US Physical Therapy (USPH) Reports In-Line Q1 EPS, Beats on Revenues

US Physical Therapy (NYSE: USPH) reported Q1 EPS of $0.56, in-line with the analyst estimate of $0.56. Revenue for the quarter came in at $108.3 million versus the consensus estimate of $106.44 million.

First Quarter 2018 Compared to First Quarter 2017

• Net revenues increased $10.8 million or 11.0% from $97.6 million in the 2017 first quarter to $108.3 million in the 2018 first quarter, primarily due to a 7.4% increase in net patient revenues from the physical therapy operations, an increase of 20.4% in revenuefrom management contracts and an increase in the revenue from the industrial injury prevention business due to a full quarter of operations versus one month in the 2017 period. The industrial injury prevention business was acquired in March 2017.
• Net patient revenues from physical therapy operations increased approximately $6.9 million, or 7.4%, to $100.6 million in the 2018 first quarter from $93.7 million in the 2017 first quarter due to an increase in total patient visits of 7.2% from 892,000 to 956,000 and an increase in the average net patient revenue per visit to $105.15 from $105.04. Of the $6.9 million increase, $5.9 million related to clinics opened or acquired after March 31, 2017 (“New Clinics”) and an increase of $1.0 million in net patient revenues related to clinics opened or acquired prior to April 1, 2017 (“Mature Clinics”).
• Revenue from management contracts was $2.2 million in the 2018 first quarter as compared to $1.9 million for the 2017 first quarter. The revenue from the industrial injury prevention business was $4.9 million for the 2018 first quarter compared to $1.5 million in the 2017 first quarter. Other revenue was $0.7 million in the 2018 first quarter and $0.5 million in the 2017 period.
• Total operating costs were $85.1 million, or 78.6% of net revenues, in the 2018 first quarter as compared to $76.8 million, or 78.7% of net revenues, in the 2017 first quarter. The $8.3 million increase was attributable to $5.5 million in operating costs related to New Clinics, an increase of $2.8 million related to the industrial injury prevention business due to a full quarter of operations and an increase of $0.3 million related to management contracts while costs of Mature Clinics were reduced by $0.3 million. Total salaries and related costs, including those from New Clinics, were 57.5% of net revenue in the recent quarter versus 57.2% for the 2017 first quarter. Rent, supplies, contract labor and other costs as a percentage of net revenue were 20.1% for the recent quarter versus 20.6% for the 2017 first quarter. The provision for doubtful accounts as a percentage of net revenue was 1.0% for the 2018 first quarter as compared to 0.9% in the 2017 first quarter.
• The gross profit for the 2018 first quarter grew by $2.5 million, or 11.9%, to $23.2 million, as compared to $20.7 million in the first quarter of 2017. The gross profit percentage was 21.4% of net revenue in the recent period as compared to 21.3% for the 2017 first quarter. The gross profit percentage for the Company’s physical therapy clinics was 21.9% in the recent quarter as compared to 21.5% in the 2017 first quarter. The gross profit percentage on management contracts was 13.8% in the 2018 first quarter as compared to 14.8% in the 2017 first quarter. The gross profit percentage for the industrial injury prevention business was 15.8% for the recent quarter as compared to 14.3% for the one month of operation in the 2017 period.
• Corporate office costs were $10.2 million in the 2018 first quarter compared to $8.5 million in the 2017 first quarter. Corporate office costs were 9.4% of net revenues for the 2018 first quarter compared to 8.8% for the 2017 first quarter.
• Operating income for the recent quarter increased 7.0% to $13.1 million as compared to $12.2 million in the 2017 first quarter.
• The Company no longer has mandatorily redeemable non-controlling interest. See discussion following – Redeemable Non-Controlling Interests.
• Interest expense – debt and other was $0.6 million in the 2018 first quarter and $0.4 million in the 2017 first quarter.
• The provision for income tax for the 2018 first quarter was $2.5 million and for the 2017 first quarter was $1.8 million both of which are inclusive of the reduction of $0.3 million and $0.8 million, respectively, for the excess tax benefit, which is a component of the provision for income taxes, related to equity compensation. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest was 25.8% and 27.3%, respectively, for the 2018 and 2017 first quarters.
• Net income attributable to non-controlling interests (permanent equity) was $1.2 million in the 2018 first quarter as compared to $1.2 million in the 2017 first quarter. Net income attributable to redeemable non-controlling interests (temporary equity) was $1.7 million in the 2018 first quarter.
• Same store revenues for de novo and acquired clinics open for one year or more increased 1.9%. Visits increased 1.4% for de novo and acquired clinics open for one year or more and the same store net rate increased by approximately 0.5%.

For earnings history and earnings-related data on US Physical Therapy (USPH) click here.

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