U S PHYSICAL THERAPY INC /NV - Quarter Report: 2023 March (Form 10-Q)

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

FOR THE QUARTERLY PERIOD ENDED March 31, 2023

OR

FOR THE TRANSITION PERIOD FROM _____TO _____

COMMISSION FILE NUMBER 1-11151

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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes     ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and such files).   ☒  Yes     ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

As of May 5, 2023 the number of shares outstanding (issued less treasury stock) of the registrant’s common stock, par value $.01 per share, was: 13,062,583.

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PART I—FINANCIAL INFORMATION - UNAUDITED

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

See notes to unaudited consolidated financial statements.

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF NET INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

See notes to unaudited consolidated financial statements.

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

See notes to unaudited consolidated financial statements.

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(IN THOUSANDS)

		U.S.Physical Therapy, Inc.
		Common Stock								Additional				Accumulated Other				Retained				Treasury Stock								Total Shareholders’				Non-Controlling
		Shares				Amount				Paid-In Capital				Comprehensive Gain				Earnings				Shares				Amount				Equity				Interests				Total
Balance December 31, 2022			15,216				152			$	110,317				4,004			$	232,948				(2,215	)		$	(31,628	)		$	315,793			$	1,260			$	317,053
Issuance of restricted stock, net of cancellations			61				-				-				-				-				-				-				-				-				-
Revaluation of redeemable non-controlling interest, net of tax			-				-				-				-				(119	)			-				-				(119	)			-				(119	)
Compensation expense - equity-based awards			-				-				1,806				-				-				-				-				1,806				-				1,806
Dividends payable to USPH shareholders			-				-				-				-				(5,617	)			-				-				(5,617	)			-				(5,617	)
Distributions to non-controlling interest partners - permanent equity			-				-				-				-				-				-				-				-				(1,139	)			(1,139	)
Deferred taxes related to redeemable non-controlling interest - temporary equity			-				-				-				-				137				-				-				137				-				137
Other			-				-				-				-				1				-				-				1				-				1
Net income attributable to non-controlling interest - permanent equity			-				-				-				-				-				-				-				-				1,297				1,297
Net income attributable to USPH shareholders			-				-				-				-				7,410				-				-				7,410				-				7,410
Other comprehensive gain			-				-				-				(1,353	)			-				-				-				(1,353	)			-				(1,353	)
Balance March 31, 2023			15,277				152			$	112,123			$	2,651			$	234,760				(2,215	)		$	(31,628	)		$	318,058			$	1,418			$	319,476

See notes to unaudited consolidated financial statements.

U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

1.	BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of U.S. Physical Therapy, Inc. and its subsidiaries (the “Company”). All significant intercompany transactions and balances have been eliminated.

Goodwill and Other Indefinite-Lived Intangible Assets

Redeemable Non-Controlling Interest

The non-controlling interests that are reflected as redeemable non-controlling interest in the unaudited consolidated financial statements consist of those that the owners and the Company have certain redemption rights, whether currently exercisable or not, and which currently, or in the future, require that the Company purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are met.  The purchase price is derived at a predetermined formula based on a multiple of trailing twelve months earnings performance as defined in the respective limited partnership agreements.  The redemption rights can be triggered by the owner or the Company at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction, typically three to five years, as defined in the limited partnership agreement.  The redemption rights are not automatic or mandatory (even upon death) and require either the owner or the Company to exercise its rights when the conditions triggering the redemption rights have been satisfied.

On the date the Company acquires a controlling interest in a partnership, and the limited partnership agreement for such partnership contains redemption rights not under the control of the Company, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption – Redeemable non-controlling interest – temporary equity.  Then, in each reporting period thereafter until it is purchased by the Company, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial carrying value, based on the predetermined formula defined in the respective limited partnership agreement.  As a result, the value of the non-controlling interest is not adjusted below its initial carrying value.  The Company records any adjustments in the redemption value, net of tax, directly to retained earnings and the adjustments are not reflected in the unaudited consolidated statements of net income.  Although the adjustments are not reflected in the unaudited consolidated statements of net income, current accounting rules require that the Company reflects the adjustments, net of tax, in the earnings per share calculation.  The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the unaudited consolidated statements of net income. Management believes the redemption value (i.e. the carrying amount) and fair value are the same.

Non-Controlling Interest

The Company recognizes non-controlling interest, in which the Company has no obligation but the right to purchase the non-controlling interest, as permanent equity in the unaudited consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interest is included in consolidated net income on the face of the statements of net income. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the non-controlling equity investment on the deconsolidation date.

When the purchase price of a non-controlling interest by the Company exceeds the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Additionally, operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner.

Provision for Credit Losses

The Company determines provisions for credit losses based on the specific agings and payor classifications at each clinic. The provision for credit losses is included in operating cost in the consolidated statements of net income. Net accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and provisions for credit losses, includes only those amounts the Company estimates to be collectible.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The Company did not have any accrued interest or penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the three months ended March 31, 2023. The Company records any interest or penalties, if required, in interest and other expense, as appropriate.

Fair Value of Financial Instruments

The fair value of the interest rate swap on March 31, 2023, was $3.6 million, of which $2.6 million has been included within Other current assets and $1.0 million has been included in Other assets in the accompanying consolidated balance sheet. The impact of the interest rate swap on the accompanying unaudited Consolidated Statements of Comprehensive Income was an unrealized loss of $1.4 million, net of tax, for the three months ended March 31, 2023.

Segment Reporting

Use of Estimates

In preparing the Company’s consolidated financial statements, management makes certain estimates and assumptions, especially in relation to, but not limited to, goodwill impairment, tradenames and other intangible assets, allocations of purchase price, allowance for credit losses, tax provision and contractual allowances, that affect the amounts reported in the consolidated financial statements and related disclosures. Actual results may differ from these estimates.

Recently Adopted Accounting Guidance

In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. As part of this update, convertible instruments are to be included in diluted earnings per share using the if-converted method, rather than the treasury stock method. Further, contracts which can be settled in cash or shares, excluding liability-classified share-based payment awards, are to be included in diluted earnings per share on an if-converted basis if the effect is dilutive, regardless of whether the entity or the counterparty can choose between cash and share settlement. The share-settlement presumption may not be rebutted based on past experience or a stated policy.

This pronouncement was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021. The Board specified that an entity should adopt the guidance at the beginning of its annual fiscal year. The Company adopted this pronouncement as of January 1, 2022. The adoption of ASU 2020-06 did not have a material impact on the Company’s financial statements.

2. ACQUISITIONS OF BUSINESSES

2023 Acquisition

On February 28, 2023, the Company acquired an 80% interest in a one-clinic physical therapy practice. The practice’s owners retained 20% of the equity interests. The purchase price for the 80% equity interest was approximately $6.2 million, of which $5.8 million was paid in cash and $0.4 million in the form of a note payable. The note accrues interest at 4.5% per annum and the principal and interest are payable on February 28, 2025.

The purchase price for the 2023 acquisition has been preliminarily allocated as follows (in thousands):

		Physical Therapy
		Operations
Cash paid, net of cash acquired		$	5,796
Seller note			360
Total consideration		$	6,156
Estimated fair value of net tangible assets acquired:
Total current assets		$	168
Total non-current assets			1,062
Total liabilities			(1,012	)
Net tangible assets acquired			218
Customer and referral relationships			1,586
Non-compete agreement			76
Tradenames			391
Goodwill			5,424
Fair value of non-controlling interest (classified as redeemable non-controlling interest)			(1,539	)
		$	6,156

		Physical Therapy
		Operations
Cash paid, net of cash acquired		$	59,788
Seller notes			1,574
Contingent payments			10,000
Total consideration		$	71,362
Estimated fair value of net tangible assets acquired:
Total current assets		$	1,558
Total non-current assets			7,619
Total liabilities			(9,865	)
Net tangible assets acquired			(688	)
Customer and referral relationships			18,955
Non-compete agreements			983
Tradenames			4,417
Goodwill			74,496
Fair value of non-controlling interest (classified as redeemable non-controlling interest)			(26,801	)
		$	71,362

For the 2023 and 2022 acquisitions, a majority of total current assets primarily represents accounts receivable. Total non-current assets are fixed assets and equipment used in the practice.

The purchase price plus the fair value of the non-controlling interests for the acquisitions in 2022 were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, (i.e. trade names, referral relationships and non-compete agreements) and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill.

3. REVENUE RECOGNITION

The following table details the revenue related to the various categories (in thousands):

The Company’s performance obligations are satisfied at a point in time. After the clinic has provided services and satisfied its obligation to the customer for the reimbursement rates stipulated in the payor contracts (i.e. the transaction price), the Company recognizes the revenue, net of contractual allowances, in the period in which the services are rendered. The Company recognizes the full amount of revenue and reports the contractual allowances as a contra (or offset) revenue account to report a net revenue number based on the expected collections.

4. EARNINGS PER SHARE

In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest (see Note 5 – Redeemable Non-Controlling Interest), net of tax, charged directly to retained earnings is included in the earnings per basic and diluted share calculation. The following table provides a detail of the basic and diluted earnings per share computation (in thousands, except per share data).

5. REDEEMABLE NON-CONTROLLING INTEREST

Since October 2017, when the Company acquires a majority interest (the “Acquisition”) in a physical therapy clinic business (referred to as “Therapy Practice”), these Acquisitions occur in a series of steps which are described below.

The Partnership Agreement contains provisions for the redemption of the Seller Entity Interest, either at the option of the Company (the “Call Right”) or at the option of the Seller Entity (the “Put Right”) as follows:

1.

Prior to the acquisition, the Progressive Subsidiaries were owned by a legal entity (“Progressive Parent”) controlled by its individual owners (the “ Progressive Selling Shareholders”), who work in and manage the Progressive business.

2.

In conjunction with the acquisition, the Progressive Selling Shareholders caused the Progressive Parent to transfer its ownership of the Progressive Subsidiaries into a newly-formed limited liability company (“Progressive NewCo”), in exchange for one hundred percent (100%) of the membership interests in Progressive NewCo. Therefore, in this step, Progressive NewCo became wholly-owned by the Progressive Selling Shareholders.

a.

Two years after the date a Progressive Selling Shareholder no longer is involved in the management of Progressive NewCo or

For both scenarios described above, an Employed Selling Shareholder’s ownership of his or her equity interest in the Seller Entity predates the Acquisition and the Company’s purchase of its partnership interest in NewCo. The Employment Agreement and the Non-Compete Agreement do not contain any provision to escrow or “claw back” the equity interest in the Seller Entity held by such Employed Selling Shareholder, nor the Seller Entity Interest in NewCo, in the event of a breach of the employment or non-compete terms. More specifically, even if the Employed Selling Shareholder is terminated for “cause” by NewCo, such Employed Selling Shareholder does not forfeit his or her right to his or her full equity interest in the Seller Entity and the Seller Entity does not forfeit its right to any portion of the Seller Entity Interest. The Company’s only recourse against the Employed Selling Shareholder for breach of either the Employment Agreement or the Non-Compete Agreement is to seek damages and other legal remedies under such agreements. There are no conditions in any of the arrangements with an Employed Selling Shareholder that would result in a forfeiture of the equity interest held in the Seller Entity or of the Seller Entity Interest.

For the dates indicated, the following table details the changes in the carrying amount (fair value) of the redeemable non-controlling interest (in thousands):

The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interest (in thousands):

6. GOODWILL

The changes in the carrying amount of goodwill consisted of the following (in thousands):

During the year ended December 31, 2022, the Company recorded a charge for goodwill impairment of $9.1 million related to the IIP Acquisition. The impairment is related to a change in the IIP Acquisition’s current and projected operating income as well as various market inputs based on current market conditions, including the higher interest rate environment.

7. INTANGIBLE ASSETS, NET

Intangible assets, net as of March 31, 2023, and December 31, 2022 consisted of the following (in thousands):

Tradenames, customer and referral relationships and non-compete agreements are related to the businesses acquired. The value assigned to tradenames has an indefinite life and is tested at least annually for impairment using the relief from royalty method in conjunction with the Company’s annual goodwill impairment test. The value assigned to customer and referral relationships is being amortized over their respective estimated useful lives which range from 7 to 16 years. Non-compete agreements are amortized over the respective term of the agreements which range from 5 to 6 years.

The following table details the amount of amortization expense recorded for intangible assets for the three and three months ended March 31, 2023, and 2022 (in thousands):

Based on the balance of referral relationships and non-compete agreements as of March 31, 2023, the expected amount to be amortized in 2023 and thereafter by year is as follows (in thousands):

8. ACCRUED EXPENSES

Accrued expenses as of March 31, 2023, and December 31, 2022 consisted of the following (in thousands):

9. BORROWINGS

		For the Three Months Ended
		March 31, 2023				March 31, 2022
Net income		$	11,427			$	11,982
Other comprehensive loss
Unrealized loss on cash flow hedge			(1,817	)			-
Tax effect at statutory rate (federal and state)			464				-
Comprehensive income		$	10,074			$	11,982
Comprehensive income attributable to non-controlling interest			(4,017	)			(3,183	)
Comprehensive income attributable to USPH shareholders		$	6,057			$	8,799

		March 31, 2023				March 31, 2022
Interest rate swap:
Other current assets		$	2,614			$	-
Other assets		$	947			$	-

11. LEASES

The Company has operating leases for its corporate offices and operating facilities. The Company determines if an arrangement is a lease at the inception of a contract. The Company’s operating lease terms are generally five years or less. The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating fixed lease expense is recognized on a straight-line basis over the lease term.

For the three months ended March 31, 2023, and 2022, the components of lease expense were as follows (in thousands):

* Sublease income was immaterial

Lease cost is reflected in the consolidated statement of net income in the line item – rent, supplies, contract labor and other.

Supplemental information related to leases was as follows (in thousands):

The aggregate future lease payments for operating leases as of March 31, 2023 were as follows (in thousands):

Average lease terms and discount rates were as follows:

12. SEGMENT INFORMATION

The Company’s reportable segments include the physical therapy operations segment and the industrial injury prevention services segment. Also included in the physical therapy operations segment are revenues from management contract services and other services which include services the Company provides on-site, such as schools for athletic trainers.

The Company evaluates performance of the segments based on gross profit. The Company has provided additional information regarding its reportable segments which contributes to the understanding of the Company and provides useful information.

The following table summarizes selected financial data for the Company’s reportable segments.

14. SUBSEQUENT EVENT

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

•	the multiple effects of the impact of public health crises and epidemics/pandemics, such as the novel strain of COVID-19 and its variants, for which the total financial magnitude cannot be currently estimated;

•	changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status;

•	revenue we receive from Medicare and Medicaid being subject to potential retroactive reduction;

•	changes in reimbursement rates or payment methods from third party payors including government agencies, and changes in the deductibles and co-pays owed by patients;

•	compliance with federal and state laws and regulations relating to the privacy of individually identifiable patient information, and associated fines and penalties for failure to comply;

•	competitive, economic or reimbursement conditions in our markets which may require us to reorganize or close certain clinics and thereby incur losses and/or closure costs including the possible write-down or write-off of goodwill and other intangible assets;

•	one of our acquisition agreements contains a Put Right related to a future purchase of a majority interest in a separate company;

•	the impact of COVID-19 related vaccination and/or testing mandates at the federal, state and/or local level, which could have an adverse impact on staffing, revenue, costs and the results of operations:

•	our debt and financial obligations could adversely affect our financial condition, our ability to obtain future financing and our ability to operate our business;

•	changes as the result of government enacted national healthcare reform;

•	business and regulatory conditions including federal and state regulations;

•	governmental and other third party payor inspections, reviews, investigations and audits, which may result in sanctions or reputational harm and increased costs;

•	revenue and earnings expectations;

•	some of our acquisition agreements contain contingent consideration, the value of which may impact future financial results;

•	legal actions, which could subject us to increased operating costs and uninsured liabilities;

•	general economic conditions, including but not limited to inflationary and recessionary periods;

•

actual or perceived events involving banking volatility or limited liability, defaults or other adverse developments that affect the U.S. or international financial systems, may result in market wide liquidity problems which could have a material and adverse impact on our available cash and results of operations;

•	our business depends on hiring, training, and retaining qualified employees

•	availability and cost of qualified physical therapists;

•	competitive environment in the industrial injury prevention services business, which could result in the termination or non-renewal of contractual service arrangements and other adverse financial consequences for that service line;

•	acquisitions, and the successful integration of the operations of the acquired businesses;

•	impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interest (minority interests);

•	maintaining our information technology systems with adequate safeguards to protect against cyber-attacks;

•

a security breach of our or our third party vendors’ information technology systems may subject us to potential legal action and reputational harm and may result in a violation of the Health Insurance Portability and Accountability Act of 1996 of the Health Information Technology for Economic and Clinical Health Act;

•	maintaining clients for which we perform management, industrial injury prevention related services, and other services, as a breach or termination of those contractual arrangements by such clients could cause operating results to be less than expected;

•	maintaining adequate internal controls;

•	maintaining necessary insurance coverage;

•	availability, terms, and use of capital; and

•	weather and other seasonal factors.

Acquisition		Date		% Interest Acquired		Number of Clinics
February 2023 Acquisition		February 28, 2023		80%		1
November 2022 Acquisition		November 30, 2022		80%		13
October 2022 Acquisition		October 31, 2022		60%		14
September 2022 Acquisition		September 30, 2022		80%		2
August 2022 Acquisition		August 31, 2022		70%		6
March 2022 Acquisition		March 31, 2022		70%		6

		Three Months Ended March 31,
		2023					2022*
Adjusted EBITDA
Net income attributable to USPH shareholders		$	7,410			$	8,799
Adjustments:
Depreciation and amortization			3,788				3,824
Change in fair value of contingent earn-out consideration			698				-
Interest income			(64	)			(46	)
Relief funds			(467	)			-
Change in revaluation of put-right liability			149				(603	)
Interest expense - debt and other, net			2,560				540
Provision for income taxes			2,969				3,498
Equity-based awards compensation expense			1,806				1,846
Allocation to non-controlling interests			(371	)			(363	)
Adjusted EBITDA (a non-GAAP measure)			18,478				17,495
Earnings per share
Computation of earnings per share - USPH shareholders:
Net income attributable to USPH shareholders		$	7,410			$	8,799
Charges to retained earnings:
Revaluation of redeemable non-controlling interest			119				(153	)
Tax effect at statutory rate (federal and state)			(30	)			39
		$	7,499			$	8,685
Earnings per share (basic and diluted)		$	0.58			$	0.67
Operating Results
Net income attributable to USPH shareholders			7,410				8,799
Adjustments:
Change in fair value of contingent earn-out consideration			698				-
Change in revaluation of put-right liability			149				(603	)
Allocation to non-controlling interests			33				-
Relief Funds			(467	)			-
Tax effect at statutory rate (federal and state)			(105	)			154
Operating Results (a non-GAAP measure)		$	7,718			$	8,350
Basic and diluted Operating Results per share (a non-GAAP measure)		$	0.59			$	0.65
Shares used in computation - basic and diluted			13,025				12,937

		Three Months Ended March 31,
		2023				2022
Net operating revenue:
Physical therapy operations		$	129,159			$	112,636
Industrial injury prevention services			19,350				19,068
Total Company		$	148,509			$	131,704
Gross profit:
Physical therapy operations		$	27,089			$	22,436
Industrial injury prevention services			3,768				4,152
Total Company		$	30,857			$	26,588
Total Assets:
Physical therapy operations		$	726,422			$	608,240
Industrial injury prevention services			141,705				155,623
Total Company		$	868,127			$	763,863

		Three Months Ended March 31,								Variance
		2023				2022				$					%
		(In thousands, except percentages)
Revenue related to:		In USD
Mature Clinics (1)		$	114,502			$	108,229			$	6,273				5.8	%
2023 Clinic Additions			371				-				371				*		(2)
2022 Clinic Additions			11,708				195				11,513				*		(2)
Clinics sold or closed in 2022			-				1,114				(1,114	)			*		(2)
Net patient revenue from physical therapy operations			126,581				109,538				17,043				15.6	%
Other revenue			799				872				(73	)			-8.4	%
Physical therapy operations			127,380				110,410				16,970				15.4	%
Management contracts			1,779				2,226				(447	)			-20.1	%
Industrial injury prevention services			19,350				19,068				282				1.5	%
		$	148,509			$	131,704			$	16,805				12.8	%

(1)

See Glossary of Terms - Key Business Metrics for the definition.

(2)

Not meaningful.

		Three Months Ended March 31,								Variance
		2023				2022				$					%
Operating costs related to:
Mature clinics (1)		$	91,025			$	86,978			$	4,047				4.7	%
2023 clinic additions			432				-				432				*		(2)
2022 clinic additions			9,100				389				8,711				*		(2)
Clinics sold or closed in 2022			64				1,002				(938	)			*		(2)
Physical therapy operations			100,621				88,369				12,252				13.9	%
Management contracts			1,449				1,831				(382	)			-20.9	%
Industrial injury prevention services			15,582				14,916				666				4.5	%
Operating costs		$	117,652			$	105,116			$	12,536				11.9	%

(1)

See Glossary of Terms of our Key Business Metrics for the definition of these terms.

(2)

Not meaningful

		First Quarter Ended March 31,
		2023								2022								Variance
		In USD				Margin %				In USD				Margin %				$					%
Physical therapy operations		$	26,759				21.0	%		$	22,041				20.0	%		$	4,718				21.4	%
Management contracts			330				18.5	%			395				17.7	%			(65	)			-16.5	%
Industrial injury prevention services			3,768				19.5	%			4,152				21.8	%			(384	)			-9.2	%
Gross profit		$	30,857				20.8	%		$	26,588				20.2	%		$	4,269				16.1	%

		First Quarter Ended March 31,
		2023				2022
		(In thousands, except percentages)
Income before taxes		$	14,396			$	15,480
Less: net loss (income) attributable to non-controlling interest:
Redeemable non-controlling interest - temporary equity			(2,720	)			(2,557	)
Non-controlling interest - permanent equity			(1,297	)			(626	)
		$	(4,017	)		$	(3,183	)
Income before taxes less net income attributable to non-controlling interest		$	10,379			$	12,297
Provision for income taxes		$	2,969			$	3,498
Percentage			28.6	%			28.4	%

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 4.

CONTROLS AND PROCEDURES.

ITEM 1.

LEGAL PROCEEDINGS.

ITEM 1A.

RISK FACTORS.

ITEM 6.

EXHIBITS.

*	Filed herewith

	U.S. PHYSICAL THERAPY, INC.
Date: May 5, 2023	By:	/s/ CAREY HENDRICKSON
		Carey Hendrickson
		Chief Financial Officer
		(Principal financial and accounting officer)