Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $22.1 million for Q2 2024, down from $23.6 million in the prior year, resulting in an adjusted EBITDA margin of 16.4%, compared to 17.7% in Q2 2023 [13] - Operating results increased to $11 million in Q2 2024, up by $600,000 from Q2 2023, although per share results slightly decreased from $0.76 to $0.73 due to an increase in shares from a secondary offering [14] - The net rate for the quarter was $105.05 per visit, a 3% increase from the same quarter last year, despite a 1.8% reduction in Medicare rates [15] Business Line Data and Key Metrics Changes - Physical therapy revenues reached $143.5 million in Q2 2024, an increase of 8.5% from the previous year, driven by 25 more clinics and increased visits at mature clinics [16] - The injury prevention (IIP) business saw net revenues grow by 23.2%, with income up 27.4%, and margins improved from 20.7% to 21.4% [18] - Operating costs for physical therapy were $114.7 million, a 10.3% increase year-over-year, attributed to higher salaries and contract labor costs [17] Market Data and Key Metrics Changes - Workers' compensation revenue increased from 9.6% of the revenue mix in Q2 2023 to 10.1% in Q2 2024, indicating a strategic focus on this higher-paying segment [16] - The company experienced a record high in average visits per clinic per day, with April reaching 31.2 visits, contributing to a total of over 108,000 additional visits compared to the same period last year [5][6] Company Strategy and Development Direction - The company is focused on increasing reimbursement rates through contract negotiations and expanding its workers' compensation business, which is a high priority for 2024 and beyond [15][16] - There are ongoing efforts to integrate recent acquisitions and enhance partnerships in injury prevention, with expectations for continued growth in this area [7][11] - The company is also investing in recruiting initiatives to address labor shortages and improve staffing efficiency [9][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges related to labor costs, with therapists' average incentives increasing by 4% and front office personnel by 5% due to inflation and labor scarcity [8] - Despite these challenges, management remains optimistic about patient volume growth and expects to make further progress on net rates throughout the year [20] - The company is actively engaging with industry groups to address ongoing Medicare rate cuts and is hopeful for future improvements in reimbursement policies [30][32] Other Important Information - The company has a strong balance sheet with $142.5 million in debt at a favorable interest rate of 4.7%, and $90 million in excess cash available for growth initiatives [19] - The company updated its full-year EBITDA guidance to a range of $80 million to $85 million, reflecting adjustments in labor cost expectations [20] Q&A Session Summary Question: Labor challenges and volume growth - Management indicated that while labor challenges exist, they have not significantly impacted volume growth, and they are working on strategies to improve the labor situation [21][22] Question: Year-to-date volume trends - Management acknowledged that year-to-date volumes are flat, but they believe there is potential for growth if staffing issues are resolved [27][28] Question: Medicare rate proposals - Management discussed ongoing efforts to lobby for better Medicare reimbursement rates and the impact of previous cuts on operations [30][32] Question: Impact of Hurricane Beryl - The company reported a loss of approximately 2,600 visits due to Hurricane Beryl, but overall July performance remained consistent with expectations [34] Question: Automation initiatives - Management confirmed that there are still opportunities for automation at the front desk, although integration issues with the EMR vendor have slowed progress [52][53]

Core Viewpoint - U.S. Physical Therapy (USPH) reported quarterly earnings of $0.73 per share, missing the Zacks Consensus Estimate of $0.81 per share, and showing a decrease from $0.76 per share a year ago, indicating a -9.88% earnings surprise [1] Financial Performance - The company posted revenues of $167.19 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 3.12%, compared to $151.49 million in the same quarter last year [2] - Over the last four quarters, U.S. Physical Therapy has exceeded consensus revenue estimates four times [2] Stock Performance - U.S. Physical Therapy shares have declined approximately 6% since the beginning of the year, while the S&P 500 has gained 12.1% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.75 on revenues of $161.43 million, and for the current fiscal year, it is $2.84 on revenues of $644.51 million [7] - The estimate revisions trend for U.S. Physical Therapy is mixed, and changes in earnings expectations may occur following the recent earnings report [6] Industry Context - The Medical - Outpatient and Home Healthcare industry, to which U.S. Physical Therapy belongs, is currently ranked in the top 17% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Performance - Net patient revenue for Q1 2024 was $131,075,000, a 3.6% increase from $126,581,000 in Q1 2023[171]. - Total net revenue for Q1 2024 reached $155,675,000, reflecting a 4.8% growth compared to $148,509,000 in Q1 2023[171]. - Operating income decreased by 15.8% to $14,316,000 in Q1 2024 from $16,998,000 in Q1 2023[171]. - Net income attributable to USPH shareholders rose by 8.6% to $8,046,000 in Q1 2024 from $7,410,000 in Q1 2023[171]. - Total net revenue for the 2024 First Quarter increased by $7.2 million, or 4.8%, to $155.7 million compared to $148.5 million for the 2023 First Quarter[173]. - Net income attributable to shareholders for the 2024 First Quarter was $8.0 million, up from $7.4 million in the 2023 First Quarter, with earnings per share decreasing to $0.46 from $0.58[175]. - Adjusted EBITDA for the 2024 First Quarter was $16.7 million, down from $18.5 million in the 2023 First Quarter, primarily due to Medicare rate reductions and adverse weather impacts[183]. - Net revenue from physical therapy operations increased by $5.3 million, or 4.1%, to $134.4 million for the 2024 First Quarter from $129.2 million for the 2023 First Quarter[188]. - Operating costs from physical therapy operations rose by $8.3 million, or 8.1%, to $110.4 million in the 2024 First Quarter, representing 82.1% of net revenue compared to 79.0% in the prior year[190]. - Gross profit from physical therapy operations decreased by $3.0 million, or 11.2%, to $24.1 million, with a gross profit margin of 17.9% in the 2024 First Quarter compared to 21.0% in the 2023 First Quarter[195]. Operational Metrics - The number of clinics increased to 679 by the end of Q1 2024, up from 647 at the end of Q1 2023[162]. - Total patient visits increased by 3.3% to 1,268,002 in the 2024 First Quarter, while average daily visits per clinic decreased slightly to 29.5 from 29.8[189]. - The net rate per patient visit increased to $103.37 in the 2024 First Quarter from $103.12 in the 2023 First Quarter, driven by higher reimbursement rates[188]. - Salaries and related costs per visit increased to $61.42 in the 2024 First Quarter from $59.14 in the 2023 First Quarter, reflecting a 3.9% rise[192]. - The provision for credit losses was $1.6 million for the 2024 First Quarter, consistent with 1.0% of net revenues for both quarters[194]. Costs and Expenses - Salaries and related costs increased by 8.9% to $93,731,000 in Q1 2024 from $86,040,000 in Q1 2023[171]. - Operating costs rose by $1.3 million, or 8.5%, to $16.9 million in the first quarter of 2024 from $15.6 million in the same period last year[196]. - Operating income decreased to $14.3 million in the first quarter of 2024 from $17.0 million in the first quarter of 2023[198]. - Interest expense decreased by $0.6 million to $2.0 million in the first quarter of 2024, attributed to a lower outstanding balance on the revolver[200]. - Cash provided by operating activities was $4.4 million for the first quarter of 2024, down from $11.3 million in the first quarter of 2023[215]. - Cash used in investing activities totaled $20.5 million in the first quarter of 2024, primarily for business acquisitions and fixed asset purchases[217]. Acquisitions and Investments - The company completed several acquisitions, including a 50% interest in 9 clinics in March 2024 and a 70% interest in 4 clinics in September 2023[158]. - On March 29, 2024, the company acquired a 50% equity interest in a physical therapy practice for approximately $16.4 million, with $0.5 million structured as a note payable accruing interest at 4.5% per annum, due March 29, 2026[232]. - On September 29, 2023, the company acquired a 70% equity interest in a four-clinic practice for approximately $6.0 million, with $0.6 million as a note payable accruing interest at 5.0% per annum, payable in two installments[234]. - The company also acquired a 70% equity interest in a single clinic practice for approximately $7.8 million, with $0.4 million as a deferred payment due on June 30, 2025[235]. - On July 31, 2023, the company acquired a 70% equity interest in a five-clinic practice for approximately $2.1 million, with $0.3 million as a deferred payment due on June 30, 2025[236]. - The company acquired an 80% interest in a one-clinic practice for approximately $6.2 million, with $0.4 million structured as a note payable accruing interest at 4.5% per annum, due February 28, 2025[238]. Financial Position and Debt - As of March 31, 2024, total cash and cash equivalents were $132.3 million, down from $152.8 million as of December 31, 2023[209]. - The fair value of the interest rate swap increased by $1.3 million to $5.5 million as of March 31, 2024, generating $0.9 million in interest savings for the period[230]. - As of March 31, 2024, the outstanding balance on notes payable related to acquisitions is $3.9 million, with $3.1 million due in 2025 and $0.8 million due in 2026[231]. - The company's total indebtedness as of March 31, 2024, includes $3.9 million in seller notes and $143.4 million in a term note related to the Credit Agreement[241]. Regulatory and Legal Matters - The company is involved in various legal actions and regulatory audits that could materially affect its financial position and operations[245]. - There have been no changes in internal control over financial reporting that materially affected the company during the quarter ended March 31, 2024[244].

Financial Data and Key Metrics Changes - Revenue for Q1 2024 grew by 9.8%, resulting in a gross profit increase of over 15% [6] - Adjusted EBITDA for Q1 2024 was $16.7 million, down from $18.5 million in the prior year, impacted by a $1.7 million Medicare rate reduction and $1.3 million from adverse weather [7] - Operating results per share were $0.51 in Q1 2024 compared to $0.59 in Q1 2023, affected by a secondary offering completed in May 2023 [7] - The net rate for Q1 2024 was $103.37, an increase of $0.25 despite the Medicare rate reduction [84] Business Line Data and Key Metrics Changes - Physical therapy revenues reached $134.4 million in Q1 2024, a 4.1% increase from the previous year, driven by 28 additional clinics [8] - Operating costs for physical therapy were $110.4 million, an 8.1% increase year-over-year, also due to the additional clinics [8] - The physical therapy margin was 17.9% in Q1 2024, improving to 20.6% for February and March combined [17] Market Data and Key Metrics Changes - Non-Medicare rates improved by 2.8% year-over-year in Q1 2024, and by 5% since Q1 2022 [14] - Workers' compensation revenue increased from 9.3% of total revenue in Q1 2023 to 10% in Q1 2024, reflecting both volume and rate growth [16][72] Company Strategy and Development Direction - The company is focused on increasing reimbursement rates through contract negotiations and expanding its workers' compensation business [84] - Recent acquisitions are expected to broaden exposure to various industries, enhancing sales traction and cross-selling opportunities [14] - The company raised its EBITDA guidance for the full year of 2024 to a range of $82.5 million to $87.5 million, reflecting confidence in operational performance [9] Management's Comments on Operating Environment and Future Outlook - Management noted strong demand for services despite a challenging start to the year due to adverse weather [13] - The company is optimistic about continued volume growth, with record levels of visits per clinic per day in February, March, and April [13][84] - Management emphasized the importance of staffing as a gating factor for capturing additional volume, with turnover rates at their lowest in years [23][88] Other Important Information - The company has approximately $105 million in excess cash available for growth initiatives and has deployed over $40 million into acquisitions so far this year [9] - The balance sheet remains strong, with $143 million in debt at a favorable interest rate of 4.7% [40] Q&A Session Summary Question: What is driving the better volume in April? - Management attributed the improved volume to strong clinician performance and effective outreach efforts, noting that staffing remains a challenge [23] Question: Can you provide insight into the revenue growth? - The growth is driven by both adding new clients and expanding services within existing partnerships, particularly in the injury prevention sector [68] Question: What is the outlook for Medicare reimbursement? - Management expressed uncertainty about future Medicare changes but highlighted ongoing efforts to advocate for better reimbursement rates [60] Question: What is the status of M&A activity? - The company is actively pursuing tuck-in acquisitions at reasonable prices and expects to continue strong organic growth [61] Question: How is the company managing staffing challenges? - Management noted improvements in staffing and retention, with a new leader in the recruiting department expected to enhance efforts [88]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-11151 U.S. PHYSICAL THERAPY, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (STATE OR OTHER JURISDICTION OF INCORPORATION ...

US Physical Therapy, Inc. (NYSE:USPH) Q4 2023 Earnings Conference Call February 29, 2024 10:30 AM ET Company Participants Christopher Reading - CEO Jake Martinez - SVP, Accounting and Finance Carey Hendrickson - CFO Eric Williams - COO Conference Call Participants Brian Tanquilut - Jefferies Larry Solow - CJS Securities Joanna Gajuk - Bank of America Merrill Lynch Jared Hoff - William Blair Mike Petusky - Barrington Research Operator Good day, and thank you for standing by. Welcome to the US Physical Therap ...

U.S. Physical Therapy Reports Fourth Quarter and Full Year 2023 Results [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Full year 2023 saw non-GAAP growth despite a GAAP net income decline from an impairment charge, while Q4 revenue increased significantly with record patient visits Full Year 2023 vs 2022 Key Financial Metrics | Metric | Full Year 2023 | Full Year 2022 | Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA (Non-GAAP) | $77.7M | $73.6M | +$4.1M | | Operating Results (Non-GAAP) | $36.3M | $35.0M | +$1.3M | | USPH Net Income (GAAP) | $28.2M | $32.2M | -$4.0M | | Earnings Per Share (GAAP) | $1.28 | $2.25 | -$0.97 | Fourth Quarter 2023 vs 2022 Key Financial Metrics | Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | Total Net Revenue | $154.8M | $141.2M | +$13.6M (+9.6%) | | Adjusted EBITDA (Non-GAAP) | $19.0M | $17.9M | +$1.1M | | Operating Results (Non-GAAP) | $8.9M | $7.5M | +$1.3M | | USPH Net Income (GAAP) | $0.7M | $2.6M | -$1.9M | - The company achieved **record-high average daily visits per clinic** for both Q4 2023 (**29.9**) and the full year 2023 (**30.0**), with total patient visits growing **10.0%** in Q4 and **11.6%** for the full year[2](index=2&type=chunk) [Management's Comments](index=3&type=section&id=Management's%20Comments) Management highlighted record 2023 volumes, a strong balance sheet for 2024 acquisitions, and confidence in achieving 2024 EBITDA growth despite Medicare rate reductions - CEO Chris Reading noted **record physical therapy volume** for each quarter of 2023 and plans to use the company's strong balance sheet to acquire more partner-owners in 2024[4](index=4&type=chunk) - CFO Carey Hendrickson stated confidence in producing **EBITDA growth** in 2024, despite headwinds from Medicare rate reductions, through continued progress in rate negotiations, volume growth, and cost efficiencies[4](index=4&type=chunk) [Fourth Quarter 2023 Performance Review](index=3&type=section&id=Fourth%20Quarter%202023%20Performance%20Review) Q4 2023 total net revenue increased **9.6%** driven by strong segment performance, but operating results were impacted by a significant non-cash impairment charge [Physical Therapy Operations - Q4](index=3&type=section&id=Physical%20Therapy%20Operations%20-%20Q4) Q4 2023 Physical Therapy revenue grew **9.6%** due to a **10.0%** increase in patient visits, offsetting a **0.6%** decrease in net rate per visit from Medicare cuts, leading to a **7.0%** gross profit increase Physical Therapy Operations Performance (Q4 2023 vs Q4 2022) | Metric | Q4 2023 | Q4 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $134.6M | $122.8M | +9.6% | | Gross Profit | $26.2M | $24.5M | +7.0% | | Patient Visits | 1,267,842 | 1,152,139 | +10.0% | | Net Rate per Visit | $103.68 | $104.28 | -0.6% | | Avg. Daily Visits per Clinic | 29.9 | 29.1 | +2.7% | - The decrease in net rate per visit was primarily due to **Medicare rate reductions**, while all other payor categories saw a combined rate increase of **2.1%**[11](index=11&type=chunk) [Industrial Injury Prevention (IIP) Services - Q4](index=5&type=section&id=Industrial%20Injury%20Prevention%20(IIP)%20Services%20-%20Q4) Q4 2023 IIP segment revenue grew **9.7%**, with slower operating cost growth leading to a **29.8%** increase in gross profit and an expanded gross profit margin IIP Segment Performance (Q4 2023 vs Q4 2022) | Metric | Q4 2023 | Q4 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $20.2M | $18.4M | +9.7% | | Gross Profit | $4.3M | $3.3M | +29.8% | | Gross Margin | 21.2% | 17.9% | +330 bps | [Corporate, Other Expenses, and Net Income - Q4](index=5&type=section&id=Corporate%2C%20Other%20Expenses%2C%20and%20Net%20Income%20-%20Q4) Q4 2023 corporate costs rose **16.6%** and a **$17.5 million** impairment charge led to a GAAP operating loss and reduced net income, despite non-GAAP Adjusted EBITDA growth - A non-cash impairment charge of **$17.5 million** was recognized in Q4 2023 related to a reporting unit in the IIP segment, compared to a **$9.1 million** charge in Q4 2022[16](index=16&type=chunk) - USPH net income was **$0.7 million**, or a **loss of $0.38 per share**, compared to **$2.6 million**, or a **loss of $0.01 per share**, in Q4 2022, with both periods impacted by impairment charges[21](index=21&type=chunk) - Non-GAAP Adjusted EBITDA increased to **$19.0 million** from **$17.9 million** in Q4 2022, primarily due to clinic additions and increased volume at mature clinics[22](index=22&type=chunk) [Full Year 2023 Performance Review](index=7&type=section&id=Full%20Year%202023%20Performance%20Review) Full year 2023 total net revenue grew **9.3%** driven by Physical Therapy, though GAAP operating and net income decreased due to an impairment, while non-GAAP metrics showed growth Full Year 2023 vs 2022 Consolidated Performance | Metric | Full Year 2023 | Full Year 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Net Revenue | $604.8M | $553.1M | +9.3% | | Gross Profit | $121.5M | $112.0M | +8.5% | | Operating Income | $52.1M | $56.8M | -8.3% | | USPH Net Income | $28.2M | $32.2M | -12.4% | - The company added **46 new clinics** and closed **15** in 2023, bringing the total clinic count to **671** at year-end, up from **640** at the end of 2022[8](index=8&type=chunk) [Segment Performance - Full Year](index=7&type=section&id=Segment%20Performance%20-%20Full%20Year) Full year 2023 Physical Therapy revenue increased **10.6%** driven by record average daily visits, while IIP revenue grew **1.6%** with an improved gross profit margin - Physical Therapy operations revenue grew **10.6%** to **$526.5 million**, driven by a record-high average of **30.0** daily visits per clinic, which offset a decrease in the net rate per visit to **$102.80**[25](index=25&type=chunk) - IIP revenue increased **1.6%** to **$78.3 million**, and its gross profit margin expanded slightly from **20.7%** to **21.0%**[26](index=26&type=chunk) [Non-GAAP Measures - Full Year](index=8&type=section&id=Non-GAAP%20Measures%20-%20Full%20Year) Full year 2023 non-GAAP measures showed underlying operational growth, with Adjusted EBITDA increasing by **$4.1 million** and Operating Results growing by **$1.2 million** Full Year 2023 vs 2022 Non-GAAP Performance | Metric | Full Year 2023 | Full Year 2022 | Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $77.7M | $73.7M | +$4.1M | | Operating Results | $36.3M | $35.0M | +$1.2M | | Operating Results per Share | $2.56 | $2.70 | -$0.14 | - The decrease in Operating Results per share from **$2.70** to **$2.56** was attributable to an increase in shares outstanding following the company's secondary offering in May 2023[2](index=2&type=chunk) [Financial Position and Capital Allocation](index=9&type=section&id=Financial%20Position%20and%20Capital%20Allocation) The company significantly strengthened its balance sheet in 2023, increasing cash to **$152.8 million** from a secondary stock offering, while focusing on acquisitions and increasing its quarterly dividend - Cash and cash equivalents increased to **$152.8 million** as of December 31, 2023, from **$31.6 million** a year prior, primarily due to net proceeds of **$163.6 million** from a secondary stock offering in May 2023[33](index=33&type=chunk)[34](index=34&type=chunk) - The company is in various stages of completing several acquisitions expected to close in or shortly after the first half of 2024, continuing its strategy of acquiring outpatient physical therapy practices and IIP service companies[35](index=35&type=chunk) - The Board of Directors increased the quarterly dividend from **$0.43** to **$0.44 per share**, effective for the first quarter of 2024[8](index=8&type=chunk)[36](index=36&type=chunk) [2024 Business Outlook](index=9&type=section&id=2024%20Business%20Outlook) Management projects 2024 Adjusted EBITDA between **$80 million** and **$85 million**, expecting to offset a **$5.3 million** Medicare rate reduction through strategic initiatives and acquisitions 2024 Adjusted EBITDA Guidance | Metric | Guidance Range | | :--- | :--- | | Adjusted EBITDA | $80M - $85M | - The guidance accounts for an expected **$6.0 million** revenue reduction (**$5.3 million** EBITDA reduction) due to the 2024 Medicare rate cut[37](index=37&type=chunk) - Management expects to offset the Medicare rate reduction through: - Full-year impact of 2023 rate negotiations - Partial-year impact of 2024 rate negotiations - Volume increases at existing clinics - Continued expense control - Contributions from 2023 and 2024 acquisitions[40](index=40&type=chunk) [Consolidated Financial Statements and Reconciliations](index=13&type=section&id=Consolidated%20Financial%20Statements%20and%20Reconciliations) This section presents detailed consolidated financial statements for Q4 and full year 2023, including GAAP to non-GAAP reconciliations and key operational metrics [Consolidated Balance Sheet](index=15&type=section&id=Consolidated%20Balance%20Sheet) As of December 31, 2023, the balance sheet reflects total assets of **$997.2 million** and liabilities of **$345.0 million**, with cash and equity increases driven by a stock offering Key Balance Sheet Items (As of Dec 31) | Account | 2023 | 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $152.8M | $31.6M | | Goodwill | $509.6M | $494.1M | | Total Assets | $997.2M | $858.2M | | Total Liabilities | $345.0M | $373.6M | | Total USPH shareholders' equity | $476.2M | $315.8M | [Consolidated Statements of Cash Flows](index=17&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For full year 2023, net cash from operating activities was **$82.0 million**, investing activities used **$45.0 million**, and financing activities provided **$84.3 million** from a stock offering, leading to a **$121.2 million** net cash increase Cash Flow Summary (Full Year) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash from Operating Activities | $82.0M | $58.5M | | Net cash used in Investing Activities | ($45.0M) | ($81.3M) | | Net cash from Financing Activities | $84.3M | $25.8M | | **Net increase in cash** | **$121.2M** | **$3.0M** | [Key Operating Metrics](index=21&type=section&id=Key%20Operating%20Metrics) The company's 2023 operational metrics show consistent patient volume growth, with total visits exceeding **5 million** (**11.6%** increase), average daily visits per clinic improving to **30.0**, and a net increase of **31** clinics Annual Patient Visit and Rate Trends | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Patient Visits | 5,005,426 | 4,483,282 | | Net Rate Per Patient Visit | $102.80 | $103.63 | | Average Daily Visits Per Clinic | 30.0 | 28.7 | Clinic Count Roll Forward (Full Year 2023) | Description | Count | | :--- | :--- | | Beginning of period | 640 | | Additions | 46 | | Closed or sold | (15) | | **End of period** | **671** |

US Physical Therapy, Inc. (NYSE:USPH) Q3 2023 Earnings Conference Call November 8, 2023 10:30 AM ET Company Participants Christopher Reading - President, CEO & Director Jake Martinez - SVP, Finance & Accounting Carey Hendrickson - CFO Eric Williams - COO, East Conference Call Participants Joanna Gajuk - Bank of America Merrill Lynch Brian Tanquilut - Jefferies Lawrence Solow - CJS Securities Calvin Sternick - JPMorgan Michael Petusky - Barrington Research Operator Good day. Welcome to the US Physical Therap ...

Clinic Operations - As of September 30, 2023, the company operated 672 clinics across 42 states, an increase from 656 clinics at the beginning of the period[155] - The company completed several acquisitions in 2023, including 19 clinics added in the third quarter and 40 clinics added in the nine months ended September 30, 2023[157] - The company has 42 third-party facilities under management as of September 30, 2023, in addition to its owned clinics[155] - The company has made strategic acquisitions, including a 70% interest in 4 clinics in September 2023 and a 45% interest in 4 clinics in May 2023[155] - The company reported a total of 19 new clinics added in the third quarter of 2023, compared to 8 in the same quarter of 2022[157] Financial Performance - For the nine months ended September 30, 2023, net patient revenues from Medicare were approximately $128.5 million, compared to $115.1 million for the same period in 2022, reflecting a growth of about 11.8%[171] - Net income attributable to shareholders for Q3 2023 was $9.3 million, a decrease of 3.1% from $9.6 million in Q3 2022[174] - Basic and diluted earnings per share for Q3 2023 were $0.51, down 29.2% from $0.72 in Q3 2022[174] - Total net revenue for Q3 2023 was $150.0 million, representing a 7.5% increase compared to $139.6 million in Q3 2022[190] - Total net revenue for the first nine months of 2023 was $450.0 million, a 9.2% increase from $412.0 million in the same period of 2022[214] Patient Visits - The number of patient visits increased by 10.8% to 1,242,954 in Q3 2023, compared to 1,122,070 in Q3 2022[193] - The number of patient visits increased by 12.2% to 3,737,584 in the first nine months of 2023 compared to 3,331,143 in the same period of 2022[216] - The average patient visits per day per clinic reached a record-high of 29.7 in Q3 2023, compared to 28.8 in Q3 2022[193] Operating Costs - Operating costs increased to $122.1 million in Q3 2023, representing 81.4% of net revenue, up from $112.8 million or 80.8% in Q3 2022[196] - Operating costs for the first nine months of 2023 were $359.0 million, or 79.8% of net revenue, compared to $327.8 million, or 79.6% in the same period of 2022[220] - Physical therapy operating costs rose by $9.5 million, or 9.9%, to $105.0 million in Q3 2023, driven by new clinics and increased patient visits[198] - Physical therapy operating costs rose by $31.0 million, or 11.2%, to $307.8 million in the 2023 Nine Months, driven by the addition of 58 net new clinics and a 3.2% increase in patient visits at mature clinics[222] Profitability Metrics - Adjusted EBITDA for Q3 2023 was $18.6 million, an increase of $1.6 million from $17.0 million in Q3 2022[187] - For the first nine months of 2023, Adjusted EBITDA was $58.7 million, an increase of $2.9 million from $55.8 million in the same period of 2022[188] - Gross profit for Q3 2023 increased by $1.1 million, or 4.3%, to $27.9 million, with a gross profit margin of 18.6%, down from 19.2% in Q3 2022[203] - Gross profit increased by $6.8 million, or 8.1%, to $91.0 million for the 2023 Nine Months, with a gross profit margin slightly decreasing to 20.2% from 20.4% in the 2022 Nine Months[228] - Operating income rose by 5.9% to $52.9 million, representing 11.8% of net revenues for the 2023 Nine Months, down from 12.1% in the previous year[231] Cash Flow and Liquidity - Cash and cash equivalents increased significantly to $147.7 million as of September 30, 2023, compared to $31.6 million at the end of 2022[240] - The company generated $55.1 million in cash from operating activities during the 2023 Nine Months, while $36.6 million was used in investing activities[246] Tax and Interest Expenses - The provision for income taxes was $3.6 million in Q3 2023, with an effective tax rate of 27.8%, up from 25.2% in Q3 2022[208] - The provision for income taxes was $10.8 million for the 2023 Nine Months, with an effective tax rate of 28.1%, compared to 27.0% in the 2022 Nine Months[236] - Interest expense increased to $7.3 million for the 2023 Nine Months, primarily due to a higher effective interest rate and increased borrowings for acquisitions[234] Future Plans and Risks - The company plans to continue developing new clinics and making additional acquisitions, supported by cash generated from operations[243] - The company is subject to various risks, including changes in Medicare rules and potential retroactive reductions in revenue from Medicare and Medicaid[147] Debt and Financing - As of September 30, 2023, the outstanding balance on the Term Facility was $143.7 million, with $175.0 million of credit availability under the Revolving Facility[257] - The average effective interest rate for borrowings under the Senior Credit Facility was 5.6% for the 2023 Third Quarter and 5.7% for the 2023 Nine Months[257] - The company has outstanding notes payable related to acquisitions totaling $5.3 million, with varying payment schedules and interest rates from 3.25% to 8.0% per annum[262] - A 1% change in the interest rate would yield no additional interest expense on the Revolving Facility due to the interest rate swap arrangement[279] Acquisitions - The company acquired a 70% equity interest in a four-clinic physical therapy practice for approximately $6.0 million, with $5.4 million paid in cash[263] - The company acquired a 70% equity interest in a single clinic physical therapy practice for approximately $7.8 million, with $7.4 million paid in cash[264] - The company acquired a 70% equity interest in a five-clinic practice for approximately $2.1 million, with $1.8 million paid in cash[265] Interest Rate Management - The company has an interest rate swap agreement with a notional value of $150 million, effective from June 30, 2022, which has generated $2.3 million in interest savings since inception[261] - The fair value of the redeemable non-controlling interest was $174.7 million as of September 30, 2023[274] - The company did not purchase any shares of common stock during the three and nine months ended September 30, 2023[277]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____TO _____ COMMISSION FILE NUMBER 1-11151 U.S. PHYSICAL THERAPY, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEVADA 76-0364866 (STATE OR OTH ...