U.S. Physical Therapy(US:USPH)2023-05-04 22:18Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $18.5 million for Q1 2023, an increase of $1 million from $17.5 million in Q1 2022 [14] - Total company revenues increased by 12.8%, from $131.7 million in Q1 2022 to $148.5 million in Q1 2023 [14] - Operating income rose by $2 million, from $15 million in Q1 2022 to $17 million in Q1 2023 [14] - The average visits per clinic per day reached 29.8, the highest first-quarter volume in the company's history [15] - The net rate increased to $113.12, up $0.12 from the previous year despite a 2% Medicare rate reduction [15][16] Business Line Data and Key Metrics Changes - Physical therapy revenues were $127.4 million in Q1 2023, a 15.6% increase from Q1 2022 [16] - Same-store revenue growth was 5.8%, driven by a 6% increase in visits compared to the prior year [16] - Operating costs for physical therapy were $100.6 million, a 13.9% increase year-over-year, but the cost per visit decreased from $83.09 to $81.97 [17] - The industrial injury prevention business generated revenues of $19.4 million, up $300,000 from Q1 2022, but the margin decreased to 19.5% from 21.8% [19] Market Data and Key Metrics Changes - The company experienced nearly 16% revenue growth in physical therapy, alongside double-digit operating income improvement [6] - The company is focusing on renegotiating or terminating low-margin contracts, particularly in Medicare Advantage, to improve profitability [8][16] Company Strategy and Development Direction - The company is committed to dropping low-margin business, particularly in Medicare Advantage contracts, to focus on more profitable opportunities [8][30] - There is an ongoing effort to improve employee retention and reduce turnover, particularly in clinical positions, which has shown significant improvement [10][31] - The company plans to continue expanding its injury prevention business, although growth may be slower this year due to economic uncertainties [11][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about maintaining strong volume growth, with expectations for continued improvement in staffing and operational efficiency [23][24] - The company anticipates achieving its adjusted EBITDA guidance of $75 million to $80 million for the year, excluding potential acquisitions [21] - Management acknowledged the challenges posed by inflation and labor scarcity but highlighted the team's resilience and adaptability [3][4] Other Important Information - The company has a strong balance sheet with a $150 million term loan and a $175 million revolving credit facility, maintaining a favorable interest rate environment [20][21] - The company is actively working on front-desk automation to improve employee retention and operational efficiency [10] Q&A Session Summary Question: What factors contributed to the strong same-store volume growth? - Management attributed the growth to favorable weather conditions and improved staffing availability, which allowed for better patient service [22][24] Question: Is the company gaining market share or is the industry recovering? - Management suggested that while the industry may be seeing a recovery, they believe they are also gaining market share due to improved staffing and operational capabilities [27][28] Question: What is the status of rate renegotiations? - Management indicated they are in the early stages of renegotiating rates, with mixed responses from payers, but are willing to walk away from under-paying contracts [29][30] Question: How is the injury prevention business performing? - Management noted that while the injury prevention business remains strong, growth may slow this year due to economic uncertainties affecting new contracts [11][42] Question: What is the expected impact of dropping low-margin contracts? - Management expects the impact to be several million dollars in revenue, but they are confident in replacing that volume with better-paying contracts [38]