior to revaluation of redeemable non-controlling interests, net of tax (“operating results”) declined slightly to $5.7 million from $5.8 million. Diluted earnings per share from operating results was $0.46 in the third quarter of 2016 as compared to $0.47 in the third quarter of 2015.
USPH’s net revenues for the first nine months of 2016 increased 8.6% to $265.7 million from $244.6 million in the first nine months of 2015. USPH’s operating results for the first nine months of 2016 increased 11.2% to $18.1 million as compared to $16.3 million in the first nine months of 2015. Diluted earnings per share from operating results were $1.45 for the 2016 period as compared to $1.32 in the comparable 2015 period.
Third Quarter 2016 Compared to Third Quarter 2015
- Net revenues increased $4.3 million or 5.1% from $84.0 million in the third quarter of 2015 to $88.3 million in the third quarter of 2016, due to an increase in total patient visits of 5.2% from 782,100 to 822,500 and an increase in the average net revenue per visit to $105.06 for the 2016 third quarter from $105.04 for the 2015 third quarter. Net revenues from new clinics opened or acquired in the 12 months prior to September 30, 2016 was $5.2 million.
- Total clinic operating costs were $68.7 million, or 77.7% of net revenues, in the third quarter of 2016, as compared to $65.2 million, or 77.5% of net revenues, in the 2015 period. Of the net $3.5 million expense increase, $4.1 million was attributable to operating costs of new clinics opened or acquired in the 12 months prior to September 30, 2016 offset by a decrease of $0.6 million in operating costs of clinics opened or acquired prior to September 30, 2015. Total clinic salaries and related costs, including those from new clinics, were 56.4% of net revenues in the recent quarter versus 55.4% in the 2015 period. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were 20.2% for the recent quarter versus 20.7% in the 2015 period. The provision for doubtful accounts as a percentage of net revenues was 1.0% for the 2016 and 1.3% in the 2015 period.
- The gross margin for the third quarter of 2016 was $19.7 million or 22.3%, as compared to $18.9 million, or 22.5% in the 2015 third quarter.
- Corporate office costs were $7.6 million in the third quarter of 2016 compared to $6.9 million in the 2015 third quarter. Corporate office costs were 8.6% of net revenues for the 2016 third quarter compared to 8.2% of net revenues for the 2015 period.
- Operating income for the third quarter of 2016 was $12.1 million or 13.6% compared to $11.9 million or 14.2% in the 2015 third quarter.
- Interest expense was $0.3 million in the third quarter of 2016 and in the third quarter of 2015.
- The provision for income taxes for the 2016 period was $3.8 million and for the 2015 period $3.7 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 third quarter and 38.6% in the 2015 third quarter.
- Net income attributable to non-controlling interests was $2.3 million in the recent quarter as compared to $2.2 million in the year earlier period.
- Operating results attributable to common shareholders for the three months ended September 30, 2016 was $5.7 million versus $5.8 million for the 2015 period. Diluted earnings per share from operating results were $0.46 for the 2016 period and $0.47 for the 2015 period.
- Same store visits increased 1.2% for de novo and acquired clinics open for one year or more while same store revenue remained relatively the same as the average same store net rate per visit decreased by $1.16.
First Nine Months 2016 Compared to First Nine Months 2015
- Net revenues increased 8.6% from $244.6 million in the first nine months of 2015 to $265.7 million in the first nine months quarter of 2016, due to an increase in total patient visits of 8.8% from 2,271,900 to 2,470,800 and offset by a slight decrease in the average net revenue per visit to $105.19 from $105.38. Net revenues from new clinics opened or acquired in the past 12 months was $12.1 million.
- Total clinic operating costs were $202.5 million, or 76.2% of net revenues, in the first nine months of 2016, as compared to $187.7 million, or 76.8% of net revenues, in the 2015 period. Of the $14.7 million expense increase $9.4 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 55.1% of net revenues for the 2016 versus 54.8% in the 2015 period. Rent, clinic supplies, contract labor and other costs as a percentage of net revenues were 19.9% for the 2016 first nine months versus 20.6% 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 period.
- The gross margin for the first nine months of 2016 increased 11.2% to $63.2 million, or 23.8% of revenue, as compared to $56.9 million, or 23.2% of revenue, for the 2015 period.
- Corporate office costs were $24.6 million in the first nine months of 2016 compared to $22.2 million in the 2015 period. Corporate office costs were 9.3% of net revenues for the 2016 first nine months compared to 9.1% of net revenues for the 2015 period.
- Operating income for the first nine months of 2016 rose 11.2% to $38.6 million compared to $34.7 million in the 2015 first nine months.
- Interest expense was $1.0 million in the first nine months of 2016 and $0.8 million in the first nine months of 2015.
- The provision for income taxes for the 2016 period was $12.0 million and for the 2015 period was $10.6 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 nine months and 39.5% in the 2015 first nine months.
- Net income attributable to non-controlling interests was $7.6 million for the nine months of 2016 as compared to $7.0 million in the year earlier period.
- Operating results attributable to common shareholders for the nine months ended September 30, 2016 rose 11.2% to $18.1 million as compared to $16.3 million for the nine months ended September 30, 2015. Diluted earnings per share from operating results were $1.45 for the 2016 period and $1.32 for the 2015 period.
- Same store visits increased 3.7% for de novo and acquired clinics open for one year or more and same store revenue increased 3.0% as the average net rate per visit decreased by $0.82.
Other Financial Measures
In the third quarter of 2016, the Company’s Adjusted EBITDA was $13.1 million and $12.8 million in the 2015 third quarter. In the first nine months of 2016, the Company’s Adjusted EBITDA grew by 11.7% to $40.9 million from $36.7 million in the 2015 first nine months.
In the third quarter of 2016 and 2015, operating results prior to equity-based compensation (a non-cash expense) was $6.5 million for both, and on a per share basis was $0.52 as compared to $0.53, respectively. In the first nine months of 2016, operating results prior to equity-based compensation, increased by 11.1% to $20.4 million versus $18.3 million for the 2015 first nine months, and on a per share basis grew to $1.63 from $1.48. (See schedule on page 9 of the full release.)
Management’s Comments
Chris Reading, Chief Executive Officer, said about the recent quarter, “While we got off to a slower than expected start in July, visits rebounded sequentially in August and September. Additionally, our development activity is strong and we expect to finish this year with very solid de novo as well as acquisition-related growth.”
U.S. Physical Therapy Declares Quarterly Dividend
The fourth quarterly dividend of 2016 for $0.17 per share will be paid on December 2, 2016 to shareholders of record as of November 18, 2016.
The complete results release is available here: U.S. Physical Therapy Third Quarter 2016 and Nine Months Results (PDF)