Houston, TX – U.S. Physical Therapy, Inc.(NYSE: USPH), a national operator of outpatient physical therapy clinics, today reported results for the first quarter ended March 31, 2018.
For the quarter ended March 31, 2018, USPH’s Operating Results increased 10.6% to $7.1 million, or $.56 per diluted share, as compared to $6.4 million, or $.51 per diluted share, in the first quarter of 2017. Operating Results, a non-generally accepted accounting principles (“non-GAAP”) measure, for the 2018 first quarter equals net income attributable to USPH shareholders. For the 2017 first quarter, Operating Results, is defined as net income attributable to common shareholders prior to interest expense – mandatorily redeemable non-controlling interests – change in redemption value, net of tax.
For the quarter ended March 31, 2018, USPH’s net income attributable to its shareholders, in accordance with generally accepted accounting principles (“GAAP”), was $7.1 million as compared to $4.8 million for the first quarter of 2017. Earnings per diluted share of $0.27 in the first quarter of 2018 compares to $0.38 per diluted share for the 2017 first quarter. For 2018, in accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, which is charged directly to retained earnings, is included in the earnings per basic and diluted share calculation. See the schedule on page 11 for a computation of diluted earnings per share and a reconciliation of net income attributable to USPH shareholders to Operating Results.
First Quarter 2018 Compared to First Quarter 2017
Net revenues increased $10.8 million or 11.0% from $97.6 million in the 2017 first quarter to $108.3 million in the 2018 first quarter, primarily due to a 7.4% increase in net patient revenues from the physical therapy operations, an increase of 20.4% in revenue from management contracts and an increase in the revenue from the industrial injury prevention business due to a full quarter of operations versus one month in the 2017 period. The industrial injury prevention business was acquired in March 2017.
Net patient revenues from physical therapy operations increased approximately $6.9 million, or 7.4%, to $100.6 million in the 2018 first quarter from $93.7 million in the 2017 first quarter due to an increase in total patient visits of 7.2% from 892,000 to 956,000 and an increase in the average net patient revenue per visit to $105.15 from $105.04. Of the $6.9 million increase, $5.9 million related to clinics opened or acquired after March 31, 2017 (“New Clinics”) and an increase of $1.0 million in net patient revenues related to clinics opened or acquired prior to April 1, 2017 (“Mature Clinics”).
Revenue from management contracts was $2.2 million in the 2018 first quarter as compared to $1.9 million for the 2017 first quarter. The revenue from the industrial injury prevention business was $4.9 million for the 2018 first quarter compared to $1.5 million in the 2017 first quarter. Other revenue was $0.7 million in the 2018 first quarter and $0.5 million in the 2017 period.
Total operating costs were $85.1 million, or 78.6% of net revenues, in the 2018 first quarter as compared to $76.8 million, or 78.7% of net revenues, in the 2017 first quarter. The $8.3 million increase was attributable to $5.5 million in operating costs related to New Clinics, an increase of $2.8 million related to the industrial injury prevention business due to a full quarter of operations and an increase of $0.3 million related to management contracts while costs of Mature Clinics were reduced by $0.3 million. Total salaries and related costs, including those from New Clinics, were 57.5% of net revenue in the recent quarter versus 57.2% for the 2017 first quarter. Rent, supplies, contract labor and other costs as a percentage of net revenue were 20.1% for the recent quarter versus 20.6% for the 2017 first quarter. The provision for doubtful accounts as a percentage of net revenue was 1.0% for the 2018 first quarter as compared to 0.9% in the 2017 first quarter.
The gross profit for the 2018 first quarter grew by $2.5 million, or 11.9%, to $23.2 million, as compared to $20.7 million in the first quarter of 2017. The gross profit percentage was 21.4% of net revenue in the recent period as compared to 21.3% for the 2017 first quarter. The gross profit percentage for the Company’s physical therapy clinics was 21.9% in the recent quarter as compared to 21.5% in the 2017 first quarter. The gross profit percentage on management contracts was 13.8% in the 2018 first quarter as compared to 14.8% in the 2017 first quarter. The gross profit percentage for the industrial injury prevention business was 15.8% for the recent quarter as compared to 14.3% for the one month of operation in the 2017 period.
Corporate office costs were $10.2 million in the 2018 first quarter compared to $8.5 million in the 2017 first quarter. Corporate office costs were 9.4% of net revenues for the 2018 first quarter compared to 8.8% for the 2017 first quarter.
Operating income for the recent quarter increased 7.0% to $13.1 million as compared to $12.2 million in the 2017 first quarter.
The Company no longer has mandatorily redeemable non-controlling interest. See discussion following – Redeemable Non-Controlling Interests.
Interest expense – debt and other was $0.6 million in the 2018 first quarter and $0.4 million in the 2017 first quarter.
The provision for income tax for the 2018 first quarter was $2.5 million and for the 2017 first quarter was $1.8 million both of which are inclusive of the reduction of $0.3 million and $0.8 million, respectively, for the excess tax benefit, which is a component of the provision for income taxes, related to equity compensation. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest was 25.8% and 27.3%, respectively, for the 2018 and 2017 first quarters.
Net income attributable to non-controlling interests (permanent equity) was $1.2 million in the 2018 first quarter as compared to $1.2 million in the 2017 first quarter. Net income attributable to redeemable non-controlling interests (temporary equity) was $1.7 million in the 2018 first quarter.
Same store revenues for de novo and acquired clinics open for one year or more increased 1.9%. Visits increased 1.4% for de novo and acquired clinics open for one year or more and the same store net rate increased by approximately 0.5%.
Other Financial Measures
For the first quarter of 2018 the Company’s Adjusted EBITDA increased by 4.8% to $14.0 million from $13.3 million in the comparable 2017 quarter. See definition and explanation of Adjusted EBITDA in the schedule on pages 10 and 11.
Management’s Comments
Chris Reading, Chief Executive Officer, said, “We built a good, sturdy foundation this first quarter to start off the year on solid footing. Our core physical therapy business as well as our industrial injury prevention initiatives are growing and realizing margin expansion despite the extreme weather experienced in the first part of the year. Our leadership and operations team additions are working well and their impact should increase as the year progresses. Finally, we are excited about our newest acquisition within our industrial injury prevention business and the opportunities we are seeing to continue to grow and scale that part of our service offering.”
Larry McAfee, Chief Financial Officer, noted, “The Company’s net cash flow from operations in the first quarter of 2018 was strong as evidenced by the $12.7 million or 21% reduction in debt as compared to year-end 2017.”
Click here for the complete results release: U.S. Physical Therapy First Quarter 2018 Results (PDF)
Source: US Physical Therapy