U.S. Physical Therapy, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing reports annual results; standalone fourth-quarter figures are not clearly provided in the supplied text. The Company operates outpatient physical therapy clinics and industrial injury prevention services (IIP).
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Net revenue | $604.8 million | $553.1 million |
| Gross profit / margin | $121.5 million / 20.1% | $112.0 million / 20.3% |
| Operating income | $52.1 million | $56.8 million |
| Net income attributable to USPH shareholders | $28.2 million | $32.2 million |
| Diluted earnings per share | $1.28 | $2.25 |
| Adjusted EBITDA (non-GAAP) | $77.7 million | $73.7 million |
| Operating Results (non-GAAP) | $36.3 million; $2.56 per share | $35.0 million; $2.70 per share |
- Revenue grew 9.3%. Physical therapy operations revenue rose 10.6% to $526.5 million; IIP revenue increased 1.6% to $78.3 million.
- Physical therapy visits increased 11.6% to 5.01 million; visits at mature clinics rose 3.1%. Average daily visits per clinic reached 30.0. Net revenue per visit declined 0.8% to $102.80, which management primarily attributed to Medicare rate reductions.
- Operating income included a $17.5 million non-cash impairment charge in 2023, versus $9.1 million in 2022. Excluding these charges, operating income was $69.6 million versus $65.9 million.
- Interest expense rose to $9.3 million from $5.8 million, partly reflecting borrowings; the interest-rate swap provided $3.3 million of savings in 2023. Interest income was $3.8 million, primarily on offering proceeds.
Cash flow, debt and liquidity
- Cash from operating activities was $82.0 million, up from $58.5 million. Investing activities used $45.0 million, including acquisitions and purchases of partnership interests; financing activities provided $84.3 million.
- Year-end cash and cash equivalents were $152.8 million, versus $31.6 million a year earlier. The Company reported $144.4 million outstanding under its term facility, no revolver borrowings and $175.0 million of available revolving credit. Acquisition notes added approximately $3.8 million of principal debt.
- The credit agreement matures in June 2027. The Company reported compliance with its covenants and stated that cash and credit availability should fund operating working-capital needs through at least February 29, 2025.
- Accounts receivable days outstanding improved to 29 from 31. Lease liabilities totaled $111.9 million on the balance sheet; disclosed future operating-lease payments were $144.7 million.
Material changes and capital allocation
- The Company operated 671 clinics at year-end, up from 640; it added 46 clinics and closed or sold 15 during 2023. It also managed 43 practices for unrelated providers.
- A May 2023 equity offering of 1,916,667 shares generated approximately $163.6 million in net proceeds. The Company used $35.0 million to repay revolver borrowings and expects to use the remainder primarily for acquisitions.
- Dividends declared totaled $1.72 per share in 2023. In February 2024, the Board raised the quarterly dividend to $0.44 per share.
- 2023 results included a $1.6 million expense from revaluing contingent acquisition consideration and a $2.6 million gain from revaluing a put-right liability. A $0.5 million Relief Funds item was also recorded.
Outlook, risks and contingencies
- No specific financial guidance was provided in the supplied filing text. Management plans to continue acquiring practices and IIP businesses, opening satellite clinics and pursuing patient-volume growth through marketing and new programs.
- The Company expects 2024 Medicare reimbursement for applicable therapy services to be approximately 3.5% below 2023 rates, absent further mitigation. Medicare and Medicaid represented 36.6% of 2023 net patient revenue; managed care and commercial health insurance represented 47.5%.
- Key risks include reimbursement changes, payor audits and potential recoupments, therapist recruitment and retention, wage inflation, referral relationships, acquisition integration, regulation and litigation, cybersecurity, and variable-rate debt.
- Redeemable non-controlling interests were $174.8 million at year-end and may require future cash purchases under partner put rights. A separate acquisition-related contingent consideration liability was valued at $9.8 million, with no maximum payout disclosed for that arrangement.
- The Company reported ordinary-course legal and regulatory matters. A Florida False Claims Act matter was settled in 2022 for $2.8 million; the Company admitted no liability or wrongdoing. Management reported no known pending or threatened investigations expected to materially affect the financial statements as of year-end.
- Goodwill and intangible-asset impairment was concentrated in one IIP reporting unit, reflecting changes in current and projected operating income and market conditions. The auditor identified patient-revenue contractual adjustments and valuation of that reporting unit as critical audit matters. The financial statement and internal-control audit opinions were unqualified.
Important facts for investors to verify
- Whether 2024 clinic volumes and acquisition contributions offset Medicare reimbursement reductions, labor-cost pressure and the lower net rate per visit.
- Whether the impaired IIP reporting unit improves, and the assumptions underlying future goodwill and intangible-asset valuations.
- The timing and potential cash cost of partner put rights, redeemable non-controlling interests and contingent acquisition payments.
- How the Company deploys remaining offering proceeds and maintains liquidity while pursuing acquisitions and paying dividends.
- Future payor audit outcomes, contractual-adjustment estimates and collection trends; contractual adjustments were identified as a critical audit matter.