U.S. Physical Therapy(USPH) - 2022 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements The financial statements detail the company's Q1 2022 financial position and performance, showing total assets of $763.9 million, net revenue of $131.7 million, and net income of $8.8 million Consolidated Balance Sheets Total assets increased to $763.9 million by March 31, 2022, driven by acquisitions, while total liabilities also rose to $303.6 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $24,229 | $28,567 | | Goodwill | $443,692 | $434,679 | | Total assets | $763,863 | $749,426 | | Revolving line of credit | $118,000 | $114,000 | | Total liabilities | $303,639 | $296,983 | | Total USPH shareholders' equity | $300,971 | $295,606 | Consolidated Statements of Income Net revenue increased 17.2% to $131.7 million in Q1 2022, with net income attributable to shareholders rising to $8.8 million Q1 2022 vs. Q1 2021 Income Statement (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net revenue | $131,704 | $112,368 | | Gross profit | $26,588 | $25,896 | | Operating income | $15,032 | $15,022 | | Net income attributable to USPH shareholders | $8,799 | $8,173 | | Basic and diluted EPS | $0.67 | $0.21 | | Dividends declared per common share | $0.41 | $0.35 | Consolidated Statements of Cash Flows Net cash from operations decreased to $11.6 million in Q1 2022, with $15.9 million used in investing activities, ending the quarter with $24.2 million cash Q1 2022 vs. Q1 2021 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,649 | $17,674 | | Net cash used in investing activities | ($15,944) | ($13,203) | | Net cash used in financing activities | ($43) | ($19,452) | | Net decrease in cash and cash equivalents | ($4,338) | ($14,981) | | Cash and cash equivalents - end of period | $24,229 | $17,937 | Notes to Consolidated Financial Statements Notes detail accounting policies, acquisitions, and financial instruments, highlighting 601 clinics, a new 6-clinic acquisition, and Medicare rate changes - The company operates through two reportable segments: physical therapy operations and industrial injury prevention services. As of March 31, 2022, the company operated 601 clinics in 39 states and managed 38 third-party facilities[20][23] - On March 31, 2022, the company acquired a 70% interest in Madden and Gilbert Physical Therapy, a six-clinic practice, for approximately $11.5 million[73] - The company estimates the Medicare rate reduction for the full year of 2022 will be approximately 0.75%, with a 15% reduction for services by physical or occupational therapist assistants effective January 1, 2022[100] - Goodwill increased from $434.7 million at year-end 2021 to $443.7 million at March 31, 2022, primarily due to $11.5 million in goodwill from a new acquisition[128] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 revenue growth of 17.2% to $131.7 million, driven by acquisitions, with gross profit margin declining to 20.2% due to higher costs Results of Operations Total revenue grew 17.2% to $131.7 million in Q1 2022, driven by acquisitions, but operating costs increased, leading to a gross profit margin decline to 20.2% Q1 2022 Revenue Breakdown (in thousands) | Revenue Source | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Physical therapy operations | $110,410 | $99,800 | | Industrial injury prevention services | $19,068 | $10,009 | | Total Revenue | $131,704 | $112,368 | - The average net patient revenue per visit decreased slightly to $103.00 in Q1 2022 from $104.72 in Q1 2021, while total patient visits increased 12.2% to 1,063,519[174] - Total operating costs rose to 79.8% of total revenue in Q1 2022, compared to 77.0% in Q1 2021, driven by higher salaries and acquisition-related costs[179] - The gross profit margin declined to 20.2% in Q1 2022 from 23.0% in Q1 2021, with physical therapy operations at 20.0% and industrial injury prevention services at 21.8%[186] Liquidity and Capital Resources The company ended Q1 2022 with $24.2 million cash and $32.0 million available under its $150 million credit facility, with cash primarily used for acquisitions - As of March 31, 2022, the company had $24.2 million in cash and $32.0 million available under its revolving credit facility[193][198] - The credit facility was increased to $150.0 million in November 2021, with an accordion feature for an additional $25.0 million[195] - During Q1 2021, the company repaid $14.1 million in MAAPP Funds received under the CARES Act[207] Quantitative and Qualitative Disclosure About Market Risk The company's primary market risk is interest rate exposure on its $118.0 million variable-rate credit agreement, with a 1% change impacting annual interest expense by $1.18 million - The company is exposed to interest rate risk from its variable-rate Amended Credit Agreement, which had $118.0 million outstanding as of March 31, 2022[220] - A hypothetical 1% change in the interest rate would impact annual interest expense by $1.18 million[220] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are effective[222] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[223] PART II—OTHER INFORMATION Legal Proceedings The company settled a qui tam lawsuit in January 2022 for $2.75 million related to billing practices, admitting no liability to avoid litigation costs - In January 2022, the company settled a qui tam lawsuit concerning alleged 'upcoding' of billings for Medicare patients at a Florida partnership[227] - The settlement amount was $2.75 million, with the company admitting no liability; the expense was primarily recorded in 2021[228] Exhibits This section lists exhibits filed with the Form 10-Q, including employment agreements and CEO/CFO certifications - Exhibits filed include CEO and CFO certifications as required by the Sarbanes-Oxley Act of 2002[230] Signatures The report was duly authorized and signed on May 9, 2022, by Carey Hendrickson, Chief Financial Officer - The Form 10-Q was signed on May 9, 2022, by Carey Hendrickson, Chief Financial Officer[234]