Houston, TX – U.S. Physical Therapy, Inc. (NYSE: USPH) recently reported results for the three and nine months ended September 30, 2023.
Third Quarter Financial Highlights
Adjusted EBITDA, a non-Generally Accepted Accounting Principles (“GAAP”) measure, was $18.6 million for the three months ended September 30, 2023 (“2023 Third Quarter”), an increase of $1.6 million from $17.0 million for the three months ended September 30, 2022 (“2022 Third Quarter”).
Net income attributable to USPH’s shareholders, a GAAP measure, was $9.3 million for the 2023 Third Quarter compared to $9.6 million for the 2022 Third Quarter. In accordance with GAAP, the revaluation of non-controlling interest, net of taxes, is not included in net income but is charged directly to retained earnings; however, this change is included in the computation of earnings per share. Earnings per share were $0.51 for the 2023 Third Quarter as compared to $0.72 for the 2022 Third Quarter.
Operating Results per share, a non-GAAP measure, were $0.62 per share for the 2023 Third Quarter as compared to $0.58 for the 2022 Third Quarter.
Net patient revenue from physical therapy operations increased 9.0% to $127.2 million for the 2023 Third Quarter from $116.7 million for the 2022 Third Quarter due primarily to increased volume from the 58 net new clinics added since the comparable prior year period as well as higher visits at the mature clinics, partially offset by lower net rate per patient visit.
Average visits per clinic per day was 29.7 in the 2023 Third Quarter, a record-high for a third quarter in the Company’s history, compared to 28.8 average visits per clinic per day in the 2022 Third Quarter. Total patient visits increased 10.8% in the 2023 Third Quarter as compared to the 2022 Third Quarter, with patient visits at mature clinics up 1.3%.
Net rate per patient visit was $102.37 in the 2023 Third Quarter compared to $104.01 in the 2022 Third Quarter. The decrease in net rate was due to the combined Medicare rate reductions in 2022 and 2023. All other payor categories, including commercial and workers compensation, increased as compared to the prior year. Net rate per patient visit increased sequentially in the 2023 Third Quarter from the net rate of $102.03 in the second quarter of 2023.
Physical therapy total operating costs per patient visit were $84.49 in the 2023 Third Quarter, a decrease of 0.8% from $85.14 in the 2022 Third Quarter. Physical therapy salaries and related costs per visit were $60.35 in the 2023 Third Quarter, a decrease of 1.0% from $60.99 in the 2022 Third Quarter.
The Company’s physical therapy gross profit increased 5.4% in the 2023 Third Quarter as compared to the 2022 Third Quarter and has increased 10.9% for the nine months ended September 30, 2023, versus the nine months ended September 30, 2022.
Industrial injury prevention (“IIP”) services revenue was $19.5 million for the 2023 Third Quarter compared to $20.2 million in the 2022 Third Quarter. IIP services operating margin increased to 22.7% in the 2023 Third Quarter from 21.9% in the 2022 Third Quarter.
During the 2023 Third Quarter, the Company added 19 clinics, including the acquisitions described below, and closed three clinics, bringing its total clinic count to 672 as of September 30, 2023, as compared to 614 clinics as of September 30, 2022.
On July 31, 2023, the Company acquired a 70% equity interest in a five-clinic practice for a purchase price of $2.1 million, with the current practice owners retaining a 30% equity interest. The business currently generates approximately $2.4 million in annual revenues.
On September 29, 2023, the Company acquired 70% equity interests in two physical therapy practices with the current practice owners retaining 30% equity interests for a combined purchase price of $13.9 million. The businesses currently generate approximately $7.2 million in combined annual revenues and approximately 48,000 visits on an annualized basis across five total clinics.
On October 31, 2023, the Company, through one of its IIP subsidiaries, acquired an IIP services and ergonomics software business for approximately $4.0 million. The Company’s IIP subsidiary purchased all of the IIP services business and 55% of the ergonomics software business. The combined businesses currently generate approximately $2.6 million in annual revenue.
On November 6, 2023, the Company’s Board of Directors declared a quarterly dividend of $0.43 per share payable on December 8, 2023, to shareholders of record on November 16, 2023.
Management currently expects the Company’s Adjusted EBITDA for 2023 to be within its provided guidance range of $75.0 million to $80.0 million, most likely at the low-to-mid area of such range. The earnings guidance represents projected Adjusted EBITDA from existing operations and excludes future acquisitions. See “2023 Earnings Guidance” for more information.
Chris Reading, Chief Executive Officer, said, “Our team continues to produce excellent results despite the pressure from Medicare rate reductions, inflationary impacts, and an improving but still challenging hiring environment. Our clinic volumes were once again at record levels in the third quarter and our total operating costs per visit continued to trend below last year. We also added 19 clinics from acquisitions and de novos during the quarter, and purchased an IIP services and ergonomics software business subsequent to quarter-end that provides us an opportunity to expand the reach of our ergonomics program. We achieved rate increases in all payor categories other than Medicare in the third quarter and will continue to focus on this initiative to drive greater progress in our net rate as we go forward.”
Carey Hendrickson, Chief Financial Officer, said, “Our balance sheet is in an outstanding position with $149 million of debt fixed at a below-market rate and approximately $120 million of excess cash, mostly from our secondary offering in May, ready for deployment into growth initiatives.”
The complete results release is available here: U.S. Physical Therapy Third Quarter 2023 Results (PDF)