Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• US Physical Therapy Inc (NYSE:USPH) achieved a record high in average visits per day at 31.7, indicating strong demand and operational efficiency.
• The company reported a 13% year-over-year increase in total patient volume, showcasing robust growth in service utilization.
• USPH completed seven acquisitions in 2024, expanding its presence into new states like Colorado and New York, which are performing well.
• The injury prevention business saw a revenue growth of over 32% in the fourth quarter, contributing significantly to the company's overall performance.
• USPH's balance sheet remains strong with a low debt level and a revolving credit facility, positioning the company well for future acquisitions and growth.

Negative Points

• The company faces challenges in controlling costs per visit due to a competitive hiring environment for therapists, impacting profitability.
• USPH absorbed a 1.8% Medicare rate reduction in 2024, and a further 2.9% reduction is expected in 2025, posing a revenue headwind.
• Operating costs increased by 16.6% in the fourth quarter, partly due to acquisitions, which pressured margins.
• The integration of Metro PT, acquired in November, resulted in a lower average rate, affecting overall revenue per visit.
• The company's PT margin decreased from 19.5% in the fourth quarter of 2023 to 17.9% in the same period of 2024, indicating margin compression.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with USPH.

Q: How is US Physical Therapy Inc. planning to handle the Medicare rate cut and what are the expectations for volume growth in 2025? A: Kerrie Hendrickson, CFO, explained that despite the 2.9% Medicare rate reduction, the company expects to increase rates through negotiations with other payers. They anticipate a 2-3% volume growth at mature clinics in 2025, aided by the closure of underperforming clinics which will positively impact financials by $1.5 million.

Q: What are the current challenges and strategies regarding recruitment and retention of therapists? A: Chris Redding, CEO, acknowledged the competitive market for hiring therapists. The company has invested in infrastructure and recruitment systems, resulting in improved applicant numbers. They aim to remain competitive to support volume growth and have stability compared to competitors.

Q: Can you elaborate on the growth and future outlook of the Injury Prevention (IIP) segment? A: Chris Redding highlighted that the IIP segment has shown consistent double-digit growth, driven by cross-selling and expanding industry verticals. The company has strong visibility into future growth, supported by successful acquisitions and increasing awareness of injury prevention's importance in reducing musculoskeletal costs.

Q: How is the integration of Metro Physical Therapy progressing, and what are the plans for expansion in New York? A: Eric Williams, President and COO East, stated that Metro is performing well, and the New York market presents significant growth opportunities. The company plans to expand both in Long Island and into other boroughs and New Jersey, leveraging Metro's strong management team and de novo pipeline.

Q: What are the expectations for cash flow and capital allocation in 2025? A: Kerrie Hendrickson indicated that the company expects cash flow growth in 2025, supported by top-line growth and a modest dividend increase. The focus remains on acquisitions, with a well-positioned capital structure to support these initiatives.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.