Houston, TX – U.S. Physical Therapy, Inc. (NYSE: USPH) recently reported results for the second quarter and six months ended June 30, 2019.
For the second quarter ended June 30, 2019, USPH’s Operating Results (as defined below) increased 11.7% to $10.3 million, or $0.81 per diluted share, as compared to $9.2 million, or $0.73 per diluted share, in the second quarter of 2018. For the six months ended June 30, 2019, USPH’s Operating Results increased 14.7% to $18.8 million, or $1.47 per diluted share, as compared to $16.4 million, or $1.29 per diluted share, in the first six months of 2018. Operating Results per share, a non-GAAP measure, equals net income attributable to USPH shareholders per the consolidated statements of net income, and excludes the impact of the gain on the sale of a partnership interest and the revaluation of redeemable non-controlling interest, net of tax, to calculate earnings per share. On June 30, 2019, the Company sold its 50% interest in one physical therapy partnership to the group’s founders for $11.6 million and recognized a pre-tax gain of $5.8 million on the sale.
For the second quarter ended June 30, 2019, USPH’s net income attributable to its shareholders was $14.6 million, inclusive of the gain on the sale of the partnership interest, as compared to $9.2 million in the second quarter of 2018. Inclusive of the charge for revaluation of non-controlling interest, net of tax, used to compute diluted earnings per share, in accordance with Generally Accepted Accounting Principles (“GAAP”), in the recent quarter, the amount is $10.8 million, or $0.85 per share, as compared to $6.0 million, or $0.48 per share for the second quarter of 2018. For the six months ended June 30, 2019, USPH’s net income attributable to its shareholders, in accordance with GAAP, was $23.1 million as compared to $16.4 million for the comparable period of 2018. Inclusive of the charge for revaluation of non-controlling interest, net of tax, used to compute diluted earnings per share, in accordance with GAAP, in the recent six months, the amount is $15.8 million, or $1.24 per share, as compared to $9.4 million, or $0.74 per share for the second quarter of 2018. In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is not included in net income but charged directly to retained earnings and is included in the earnings per basic and diluted share calculation. See the schedule on page 12 for the computation of diluted earnings per share.
Second Quarter 2019 Compared to Second Quarter 2018
Net revenues increased $11.3 million, or 9.8%, from $115.1 million in the second quarter of 2018, to $126.4 million in the second quarter of 2019, due to an increase in net patient revenues from physical therapy operations, internal growth, new clinic development and acquisitions, and an increase in the revenue from the industrial injury prevention business, due to internal growth and an acquisition.
Net patient revenues from physical therapy operations increased approximately $7.4 million, or 7.0%, to $113.4 million in the second quarter of 2019 from $106.0 million in the second quarter of 2018 due to an increase in total patient visits of 6.0% from 998,000 to 1,058,000 and an increase in the average net patient revenue per visit to $107.16 from $106.16. Of the $7.4 million increase in net patient revenues, $4.6 million related to an increase in business of clinics opened or acquired prior to July 1, 2018 (“Mature Clinics”) and $2.8 million related to clinics opened or acquired after June 30, 2018 (“New Clinics”). Revenue from physical therapy management contracts was $2.2 million for both the second quarter of 2019 and the 2018 comparable period.
Revenue from the industrial injury prevention business increased 64.0% to $10.3 million in the second quarter of 2019 compared to $6.3 million in the second quarter 2018 due to internal growth and an acquisition in April 2019. Other miscellaneous revenue was $0.5 million in the second quarter of 2019 and $0.7 million in the second quarter of 2018.
Total operating costs were $95.0 million, or 75.1% of net revenues, in the second quarter of 2019 as compared to $88.0 million, or 76.4% of net revenues, in the second quarter of 2018. The $7.0 million increase was attributable to $2.6 million in operating costs related to New Clinics, an increase of $1.9 million related to Mature Clinics and an increase of $2.5 million related to the industrial injury prevention business including a recent acquisition. Total salaries and related costs, including physical therapy operations and the industrial injury prevention business, were 55.9% of net revenues in the recent quarter versus 56.1% in the second quarter of 2018. Rent, supplies, contract labor and other costs as a percentage of net revenues were 18.2% in the second quarter of 2019 versus 19.3% in the second quarter of 2018. The provision for doubtful accounts as a percentage of net revenue was 1.0% for both periods.
The gross profit for the second quarter of 2019 grew by 15.7%, or $4.3 million, to $31.4 million, as compared to $27.1 million in the second quarter of 2018. The gross profit percentage increased by 130 basis points to 24.9% of net revenue in the recent period as compared to 23.6% in the 2018 second quarter. The gross profit percentage for the Company’s physical therapy clinics increased by 100 basis points to 24.7% in the recent quarter as compared to 23.7% in the second quarter of 2018. The gross profit percentage on physical therapy management contracts declined by 90 basis points to 15.4% in the 2019 second quarter as compared to 16.3% in the 2018 second quarter. The gross profit percentage for the industrial injury prevention business increased by 480 basis points to 29.2% in the recent quarter as compared to 24.4% in the 2018 period.
Corporate office costs were $11.5 million in the second quarter of 2019 compared to $10.1 million in the second quarter of 2018. Corporate office costs were 9.1% of net revenues for the second quarter of 2019 quarter as compared to 8.8% for the second quarter of 2018.
Operating income for the second quarter of 2019 increased 16.9% to $19.9 million as compared to $17.0 million in the second quarter of 2018. Operating income as a percentage of net revenue increased by 90 basis points from 14.8% in the 2018 period to 15.7% in the recent quarter.
The gain of $5.8 million in the second quarter of 2019 resulted from a sale of partnership interest. As previously disclosed, on June 30, 2019, the Company sold its 50% interest in one physical therapy partnership to the group’s founders. The sales proceeds, all of which is cash, was $11.6 million, which is included in the consolidated balance sheet in the line item – Receivable, net – sale and purchase of partnership interest. The $2.2 million dollar offset relates to the Company’s purchase of interest from the group’s founders in three other partnerships which did not yield any gain or loss in the Company’s consolidated statements of net income. The net amount was collected in full on July 1, 2019.
Interest expense was $0.6 million in the second quarter of 2019 and $0.5 million in second quarter of 2018 due to higher average borrowings under the Company’s revolving credit line.
The provision for income tax for the second quarter of 2019 was $5.3 million and $3.3 million in the 2018 second quarter. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest was 26.7% for the second quarter of 2019 and 26.1% for the second quarter of 2018.
Net income attributable to non-controlling interests (permanent equity) was $1.8 million in the second quarter of 2019 and $1.4 million in the second quarter of 2018. Net income attributable to redeemable non-controlling interests (temporary equity) was $3.4 million in the second quarter of 2019 and $2.6 million in the 2018 second quarter.
Same store revenues for de novo and acquired clinics open for one year or more increased 5.4% in the most recent quarter. Visits increased 4.6% for de novo and acquired clinics open for one year or more while the same store net rate increased 0.8%.
The complete results release is available here: US Physical Therapy Second Quarter 2019 Results (PDF)
Source: US Physical Therapy