Chris Reading, Chief Executive Officer, said, “Physical therapy volumes, net rate and injury prevention growth and profitability were all strong for the quarter and a result of our persistent focus in these areas.  While our retention has been good with respect to our team members, the new employees who join our team as a result of turnover are coming in at higher rates.  This is especially true of our hourly employees who are more sensitive to escalating prices elsewhere.   Additionally, we have a higher than anticipated usage of contract therapists in several markets around the country.  We have made significant recent and ongoing investments in people and processes on the recruiting side of our efforts with more work to be done -- especially in these more challenging markets.  Our teams are working diligently to optimize our ability to address demand while maintaining a close eye on cost and related expense management.”

Additional supplemental tables of financial and performance metrics are presented on page 14 of this release.

Physical Therapy Operations

		For the Three Months Ended								Variance
		June 30, 2024				June 30, 2023								$	%
		(In thousands, except percentages)
Revenue related to:
Mature Clinics (1)		$	129,349			$	126,057			$	3,292				2.6	%
Clinic additions (2)			10,905				1,910				8,995				*		(6)
Clinics sold or closed (3)			17				1,313				(1,296	)			*		(6)
Net Patient Revenue			140,271				129,280				10,991				8.5	%
Other (4)			3,215				2,959				256				8.7	%
Total			143,486				132,239				11,247				8.5	%
Operating costs (4)			114,703				104,017				10,686				10.3	%
Gross profit		$	28,783			$	28,222			$	561				2.0	%
Financial and operating metrics (not in thousands):
Net rate per patient visit (1)		$	105.05			$	102.03			$	3.02				3.0	%
Patient visits (1)			1,335,335				1,267,140				68,195				5.4	%
Average daily visits per clinic (1)			30.6				30.4				0.2				0.7	%
Gross margin			20.1	%			21.3	%
Salaries and related costs per visit, clinics (5)		$	59.66			$	57.59			$	2.07				3.6	%
Operating costs per visit, clinics (5)		$	84.46			$	80.61			$	3.85				4.8	%
(1) See Glossary of Terms - Revenue Metrics for definitions.
(2) Includes 21 clinics added during the six months ended June 30, 2024 and 46 clinic added during the year ended December 31, 2023.
(3) Includes 11 clinics closed during the six months ended June 30, 2024 and 15 clinics closed during the year ended December 31, 2023.
(4) Includes revenues and costs from management contracts.
(5) Per visit costs excludes management contract costs.
(6) Not meaningful.

Net revenue from physical therapy operations increased $11.2 million, or 8.5%, to $143.5 million for the 2024 Second Quarter from $132.2 million for the 2023 Second Quarter.  This increase was due to the increase in visits from the 25 net new clinics added since the comparable prior year period, an increase in visits at mature clinics and an increase in net rate per patient visit.  The increase in net rate per patient visit was mainly driven by higher reimbursement rates from commercial and other payors as a result of contract negotiations and an increase in workers compensation as a percent of the Company’s total net patient revenues.  

Operating costs from physical therapy operations increased $10.7 million, or 10.3%, to $114.7 million in the 2024 Second Quarter from $104.0 million in the 2023 Second Quarter primarily driven by costs associated with the 25 net new clinics added since the comparable prior year period.  Salaries and related costs per visit increased to $59.66 in the 2024 Second Quarter from $57.59 in the 2023 Second Quarter while total operating costs per visit increased to $84.46 from $80.61 over the same periods, respectively.

Gross profit from physical therapy operations in the 2024 Second Quarter increased $0.6 million, or 2.0%, to $28.8 million from $28.2 million in the 2023 Second Quarter. The gross profit margin from physical therapy operations was 20.1% in the 2024 Second Quarter.

Industrial Injury Prevention Services

		For the Three Months Ended								Variance
		June 30, 2024				June 30, 2023								$	%
		(In thousands, except percentages)
Net revenue		$	23,704			$	19,246			$	4,458				23.2	%
Operating costs			18,625				15,261				3,364				22.0	%
Gross profit		$	5,079			$	3,985			$	1,094				27.5	%
Gross margin			21.4	%			20.7	%

IIP revenues increased $4.5 million, or 23.2%, to $23.7 million for the 2024 Second Quarter as compared to $19.2 million for the 2023 Second Quarter. Excluding the Company’s IIP acquisition during the 2024 Second Quarter, IIP revenues increased 13.5%.  IIP operating costs increased $3.4 million, or 22.0%, versus the comparable prior year period.  Gross profit from IIP operations in the 2024 Second Quarter increased $1.1 million, or 27.5%, to $5.1 million from $4.0 million in the 2023 Second Quarter. Excluding the Company’s IIP acquisition in the 2024 Second Quarter, IIP gross profit increased 15.7%. The gross profit margin from IIP operations increased to 21.4% in the 2024 Second Quarter from 20.7% in the 2023 Second Quarter.

Corporate Office and Other Expenses

Corporate office costs were $14.2 million, or 8.5% of revenue, in the 2024 Second Quarter compared to $12.1 million, or 8.0% of revenue in the 2023 Second Quarter.

Operating income was $19.6 million for the 2024 Second Quarter compared to $20.1 million for the 2023 Second Quarter.

Interest expense decreased $0.7 million to $2.0 million for the 2024 Second Quarter compared to $2.6 million in the 2023 Second Quarter due to a lower outstanding balance on our revolver, which was paid down in May 2023. The interest rate on the Company’s credit facility was 4.7% for the 2024 Second Quarter and 5.7% for the 2023 Second Quarter, with an all-in effective interest rate, including all associated costs of 5.4% and 6.0% over the same periods, respectively.

Interest income from investing excess cash (primarily proceeds from the secondary offering sale of the Company’s stock completed in May 2023) in a high-yield savings account was $1.1 million during the 2024 Second Quarter compared to $0.5 million in the 2023 Second Quarter.   

The Company revalued contingent and put-right liabilities related to certain acquisitions and recognized a net expense of $4.3 million (an increase in the related liabilities) in the 2024 Second Quarter compared to an income of $0.7 million (a decrease in the related liabilities) in the 2023 Second Quarter.  

The provision for income taxes was $3.1 million in the 2024 Second Quarter compared to $4.2 million during the 2023 Second Quarter while the effective tax rates were 29.1% and 27.9% over the same periods, respectively.

Total cash and cash equivalents were $112.9 million as of June 30, 2024, compared to $152.8 million at December 31, 2023.  Additionally, the Company had $142.5 million of outstanding borrowings and $175.0 million in available credit under its credit facilities as of June 30, 2024, compared to $144.4 million of outstanding borrowings and $175.0 million in available credit under its credit facilities as of December 31, 2023.

Founded in 1990, U.S. Physical Therapy, Inc. currently operates 680 outpatient physical therapy clinics in 42 states. The Company’s clinics provide preventative and post-operative care for a variety of orthopedic-related disorders and sports-related injuries, treatment for neurologically related injuries and rehabilitation of injured workers. In addition to owning and operating clinics, the Company manages 41 physical therapy facilities for unaffiliated third parties, including hospitals and physician groups. The Company also has an industrial injury prevention services business which provides onsite services for clients’ employees including injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations, and ergonomic assessments.

More information about U.S. Physical Therapy, Inc. is available at www.usph.com. The information included on that website is not incorporated into this press release. 

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

		For the Three Months Ended								For the Six Months Ended
		June 30, 2024				June 30, 2023				June 30, 2024				June 30, 2023
Net patient revenue		$	140,271			$	129,280			$	271,346			$	255,861
Other revenue			26,919				22,205				51,519				44,133
Net revenue			167,190				151,485				322,865				299,994
Operating cost:
Salaries and related costs			96,334				86,871				190,065				172,911
Rent, supplies, contract labor and other			35,277				30,844				67,193				60,944
Provision for credit losses			1,717				1,563				3,344				3,075
Total operating cost			133,328				119,278				260,602				236,930
Gross profit			33,862				32,207				62,263				63,064
Corporate office costs			14,249				12,145				28,334				26,004
Operating income			19,613				20,062				33,929				37,060
Other income (expense):
Interest expense, debt and other			(1,980	)			(2,633	)			(3,948	)			(5,193	)
Interest income from investments			1,074				517				2,617				517
Change in fair value of contingent earn-out consideration			(4,046	)			708				(3,434	)			10
Change in revaluation of put-right liability			(223	)			(50	)			(303	)			(199	)
Equity in earnings of unconsolidated affiliate			248				326				519				600
Relief Funds			-				-				-				467
Other			109				165				171				229
Total other income (expense)			(4,818	)			(967	)			(4,378	)			(3,569	)
Income before taxes			14,795				19,095				29,551				33,491
Provision for income taxes			3,083				4,231				6,222				7,200
Net income			11,712				14,864				23,329				26,291
Less: Net income attributable to non-controlling interest:
Redeemable non-controlling interest - temporary equity			(3,314	)			(2,920	)			(5,541	)			(5,640	)
Non-controlling interest - permanent equity			(892	)			(1,025	)			(2,236	)			(2,322	)
			(4,206	)			(3,945	)			(7,777	)			(7,962	)
Net income attributable to USPH shareholders		$	7,506			$	10,919			$	15,552			$	18,329
Basic and diluted earnings per share attributable to USPH shareholders (1)		$	0.47			$	0.64			$	0.93			$	1.22
Shares used in computation - basic and diluted			15,072				13,720				15,044				13,375
Dividends declared per common share		$	0.44			$	0.43			$	0.88			$	0.86

		For the Three Months Ended								For the Six Months Ended
		June 30, 2024				June 30, 2023				June 30, 2024				June 30, 2023
Net income		$	11,712			$	14,864			$	23,329			$	26,291
Other comprehensive (loss) gain:
Unrealized (loss) gain on cash flow hedge			(31	)			2,881				1,750				1,064
Tax effect at statutory rate (federal and state)			8				(736	)			(447	)			(272	)
Comprehensive income		$	11,689			$	17,009			$	24,632			$	27,083
Comprehensive income attributable to non-controlling interest			(4,206	)			(3,945	)			(7,777	)			(7,962	)
Comprehensive income attributable to USPH shareholders		$	7,483			$	13,064			$	16,855			$	19,121

(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)

		June 30, 2024				December 31, 2023
ASSETS		(unaudited)
Current assets:
Cash and cash equivalents		$	112,911			$	152,825
Patient accounts receivable, less provision for credit losses of $3,184  and $2,736, respectively			54,659				51,866
Accounts receivable - other			21,669				17,854
Other current assets			12,438				10,830
Total current assets			201,677				233,375
Fixed assets:
Furniture and equipment			65,775				63,982
Leasehold improvements			48,730				46,941
Fixed assets, gross			114,505				110,923
Less accumulated depreciation and amortization			(88,277	)			(84,821	)
Fixed assets, net			26,228				26,102
Operating lease right-of-use assets			105,484				103,431
Investment in unconsolidated affiliate			12,243				12,256
Goodwill			548,970				509,571
Other identifiable intangible assets, net			123,903				109,682
Other assets			4,629				2,821
Total assets		$	1,023,134			$	997,238
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTEREST
Current liabilities:
Accounts payable - trade		$	4,100			$	3,898
Accrued expenses			58,056				55,344
Current portion of operating lease liabilities			35,243				35,252
Current portion of term loan and notes payable			9,700				7,691
Total current liabilities			107,099				102,185
Notes payable, net of current portion			1,511				1,289
Term loan, net of current portion and deferred financing costs			134,188				137,702
Deferred taxes			26,531				24,815
Operating lease liabilities, net of current portion			78,329				76,653
Other long-term liabilities			5,507				2,356
Total liabilities			353,165				345,000
Redeemable non-controlling interest - temporary equity			184,354				174,828
Commitments and Contingencies
U.S. Physical Therapy, Inc. ("USPH") shareholders’ equity:
Preferred stock, $.01 par value, 500,000 shares authorized, no shares issued and outstanding			-				-
Common stock, $.01 par value, 20,000,000 shares authorized,
17,291,366 and 17,202,291 shares issued, respectively			172				172
Additional paid-in capital			285,462				281,096
Accumulated other comprehensive gain			4,084				2,782
Retained earnings			226,482				223,772
Treasury stock at cost, 2,214,737 shares			(31,628	)			(31,628	)
Total USPH shareholders’ equity			484,572				476,194
Non-controlling interest - permanent equity			1,043				1,216
Total USPH shareholders' equity and non-controlling interest - permanent equity			485,615				477,410
Total liabilities, redeemable non-controlling interest,
USPH shareholders' equity and non-controlling interest - permanent equity		$	1,023,134			$	997,238

		For the Six Months Ended
		June 30, 2024				June 30, 2023
OPERATING ACTIVITIES
Net income including non-controlling interest		$	23,329			$	26,291
Adjustments to reconcile net income including non-controlling interest to net cash     provided by operating activities:
Depreciation and amortization			8,609				7,615
Provision for credit losses			3,344				3,075
Equity-based awards compensation expense			3,916				3,592
Amortization of debt issue costs			210				210
Change in deferred income taxes			770				1,799
Change in revaluation of put-right liability			303				199
Change in fair value of contingent earn-out consideration			3,434				(10	)
Equity of earnings in unconsolidated affiliate			(519	)			(600	)
Loss on sale of fixed assets			51				63
Changes in operating assets and liabilities:
Increase in patient accounts receivable			(5,110	)			(5,341	)
Increase in accounts receivable - other			(2,351	)			(85	)
(Increase) decrease in other current and long term assets			(1,642	)			593
(Decrease) increase in accounts payable and accrued expenses			(1,481	)			1,125
Increase in other long-term liabilities			548				253
Net cash provided by operating activities			33,411				38,779
INVESTING ACTIVITIES
Purchase of fixed assets			(4,174	)			(4,523	)
Purchase of majority interest in businesses, net of cash acquired			(38,695	)			(8,040	)
Purchase of redeemable non-controlling interest, temporary equity			(6,230	)			(7,804	)
Purchase of non controlling interest, permanent equity			(527	)			(39	)
Proceeds on sale of non-controlling interest, permanent equity			26				-
Proceeds on sale of partnership interest - redeemable non-controlling interest			69				237
Distributions from unconsolidated affiliate			532				502
Proceeds on sale of fixed assets			-				7
Other			244				-
Net cash used in investing activities			(48,755	)			(19,660	)
FINANCING ACTIVITIES
Proceeds from revolving facility			-				24,000
Proceeds from issuance of common stock pursuant to the secondary public offering,             net of issuance costs			-				163,655
Distributions to non-controlling interest, permanent and temporary equity			(8,318	)			(8,431	)
Cash dividends paid to shareholders			(13,264	)			(11,238	)
Principal payments on notes payable			(1,113	)			(1,086	)
Payments on term loan			(1,875	)			(1,875	)
Payments on revolving facility			-				(55,000	)
Net cash (used in) provided by financing activities			(24,570	)			110,025
Net (decrease) increase in cash and cash equivalents			(39,914	)			129,144
Cash and cash equivalents - beginning of period			152,825				31,594
Cash and cash equivalents - end of period		$	112,911			$	160,738
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes		$	4,932			$	1,241
Interest paid			3,708				4,011
Non-cash investing and financing transactions during the period:
Purchase of interest in businesses - seller financing portion			955				360
Deferred payments related to purchase of interest in business			-				180
Fair market value of initial contingent consideration related to purchase of interest of businesses			2,800				200
Offset of notes receivable associated with purchase of redeemable non-controlling interest			75				-
Notes payable related to purchase of non-controlling interest, temporary equity			22				-
Notes payable related to purchase of redeemable non-controlling interest, temporary equity			-				621
Notes receivable related to sale of redeemable non-controlling interest, temporary equity			402				2,687
Notes receivable related to the sale of non-controlling interest, permanent equity			243				-

The following tables provide details of the basic and diluted earnings per share computation and reconcile net income attributable to USPH shareholders calculated in accordance with GAAP to Adjusted EBITDA and Operating Results (non-GAAP measures). Management believes providing Adjusted EBITDA and Operating Results to investors is useful information for comparing the Company's period-to-period results as well as for comparing with other similar businesses since most do not have redeemable instruments and therefore have different equity structures. Management uses Adjusted EBITDA and Operating Results, which eliminate certain items described above that can be subject to volatility and unusual costs, as the principal measures to evaluate and monitor financial performance period over period.

Adjusted EBITDA, a non-GAAP measure, is defined as net income attributable to USPH shareholders before interest income, interest expense, taxes, depreciation, amortization, change in fair value of contingent earn-out consideration, Relief Funds, changes in revaluation of put-right liability, equity-based awards compensation expense, clinic closure costs, other income and related portions for non-controlling interests.

Operating Results, a non-GAAP measure, equals net income attributable to USPH shareholders less, changes in revaluation of a put-right liability, Relief Funds, clinic closure costs, changes in fair value of contingent earn-out consideration, and any allocations to non-controlling interests, all net of taxes. Operating Results per share also excludes the impact of the revaluation of redeemable non-controlling interest and the associated tax impact.

Adjusted EBITDA and Operating Results are not measures of financial performance under GAAP. Adjusted EBITDA and Operating Results should not be considered in isolation or as an alternative to, or substitute for, net income attributable to USPH shareholders presented in the consolidated financial statements.