US Physical Therapy (NYSE: USPH) reported Q1 EPS of $0.30, $0.10 worse than the analyst estimate of $0.40. Revenue for the quarter came in at $112.72 million versus the consensus estimate of $106.59 million.

First Quarter 2020 Compared to First Quarter 2019

• Excluding the loss of revenues from the clinics within the partnership sold in June of 2019 (“sold clinics”) of $5.7 million for the 2019 First Quarter, net revenues for the 2020 First Quarter of $112.7 million increased 2.0% from adjusted revenue of $110.5 million ($116.2 million reported less the $5.7 million) for the 2019 First Quarter despite the adverse effects, beginning in mid-March, of the COVID-19 pandemic.
• Excluding the $5.7 million mentioned above, net patient revenues from physical therapy operations decreased $0.8 million, or 0.8%, to $100.1 million in the 2020 First Quarter from $101.0 million ($106.7 million reported less the $5.7 million) in the 2019 First Quarter, primarily due to the adverse effects of COVID-19. Management estimates that, due to the virus, the Company lost approximately 77,000 physical therapy patient visits and more than $8 million in revenue and contribution margin. Of the $0.8 million ($6.5 million less $5.7 million) decrease in net patient revenues described above, $5.4 million related to a decrease in business of clinics opened or acquired prior to April 1, 2019 (“Mature Clinics”) offset by an increase of $4.6 million related to clinics opened or acquired after March 31, 2019 (“New Clinics”).
• The average net patient revenue per visit was $103.11 for the 2020 First Quarter and $106.49 for the 2019 First Quarter. Total patient visits were 971,000 in the 2020 First Quarter and 1,001,510 for the 2019 First Quarter (inclusive of 49,300 for the sold clinics). Excluding the 49,300 visits, the net patient revenue per visit was $106.02 for the 2019 First Quarter.
• Revenue from physical therapy management contracts was $2.1 million for both the 2020 and 2019 quarters.
• Revenue from the industrial injury prevention business increased 43.1% to $9.9 million in the 2020 First Quarter compared to $6.9 million in the 2019 First Quarter due to internal growth and an acquisition. Management estimates that the industrial injury prevention business lost approximately $0.1 million in revenue and related contribution margin in March 2020 due to the pandemic. Other miscellaneous revenue was $0.6 million in the 2020 First Quarter and $0.5 million in the 2019 First Quarter.
• Total operating costs, excluding closure costs, were $93.3 million in the 2020 First Quarter, or 82.7% of net revenues, as compared to $89.5 million in the 2019 First Quarter, or 77.0% of net revenues. The $3.8 million increase was attributable to $5.2 million in operating costs related to New Clinics and $2.6 million related to the industrial injury prevention business, primarily related to the acquisition, offset by a decrease of $4.0 million related to Mature Clinics. Closure costs of $3.8 million include estimates of remaining lease obligations, write-off of goodwill and other costs. The Company has incurred additional closure costs in the second quarter. Total salaries and related costs, including physical therapy operations and the industrial injury prevention business, were 61.2% of net revenues in the 2020 First Quarter versus 57.0% in the 2019 First Quarter. Rent, supplies, contract labor and other costs as a percentage of net revenues were 20.3% in the 2020 First Quarter versus 19.0% in the 2019 First Quarter. The provision for doubtful accounts as a percentage of net revenue was 1.2 % in the 2020 First Quarter and 1.0% in the 2019 First Quarter.
• Gross profit for the 2020 First Quarter, excluding closure costs, was $19.4 million, as compared to $26.7 million in the 2019 First Quarter. The gross profit percentage, excluding closure costs, decreased to 17.2% of net revenue in the 2020 First Quarter as compared to 23.0% in the 2019 First Quarter. The gross profit percentage for the Company’s physical therapy clinics, excluding closure costs, was 17.3% in the 2020 First Quarter as compared to 23.1% in the 2019 First Quarter. The gross profit percentage on physical therapy management contracts was 15.7% in the 2020 First Quarter as compared to 18.5% in the 2019 First Quarter. The gross profit for the industrial injury prevention business was $1.7 million, or 16.8%, in the 2020 First Quarter as compared to $1.5 million, or 22.3%, in the 2019 First Quarter.
• Corporate office costs were $11.7 million in the 2020 First Quarter compared to $11.3 million in the 2019 First Quarter. Corporate office costs were 10.4% of net revenues for the 2020 First Quarter as compared to 9.7% for the 2019 First Quarter.
• Operating income for the 2020 First Quarter was $4.0 million as compared to $15.4 million for the 2019 First Quarter. Operating income as a percentage of net revenue decreased from 13.3% in the 2019 period to 3.6% in 2020. See discussion above related to effects of COVID-19.
• Interest expense was $427,000 in the 2020 First Quarter and $358,000 in the 2019 First Quarter due to higher borrowings under the Company’s revolving credit line.
• The provision for income tax was $0.3 million for the 2020 First Quarter and $2.7 million for the 2019 First Quarter. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest was 22.3% for the 2020 First Quarter and 24.3% for the 2019 First Quarter.
• Net income attributable to non-controlling interests (permanent equity) was $0.5 million in the 2020 First Quarter and $1.5 million in the 2019 First Quarter. Net income attributable to redeemable non-controlling interests (temporary equity) was $1.8 million in the 2020 First Quarter and $2.4 million in the 2019 First Quarter.

Chris Reading, Chief Executive Officer, said, “This has obviously been a very challenging time for everyone. We were able to make changes early on which has helped our cash position while maintaining a high level of needed service in a safe environment for our patients as well as our staff. We are seeing communities begin to re-open and our volumes of new patient referrals as well as patient visits have begun to increase. In our industrial injury prevention business, the impact has been considerably less than in our core physical therapy business. Our teams in Houston and around the country in our individual partnerships are doing everything possible to conserve resources while working to carefully and safely ramp up the business. We have a strong partner-centric Company with an excellent balance sheet and these will continue to be our strengths as we work our way through this pandemic.”

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