U.S. Physical Therapy(USPH) - 2025 Q4 - Annual Report

Clinic Operations - The company owned and/or managed 780 clinics across 44 states as of December 31, 2025, with a significant concentration in Texas, Tennessee, and Michigan[28] - The company completed 49 clinic additions in 2025, while closing or selling 30 clinics, resulting in a net increase in clinic count[31] - The company’s clinics primarily charge on a per-procedure basis, with revenue sources including managed care programs, Medicare/Medicaid, and workers' compensation insurance[40] - Approximately 40.1% of visits and 35.8% of net patient revenue were from patients with Medicare or Medicaid coverage in 2025[44] - The company operates through two reportable business segments: physical therapy and industrial injury prevention services (IIP), with IIP services primarily contracted by Fortune 500 companies[210] Financial Performance - Total net patient revenue for the year ended December 31, 2025, was $650.4 million, representing a 15.9% increase from $560.6 million in 2024[42] - Managed care programs and commercial health insurance accounted for 48.5% of net patient revenue in 2025, while Medicare/Medicaid contributed 35.8%[42] - For the year ended December 31, 2025, net patient revenues from Medicare were approximately $213.5 million, an increase from $183.4 million in 2024, representing a growth of about 16.1%[113] - Approximately 64.2% of the company's revenues in 2025 were derived from private payors, while 35.8% came from Medicare and Medicaid[119] - The company declared dividends of $0.45 per share on four occasions in 2025, totaling an aggregate amount of $27,362 thousand[199] Acquisitions and Growth Strategy - The company has a strategy to continue acquiring outpatient physical therapy practices and expand its industrial injury prevention services sector[21] - The company has completed multiple acquisitions, including a 100% acquisition of an IIP business and a 55% equity interest in an ergonomics software business in October 2023[18] - The company acquired 100% of an additional industrial injury prevention (IIP) business on October 31, 2023, increasing ownership in Briotix Health to approximately 92%[59] - The company completed multiple acquisitions of outpatient physical therapy practices and IIP businesses, including a 60% interest in three clinics acquired in July 2025[212] - The company acquired a 40% interest in an outpatient home care practice on April 30, 2025, through its 50% owned subsidiary MSO Metro LLC[212] Regulatory Compliance - The company believes it is in compliance with applicable laws and regulations, but acknowledges the potential for future government review and interpretation[55] - The company is subject to various governmental inspections, reviews, audits, and investigations to verify compliance with Medicare and Medicaid programs[84] - The company has a Compliance Program in place to ensure adherence to federal and state laws and regulations related to healthcare[88] - The Compliance Committee, consisting of independent directors, oversees compliance with legal and regulatory requirements[91] - An adverse inspection or audit could result in penalties, including refunding payments, fines, or exclusion from Medicare and Medicaid programs[84] Workforce and Talent Management - As of December 31, 2025, the company employed approximately 7,294 people nationwide, including about 4,200 full-time employees[104] - The company provides management and administrative services to therapist-owned outpatient physical therapy practices, which employ an additional 801 individuals, with 453 being full-time[104] - The company emphasizes attracting and retaining top talent by fostering a diverse and healthy workplace, offering continuing education, skill development, and competitive compensation[104] - The operational leadership teams maintain long-standing relationships with local and regional universities to ensure a talent pipeline[104] - The company's clinical professionals are all licensed, with a significant majority holding advanced degrees[104] Risks and Challenges - The company is subject to risks associated with public health crises, which could disrupt operations and impact patient appointment scheduling[125] - The company may face challenges in obtaining additional financing due to outstanding debt obligations and market conditions[133] - The company is exposed to interest rate risks due to variable-rate borrowing, which could affect financial performance[136] - Labor costs are expected to rise due to competitive pressures in hiring qualified healthcare personnel, which may adversely affect profitability[160] - The company relies heavily on referrals from physicians, and any deterioration in these relationships could lead to a decline in net operating revenues[156] Cybersecurity and Technology - The company is vulnerable to cyber-attacks that could compromise sensitive patient information, leading to legal and reputational harm[153] - The Compliance Committee of the Board oversees cybersecurity risks and is composed of members with diverse expertise, including risk management and technology[185] - The Chief Information Systems Officer (CISO) is responsible for assessing and managing cybersecurity risks, with over 25 years of experience in IT and cybersecurity[187] - The company has integrated cybersecurity risk management into its broader risk management framework to promote a culture of cybersecurity awareness[179] Market Conditions and Economic Factors - The aging population is expected to increase demand for rehabilitation services, as this demographic has a higher incidence of disability[65] - The company anticipates continued efforts from federal and state governments to contain Medicaid expenditures, which could adversely affect revenue and profitability[126] - Increased post-payment reviews of claims submitted to Medicare may lead to additional costs and potential repayments of overpaid amounts[127] - Severe weather conditions can negatively impact clinic operations and lead to fluctuations in net operating revenues[163] Shareholder Considerations - The company has reserved approximately 315,221 shares for future equity grants as of December 31, 2025, which may lead to dilution for existing shareholders[174] - The common stock has traded on the NYSE since August 14, 2012, and began trading on NYSE TX under the symbol "USPH" effective May 28, 2025[197] - The company is currently restricted from paying dividends on common stock in excess of $50 million in any fiscal year under its Credit Agreement[199]