U.S. Physical Therapy(USPH) - 2024 Q2 - Earnings Call Transcript

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]