US Physical Therapy (USPH) Tops Q2 EPS by $1.03, Revenues Miss

US Physical Therapy (NYSE: USPH) reported Q2 EPS of $0.85, $1.03 better than the analyst estimate of ($0.18). Revenue for the quarter came in at $83.9 million versus the consensus estimate of $87.67 million.

Second Quarter 2020 Compared to Second Quarter 2019

• Reported net revenues in the second quarter of 2020 was $83.9 million as compared to $126.4 million in the 2019 Second Quarter. Adjusted for the clinics sold in 2019 and 2020, net patient revenues were $83.7 million in the 2020 Second Quarter compared to $118.8 million in the 2019 Second Quarter. The remaining reduction in revenue of $35.1 million is due to the adverse effects of the COVID-19 pandemic.
• Net patient revenues from physical therapy operations was approximately $72.3 million in the 2020 Second Quarter and $113.4 million in the 2019 Second Quarter. Included in net patient revenues for the 2020 Second Quarter was $5.0 million related to clinics opened or acquired after June 30, 2019 (“New Clinics”). Included in net patient revenues for the 2019 Second Quarter was $7.8 million related in clinics sold in the six months ended June 30, 2019 and 2020. During the 2019 six month period, the Company sold its interest in a partnership that included 30 clinics and during the 2020 six month period, the Company sold its interest in 11 closed clinics.
• The average net patient revenue per visit was $106.97 for the 2020 Second Quarter and $107.16 for the 2019 Second Quarter. Total patient visits were 675,700 in the 2020 Second Quarter and 1,058,000 for the 2019 Second Quarter.
• Revenue from physical therapy management contracts was $1.6 million for the second quarter of 2020 and $2.2 million in 2019 comparable period.
• Revenue from the industrial injury prevention business was $9.7 million in the 2020 Second Quarter compared to $10.3 million in the 2019 Second Quarter.
• Other miscellaneous revenue was $0.3 million in the 2020 Second Quarter and $0.5 million in the 2019 Second Quarter. Other miscellaneous revenue include physical therapy services, including athletic trainers, provided on-site such as for schools.
• Total operating costs, excluding closure costs, were $64.5 million in the 2020 Second Quarter, or 76.9% of net revenues, as compared to $94.9 million in the 2019 Second Quarter, or 75.1% of net revenues. Included in operating costs for the 2020 quarter was $3.8 million related to New Clinics, of which $2.6 million related the clinics acquired in September 2019 and February 2020. Adjusted for the operating costs for clinics related to the partnership interest sold in 2019 of $5.8 million, operating costs for clinic opened or acquired prior to July 1, 2019 (“Mature Clinics”) were reduced by $26.9 million in the Second Quarter 2020 compared to the Second Quarter 2019 . In addition, operating costs related to the industrial injury prevention business were reduced by $0.8 million and related to management contracts $0.7 million. Closure costs of $0.1 million include estimates of remaining lease obligations and other costs. Total salaries and related costs, including physical therapy operations and the industrial injury prevention business, were 51.8% of net revenues in the 2020 Second Quarter versus 55.9% in the 2019 Second Quarter. Rent, supplies, contract labor and other costs as a percentage of net revenues were 24.2% in the 2020 Second Quarter versus 18.2% in the 2019 Second Quarter. The provision for doubtful accounts as a percentage of net revenue was 0.9% in the 2020 Second Quarter and 1.0% in the 2019 Second Quarter.
• Gross profit for the 2020 Second Quarter, excluding closure costs, was $19.3 million, as compared to $31.4 million in the 2019 Second Quarter. The gross profit percentage, excluding closure costs, was 23.1% of net revenue in the 2020 Second Quarter as compared to 24.9% in the 2019 Second Quarter. The gross profit percentage for the Company’s physical therapy clinics, excluding closure costs, was 21.7% in the 2020 Second Quarter as compared to 24.7% in the 2019 Second Quarter. The gross profit percentage on physical therapy management contracts was 26.9% in the 2020 Second Quarter as compared to 15.4% in the 2019 Second Quarter. The gross profit for the industrial injury prevention business was $3.2 million, or 32.9%, in the 2020 Second Quarter as compared to $3.0 million, or 29.2%, in the 2019 Second Quarter.
• Corporate office costs were $9.0 million in the 2020 Second Quarter compared to $11.5 million in the 2019 Second Quarter. Corporate office costs were 10.8% of net revenues for the 2020 Second Quarter as compared to 9.1% for the 2019 Second Quarter.
• Operating income for the 2020 Second Quarter was $10.3 million as compared to $19.9 million for the 2019 Second Quarter. Operating income as a percentage of net revenue decreased from 15.7% in the 2019 period to 12.2% in 2020. For the 2020 Second Quarter, operating income increased $6.2 million or 3.6% compared to the first quarter of 2020. See discussion above related to effects of COVID-19.
• Included in other income was the gain of $1.1 million in the second quarter of 2020 resulting from the sale of 11 previously closed clinics and, as previously disclosed, a gain of $5.8 million in the second quarter of 2019 resulted from the sale of a partnership interest which included 30 clinics. Also, included in other income in the second quarter of 2020 was $7.9 of Relief Funds. The Relief Funds do not have to be repaid and were used for operations and offset of reduced revenues due to the COVID-19 pandemic.
• Interest expense was $653,000 in the 2020 Second Quarter and $607,000 in the 2019 Second Quarter due to higher borrowings under the Company’s revolving credit line.
• The provision for income tax was $3.9 million for the 2020 Second Quarter and $5.3 million for the 2019 Second Quarter. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest was 27.5% for the 2020 Second Quarter and 26.7% for the 2019 Second Quarter.
• Net income attributable to non-controlling interests (permanent equity) was $1.5 million in the 2020 Second Quarter and $1.8 million in the 2019 Second Quarter. Net income attributable to redeemable non-controlling interests (temporary equity) was $3.0 million in the 2020 Second Quarter and $3.4 million in the 2019 Second Quarter.

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

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