US Physical Therapy (NYSE: USPH) reported Q1 EPS of $0.66, $0.06 better than the analyst estimate of $0.60. Revenue for the quarter came in at $116.23 million versus the consensus estimate of $116.05 million.

First Quarter 2019 Compared to First Quarter 2018

• Net revenues increased $7.9 million, or 7.3%, from $108.3 million in the first quarter of 2018, to $116.2 million in the first quarter of 2019, due to an increase in net patient revenues from physical therapy operations and an increase in the revenue from the industrial injury prevention business. Both increases are due to internal growth and acquisitions. The first quarter of 2019 had 63 business days versus 64 in the first quarter of 2018.
• Net patient revenues from physical therapy operations increased approximately $6.1 million, or 6.1%, to $106.7 million in the first quarter of 2019 from $100.6 million in the first quarter of 2018 due to an increase in total patient visits of 4.7% from 956,000 to 1,001,500 and an increase in the average net patient revenue per visit to $106.49 from $105.15. Of the $6.1 million increase in net patient revenues, $3.3 million related to an increase in business of clinics opened or acquired prior to April 1, 2018 (“Mature Clinics”) and $2.8 million related to clinics opened or acquired after March 31, 2018 (“New Clinics”). Revenue from physical therapy management contracts was $2.1 million for the first quarter of 2019 and $2.2 million for the comparable 2018 period.
• Revenue from the industrial injury prevention business increased 42.2% to $6.9 million in the first quarter of 2019 compared to $4.9 million in the first quarter 2018 due to internal growth and an April 2018 acquisition. Other miscellaneous revenue was $0.5 million in the first quarter of 2019 and $0.7 million in the first quarter of 2018.
• Total operating costs were $89.5 million, or 77.0% of net revenues, in the first quarter of 2019 as compared to $85.1 million, or 78.6% of net revenues, in the first quarter of 2018. The $4.4 million increase was attributable to $1.9 million in operating costs related to Mature Clinics, an increase of $1.4 million related to New Clinics, an increase of $1.3 million related to the industrial injury prevention business and a reduction in management contracts costs of $0.2 million. Total salaries and related costs, including physical therapy operations and the industrial injury prevention business, were 57.0% of net revenues in the recent quarter versus 57.5% in the first quarter of 2018. Rent, supplies, contract labor and other costs as a percentage of net revenues were 19.0% in the first quarter of 2019 versus 20.1% in the first quarter of 2018. The provision for doubtful accounts as a percentage of net revenue was 1.0% for both periods.
• The gross profit for the first quarter of 2019 grew by 15.1% or $3.5 million to $26.7 million, as compared to $23.2 million in the first quarter of 2018. The gross profit percentage increased by 160 basis points to 23.0% of net revenue in the recent period as compared to 21.4% in the first quarter 2018. The gross profit percentage for the Company’s physical therapy clinics increased by 120 basis points to 23.1% in the recent quarter as compared to 21.9% in the first quarter of 2018. The gross profit percentage on physical therapy management contracts increased by 470 basis points to 18.5% in the 2019 first quarter as compared to 13.8% in the 2018 first quarter. The gross profit percentage for the industrial injury prevention business increased by 650 basis points to 22.3% in the recent quarter as compared to 15.8% in the 2018 period.
• Corporate office costs were $11.3 million in the first quarter of 2019 compared to $10.2 million in the first quarter of 2018. Corporate office costs were 9.7% of net revenues for the first quarter of 2019 quarter as compared to 9.4% for the first quarter of 2018.
• Operating income for the first quarter of 2019 increased 18.2% to $15.4 million as compared to $13.1 million in the first quarter of 2018. Operating income as a percentage of net revenue increased by 130 basis points from 12.0% in the 2018 period to 13.3% in the recent quarter.
• Interest expense – debt and other was $358,000 in the first quarter of 2019 and $553,000 in first quarter of 2018 due to lower borrowings under the Company’s revolving credit line.
• The provision for income tax for the first quarter of 2019 was $2.7 million and $2.5 million in the 2018 first quarter. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest was 24.3% for the first quarter of 2019 and 25.8% for the first quarter of 2018.
• Net income attributable to non-controlling interests (permanent equity) was $1.5 million in the first quarter of 2019 and $1.2 million in the first quarter of 2018. Net income attributable to redeemable non-controlling interests (temporary equity) was $2.4 million in the first quarter of 2019 and $1.7 million in the first quarter of 2018.
• Same store revenues for de novo and acquired clinics open for one year or more increased 4.7% in the most recent quarter. Visits increased 3.6% for de novo and acquired clinics open for one year or more while the same store net rate increased 1.0%.

Chris Reading, Chief Executive Officer, said, “Despite a historically long and difficult winter our dedicated team of partners, clinicians and support staff got us started off on the right foot for 2019. Cost control coupled with good volume helped to create some meaningful margin improvement in all aspects of our business. With our recently announced industrial injury prevention acquisition coupled with continued opportunity, internally and externally, we look forward to a good year ahead.”

Larry McAfee, Chief Financial Officer, noted, “Strong net cash flow in the quarter enabled the Company to reduce credit line borrowings by approximately 24% to $29,000,000, the lowest since 2013.”

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