U.S. Physical Therapy(USPH) - 2023 Q4 - Annual Results

U.S. Physical Therapy Reports Fourth Quarter and Full Year 2023 Results Financial Highlights 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] Management's Comments 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] - 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] Fourth Quarter 2023 Performance Review 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 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] Industrial Injury Prevention (IIP) Services - Q4 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 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] - 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] - 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] Full Year 2023 Performance Review 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] Segment Performance - Full Year 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] - IIP revenue increased 1.6% to $78.3 million, and its gross profit margin expanded slightly from 20.7% to 21.0%[26] Non-GAAP Measures - Full Year 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] Financial Position and Capital Allocation 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][34] - 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] - The Board of Directors increased the quarterly dividend from $0.43 to $0.44 per share, effective for the first quarter of 2024[8][36] 2024 Business Outlook 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] - 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] Consolidated Financial Statements and Reconciliations 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 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 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 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 |