US Physical Therapy (USPH) FY Conference Transcript

Summary of US Physical Therapy (USPH) FY Conference Call - August 26, 2025 Company Overview - Company Name: US Physical Therapy (USPH) - Industry: Outpatient orthopedic physical therapy - Market Presence: Operates nearly 800 facilities across the United States, with a partner model where the company generally owns about 70% of each partnership [2][4][10] Core Business Model - Partnership Model: USPH partners with local brands, allowing owners to retain a meaningful interest while benefiting from USPH's resources for growth [4][5][16] - Market Fragmentation: The physical therapy market is highly fragmented, estimated at $40 billion, with no single provider holding more than 10% market share [10][14] - Reimbursement Strategy: Focus on states with favorable reimbursement rates to ensure reasonable margins [8][9] Financial Performance - Growth Despite Challenges: Despite facing Medicare reimbursement headwinds, USPH has maintained significant growth, reporting an 18% increase in the last quarter [6][38] - EBITDA Impact: The company has faced a cumulative EBITDA reduction of $50 million due to reimbursement cuts, with $25 million impacting this year alone [35][37] - Current EBITDA Guidance: Updated guidance for EBITDA is between $93 million and $97 million for the year [38] Operational Highlights - Visit Metrics: Average visits per clinic per day reached 32.7, indicating strong demand [40] - Technological Investments: Implementation of AI-assisted documentation and partial virtualization of front desk operations to enhance efficiency [41] - Margin Recovery: Recent quarterly margins were around 21%, with expectations to improve further [42] Growth Opportunities - Industrial Injury Prevention Business: Launched in 2017, this segment has grown to over $100 million in revenue and $20 million in EBITDA, with a growth rate of 20-30% [44][48] - Strategic Acquisitions: Focus on acquiring larger practices with at least $1 million in EBITDA, enhancing profitability through better reimbursement rates [26][16] Market Dynamics - Regulatory Challenges: The company has navigated significant regulatory changes and reimbursement cuts, particularly from Medicare, which have historically impacted physical therapy providers [35][36] - Competitive Landscape: USPH differentiates itself from competitors by maintaining a strong balance sheet and avoiding excessive leverage, unlike many private equity-backed firms [31][14] Additional Insights - Dividend Policy: USPH has consistently paid dividends since 2012, currently at approximately $0.45 per quarter [51] - Share Repurchase Plan: Recently authorized a share repurchase plan due to stock price fluctuations, although this is not the primary focus for capital deployment [53] Conclusion US Physical Therapy is positioned for continued growth in a fragmented market, leveraging its partnership model and operational efficiencies to navigate regulatory challenges and capitalize on emerging opportunities in the physical therapy and industrial injury prevention sectors.