U.S. Physical Therapy Reports Second Quarter 2023 Results

Reports All-Time High Quarterly Patient Volume

U.S. Physical Therapy, Inc. (“USPH” or the “Company”) (NYSE: USPH), a national operator of outpatient physical therapy clinics and provider of industrial injury prevention services, today reported results for the three and six months ended June 30, 2023.

SECOND QUARTER FINANCIAL HIGHLIGHTS

• Adjusted EBITDA, a non-Generally Accepted Accounting Principles (“GAAP”) measure, was $21.7 million for the three months ended June 30, 2023 (“2023 Second Quarter”), an increase of $0.4 million from $21.3 million for the three months ended June 30, 2022 (“2022 Second Quarter”). See pages 14 and 15 of this release for the definition and reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure.
• Net income attributable to USPH’s shareholders, a GAAP measure, was $10.9 million for the 2023 Second Quarter compared to $11.2 million for the 2022 Second Quarter. The decrease in net income was primarily driven by the $1.6 million increase in interest expense as a result of higher effective interest rates and increased borrowings to fund acquisitions. In accordance with GAAP, the revaluation of non-controlling interest, net of taxes, is not included in net income but is charged directly to retained earnings; however, this change is included in the computation of earnings per share. Earnings per share, in accordance with GAAP, was $0.64 for the 2023 Second Quarter as compared to $0.87 for the 2022 Second Quarter.
• Operating Results per share, a non-GAAP measure, was $0.76 per share for the 2023 Second Quarter as compared to $0.90 for the 2022 Second Quarter. The decrease in our Operating Results was primarily driven by the increase in interest expense previously described. See pages 14 and 15 of this release for the definition and reconciliation of Operating Results per share to the most directly comparable GAAP measure.
• Net patient revenue from physical therapy operations increased 9.4% to $129.3 million for the 2023 Second Quarter from $118.2 million for the 2022 Second Quarter due to record-high average visits per clinic per day and increased volume from the 48 net new clinics added since the comparable prior year period, partially offset by lower net rate per patient visit.
• Average visits per clinic per day was an all-time high of 30.4 in the 2023 Second Quarter compared to 29.5 in the 2022 Second Quarter. Total patient visits increased 10.6% in the 2023 Second Quarter as compared to the 2022 Second Quarter, with patient visits at mature clinics up 2.6%.
• Net rate per patient visit was $102.03 in the 2023 Second Quarter compared to $103.18 in the 2022 Second Quarter due to a decrease in the net rate for Medicare visits, partially offset by rate increases for commercial and workers compensation visits. The decrease in the Medicare net rate is primarily due to the 2% Medicare rate reduction beginning in January 2023 and discontinuation of the sequestration relief on Medicare visits effective in July 2022.
• Physical therapy total operating costs per patient visit were $80.61 in the 2023 Second Quarter, a decrease of 0.6% from $81.09 in the 2022 Second Quarter. Physical therapy salaries and related costs decreased 1.2% to $57.59 per visit in the 2023 Second Quarter from $58.29 in the 2022 Second Quarter. On a sequential basis, both salaries and related costs and total operating costs decreased for the third consecutive quarter after peaking in the third quarter of 2022. Salaries and related costs per visit have decreased from $60.99 in the third quarter of 2022 to $57.59 in the 2023 Second Quarter, while total operating costs per visit have decreased from $85.14 in the third quarter of 2022 to $80.61 in the 2023 Second Quarter.
• The Company’s physical therapy operating margin was 21.5% in the 2023 Second Quarter, increasing for the third consecutive quarter -- up from 18.7% in the third quarter of 2022 to 20.0% in the fourth quarter of 2022, to 21.0% in the first quarter of 2023 and to 21.5% in the 2023 Second Quarter.
• Industrial injury prevention (“IIP”) services revenue was $19.2 million for the 2023 Second Quarter compared to $19.4 million in the 2022 Second Quarter. IIP services operating margin was 20.7% in the 2023 Second Quarter as compared to 21.2% in the 2022 Second Quarter.
• During the 2023 Second Quarter, the Company added 13 clinics and closed four clinics, bringing its total clinic count to 656 as of June 30, 2023 as compared to 608 clinics as of June 30, 2022. The clinic additions included an acquisition by the Company and one of its local partners of a 75% equity interest in a four-clinic practice that generates approximately $2.6 million in annual revenues and 27,000 annual visits at a purchase price of $3.1 million.
• On May 30, 2023, the Company completed a secondary offering of 1,916,667 shares of its common stock. Upon completion of the offering, the Company received net proceeds of approximately $163.7 million, after deducting fees associated with the transaction. A portion of the net proceeds was used to repay the $35.0 million then outstanding under the Company’s revolving credit facility while the remainder is expected to be used primarily for acquisitions. While such cash is awaiting deployment, it is currently invested in a high-yield savings account which generated interest income of approximately $0.5 million in June 2023.
• On July 31, 2023, the Company acquired a 70% equity interest in a five-clinic practice for a purchase price of $2.1 million, with the current practice owners retaining a 30% equity interest. The business currently generates approximately $2.4 million in annual revenues.
• On August 7, 2023, the Company’s Board of Directors declared a quarterly dividend of $0.43 per share payable on September 8, 2023, to shareholders of record on August 18, 2023.
• Management reaffirms that it currently expects the Company’s Adjusted EBITDA for 2023 to be in the range of $75.0 million to $80.0 million. The earnings guidance represents projected Adjusted EBITDA from existing operations and excludes future acquisitions. See “Management Reaffirms 2023 Earnings Guidance” below for more information.

MANAGEMENT’S COMMENTS

Chris Reading, Chief Executive Officer, said, “Considering the challenges we have had to overcome since the middle of 2022 with significant inflation and interest rate escalation, our team has done an exceptional job. We completed a very successful secondary offering, the first in our Company’s history, positioning us for future growth; we decreased our cost per visit each quarter since the third quarter of last year; we are running at record clinic volumes, well ahead of anything we have ever done before; and we are making progress with respect to contract renegotiations which is helping to offset some of the misplaced Medicare cuts that have been handed down from CMS. The combination of record volumes this quarter, and an improving but still challenging hiring environment, has created a slightly negative impact on our net rate compared to where we expected to be at this point. As we have many times in the past, our team is making the necessary adjustments to address this opportunity as we work for a strong finish to this year.”

2023 SECOND QUARTER VERSUS 2022 SECOND QUARTER

Total net revenue for 2023 Second Quarter was $151.5 million, an increase of 7.7%, compared to $140.7 million for the 2022 Second Quarter. The following table provides a breakdown of total net revenue.

• Revenue from physical therapy operations increased $11.0 million, or 9.2%, to $130.1 million for the 2023 Second Quarter from $119.1 million for the 2022 Second Quarter primarily due to record-high average visits per clinic per day (30.4 for the 2023 Second Quarter versus 29.5 for the 2022 Second Quarter) and an increase in volume from the 48 net new clinics added since the comparable prior year period, partially offset by a decrease in net rate per patient visit. The number of patient visits increased 10.6% to 1,267,140 for the 2023 Second Quarter from 1,145,554 in the 2022 Second Quarter. Patient visits at our mature clinics increased 2.6% in the 2023 Second Quarter as compared to the 2022 Second Quarter. Net rate per patient visit was $102.03 in the 2023 Second Quarter as compared to $103.18 in the 2022 Second Quarter due to a decrease in the net rate for Medicare visits, partially offset by rate increases for commercial and workers compensation visits. The decrease in the Medicare net rate is primarily due to the 2% Medicare rate reduction beginning in January 2023 and discontinuation of the sequestration relief on Medicare visits effective in July 2022.
• IIP services revenue decreased slightly to $19.2 million for the 2023 Second Quarter as compared to $19.4 million for the 2022 Second Quarter.

Operating costs were $119.3 million for the 2023 Second Quarter, or 78.7% of net revenue, compared to $109.8 million, or 78.1% of net revenue, for the 2022 Second Quarter. Salaries and related costs were 57.3% of net revenue for the 2023 Second Quarter versus 56.8% for the 2022 Second Quarter. Rent, supplies, contract labor and other costs as a percentage of total revenue were 20.4% for the 2023 Second Quarter versus 20.2% for the 2022 Second Quarter. The provision for credit losses as a percentage of total revenue was 1.0% for 2023 Second Quarter and 1.1% for 2022 Second Quarter. The following table provides a breakdown of operating costs.

• Operating costs from physical therapy operations increased $9.2 million, or 10.0%, to $102.1 million in the 2023 Second Quarter from $92.9 million in the 2022 Second Quarter primarily driven by costs associated with the 48 net new clinics since the comparable prior year period as well as increased patient visits at mature clinics.
• Operating costs from IIP services were down slightly versus the comparable prior year period.

Gross profit for the 2023 Second Quarter increased $1.4 million, or 4.5%, to $32.2 million from $30.8 million for the 2022 Second Quarter. Gross profit margin slightly decreased to 21.3% in the 2023 Second Quarter from 21.9% in the 2022 Second Quarter. The following table provides a detailed breakdown of gross profit and related gross profit margins.

Corporate office costs were $12.1 million, or 8.0% of net revenue, for the 2023 Second Quarter compared to $10.7 million, or 7.6% of net revenue, for the 2022 Second Quarter. The increase was primarily due to higher salaries related to merit increases and inflationary impacts, staff additions to support a larger number of clinics and a higher accrual for bonus expense.

Operating income was flat at $20.1 million for both the 2023 Second Quarter and 2022 Second Quarter.

Total other (expense) income was ($1.0) million in the 2023 Second Quarter compared to ($0.6) million in the 2022 Second Quarter.

• Interest expense, net of $0.8 million savings from the interest rate swap arrangement discussed below, was $2.6 million for the 2023 Second Quarter compared to $1.0 million in the 2022 Second Quarter. The increase in interest expense was primarily due to a higher effective interest rate and increased borrowings to fund acquisitions. The effective net interest rate on the Company’s credit facilities was 6.0% for the 2023 Second Quarter.
• The Company revalued the contingent earn-out consideration related to an acquisition and recognized $0.7 million as income (a reduction in the related liability).
• The revaluation of a put-right liability resulted in $0.1 million of expense (an increase in the related liability) for the 2023 Second Quarter. The put-right relates to the potential future purchase of a company that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area. The owners have the right to put this transaction to the Company in approximately five years from November 2021.
• Equity in earnings of the unconsolidated affiliate was $0.3 million in both the 2023 Second Quarter and 2022 Second Quarter.
• Other and interest income for the 2023 Second Quarter included $0.5 million of interest income earned in June 2023 from investing the net proceeds from the secondary offering of the Company’s common stock in a high-yield savings account while the prior year comparable period mostly consisted of $0.6 million of gain from the sale of certain clinics.

The provision for income tax was $4.2 million for both the 2023 Second Quarter and 2022 Second Quarter. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 27.9% for the 2023 Second Quarter and 27.5% for the 2022 Second Quarter. A reconciliation of our income tax expense and effective income tax rate is as follows:

Net income attributable to non-controlling interest was $3.9 million in the 2023 Second Quarter compared to $4.1 million in the 2022 Second Quarter.

Adjusted EBITDA, a non-GAAP measure, was $21.7 million for the 2023 Second Quarter, an increase of $0.4 million as compared to $21.3 million in 2022 Second Quarter.

Operating Results, a non-GAAP measure, was $10.4 million, or $0.76 per share, in 2023 Second Quarter as compared to $11.7 million, or $0.90 per share, in 2022 Second Quarter.

SIX MONTHS ENDED JUNE 30, 2023 VERSUS SIX MONTHS ENDED JUNE 30, 2022

Total net revenue for six months ended June 30, 2023 (“2023 Six Months”) was $300.0 million, an increase of 10.1%, compared to $272.4 million for the six months ended June 30, 2022 (“2022 Six Months”). The table below provides a breakdown of total net revenue.

• Revenue from physical therapy operations increased $27.9 million, or 12.2%, to $257.5 million for the 2023 Six Months from $229.5 million for the 2022 Six Months primarily due to higher average visits per clinic per day (30.1 for the 2023 Six Months versus 28.7 for the 2022 Six Months) and an increase in volume from the 48 net new clinics added since the comparable prior year period, partially offset by a decrease in net rate per visit. The number of patient visits increased 12.9% to 2,494,630 for the 2023 Six Months from 2,209,073 for the 2022 Six Months. Patient visits at our mature clinics increased 4.2% for the 2023 Six Months as compared to the 2022 Six Months. Net rate per patient visit decreased to $102.56 in the 2023 Six Months from $103.09 in the 2022 Six Months due to a decrease in the net rate for Medicare visits, partially offset by rate increases for commercial and workers compensation visits. The decrease in the Medicare net rate is primarily due to the 2% Medicare rate reduction beginning in January 2023 and discontinuation of sequestration relief on Medicare visits effective in July 2022.
• Revenue from IIP services increased slightly to $38.6 million for the 2023 Six Months as compared to $38.5 million for the 2022 Six Months.

Operating cost was $236.9 million for the 2023 Six Months, or 79.0% of net revenue, compared to $215.0 million, or 78.9% of net revenue, for the 2022 Six Months. Salaries and related costs were 57.6% of net revenue for the 2023 Six Months versus 56.9% for the 2022 Six Months. Rent, supplies, contract labor and other costs as a percentage of total revenue were 20.3% for the 2023 Six Months versus 20.9% for the 2022 Six Months. The provision for credit losses as a percentage of total revenue were both 1.0% for 2023 Six Months and 2022 Six Months. See table below for a more detailed breakdown of operating costs.

• Physical therapy operating costs increased $21.5 million or 11.9% to $202.8 million in the 2023 Six Months from $181.3 million in the 2022 Six Months primarily driven by costs associated with the 48 net new clinics added since the comparable prior year period as well as increased patient visits at mature clinics.
• Operating costs from IIP services increased by $0.6 million, or 2.0%, to $30.8 million as compared to $30.2 million in the 2022 Six Months.

Gross profit for the 2023 Six Months increased $5.7 million, or 9.9%, to $63.1 million from $57.4 million for the 2022 Six Months. Gross profit margin decreased slightly to 21.0% in the 2023 Six Months from 21.1% in the 2022 Six Months. The following table provides a detailed breakdown of gross profit and related gross profit margins.

Corporate office costs were $26.0 million, or 8.7% of net revenue, for the 2023 Six Months compared to $22.3 million, or 8.2% of net revenue, for the 2022 Six Months. The increase was primarily due to higher salaries related to merit increases and inflationary impacts, staff additions to support a larger number of clinics and a higher accrual for bonus expense.

Operating income increased 5.5%, to $37.1 million, or 12.4% of net revenues, for the 2023 Six Months from $35.1 million, or 12.9% of net revenues, in the 2022 Six Months.

Total other (expense) income was ($3.6) million during the 2023 Six Months compared to ($0.1) million during the 2022 Six Months.

• Interest expense, net of $1.4 million savings from the interest rate swap arrangement discussed below, was $5.2 million for the 2023 Six Months compared to $1.5 million in the 2022 Six Months. The increase in interest expense was primarily due to a higher effective interest rate and increased borrowings to fund acquisitions. The effective interest rate on the Company’s credit facilities was 5.7% for the 2023 Six Months.
• During the 2023 Six Months, the Company recognized $0.5 million of income received under the Coronavirus Aid, Relief and Economic Security Act (“Relief Funds”). The Relief Funds were received in prior years but were subject to certain compliance requirements which were met in the first quarter of 2023. The Company does not expect to receive or recognize any future Relief Funds. No such income was recognized in the prior year six months period.
• Equity in earnings of the unconsolidated affiliate was $0.6 million and $0.7 million in the 2023 Six Months and the 2022 Six Months, respectively.
• Other and interest income for the 2023 Six Months included $0.5 million of interest income earned in June 2023 from the investment of excess cash from the secondary offering of the Company’s common stock in a high-yield savings account while the prior year comparable period included $0.6 million of gain from the sale of certain clinics.

The provision for income tax was $7.2 million for the 2023 Six Months compared to $7.7 million for the 2022 Six Months. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 28.2% for the 2023 Six Months and 27.9% for the 2022 Six Months. A reconciliation of our income tax expense and effective income tax rate is as follows:

Net income attributable to redeemable non-controlling interest was $8.0 million for the 2023 Six Months and $7.2 million for the 2022 Six Months.

Adjusted EBITDA, a non-GAAP measure, was $40.1 million for the 2023 Six Months, an increase of $1.3 million from $38.8 million for the 2022 Six Months.

Operating Results, a non-GAAP measure, was $18.1 million, or $1.36 per share, in 2023 Six Months as compared to $20.0 million, or $1.54 per share, in 2022 Six Months.

BALANCE SHEET AND CASH FLOW

Total cash and cash equivalents were $160.7 million as of June 30, 2023, compared to $31.6 million as of December 31, 2022. Additionally, the Company had $146.3 million of outstanding borrowings and $175.0 million in available credit under its revolving credit facilities as of June 30, 2023 compared to $179.1 million of outstanding borrowings and $144.0 million in available credit under its revolving credit facilities as of December 31, 2022. As discussed above, on May 30, 2023, the Company completed a secondary offering of its common stock resulting in net proceeds of $163.7 million after deducting fees associated with the transaction. A portion of the net proceeds was used to repay the $35.0 million then outstanding under the Company’s credit facility while the remainder is expected to be used primarily for acquisitions. While such cash is awaiting deployment, it is currently invested in a high-yield savings account which generated interest income of approximately $0.5 million in June 2023.

During the 2023 Six Months, $38.8 million of cash was provided by operations. The major uses of cash for investing and financing activities included: dividends paid to shareholders ($11.2 million), purchase of majority interest in businesses ($8.0 million), purchase of non-controlling interests from existing partners ($7.8 million), purchase of fixed assets ($4.5 million), and distributions to non-controlling interests ($8.4 million).

The Company entered into an interest rate swap effective on June 30, 2022, which will mature on June 30, 2027. It has a $150.0 million notional value adjusted concurrently with scheduled principal payments made on the Company’s term loan. On June 30, 2023, the fair value of the interest rate swap was $6.4 million, an increase of $0.8 million, net of tax, as compared to December 31, 2022. The fair value of the interest rate swap is included in other assets (current and long term) in the accompanying consolidated balance sheet while the increase in fair value is presented as unrealized gain in the accompanying consolidated statements of comprehensive income. The interest rate swap arrangement has generated $1.5 million in interest savings since its inception. The average interest rate for the term loan during the 2023 Six Months was 4.9%.

RECENT ACQUISITIONS

On May 31, 2023, the Company, together with one of its local partners, acquired a 75% equity interest in a four-clinic practice for a purchase price of $3.1 million, with the current practice owners retaining a 25% equity interest. The business currently generates approximately $2.6 million in annual revenues and approximately 27,000 annual visits.

On July 31, 2023, the Company acquired a 70% equity interest in a five-clinic practice for a purchase price of $2.1 million, with the current practice owners retaining a 30% equity interest. The business currently generates approximately $2.4 million in annual revenues.

The Company’s strategy is to continue acquiring multi-clinic outpatient physical therapy practices, to develop outpatient physical therapy clinics as satellites in existing partnerships and to continue acquiring companies that provide industrial injury prevention services.

QUARTERLY DIVIDEND

The Board of Directors declared a quarterly dividend of $0.43 per share payable on September 8, 2023 to shareholders of record on August 18, 2023.

MANAGEMENT REAFFIRMS 2023 EARNINGS GUIDANCE

Management reaffirms that it currently expects the Company’s Adjusted EBITDA for 2023 to be in the range of $75.0 million to $80.0 million. Please note that the earnings guidance represents projected Adjusted EBITDA from existing operations and excludes future acquisitions. The annual guidance figures will not be updated unless there is a material development that causes management to believe that Adjusted EBITDA will be significantly outside the given range.

CONFERENCE CALL INFORMATION

U.S. Physical Therapy's management will host a conference call at 10:30 a.m. ET, 9:30 a.m. CT, on August 9, 2023, to discuss the Company’s financial results for the three and six months ended June 30, 2023. Interested parties may participate in the call by dialing (866) 952-8559 (Primary) or (785) 424-1743 (Alternate) and conference ID of USPHQ223 approximately 10 minutes before the call is scheduled to begin. To listen to the live call, go to the Company's website at www.usph.com at least 15 minutes early to register, download and install any necessary audio software. The conference call will be archived and can be accessed until November 7, 2023, at U.S. Physical Therapy’s website.

FORWARD LOOKING STATEMENTS

This press release contains statements that are considered to be forward-looking within the meaning under Section 21E of the Securities Exchange Act of 1934, as amended. These statements contain forward-looking information relating to the financial condition, results of operations, plans, objectives, future performance and business of our Company. These statements (often using words such as “believes”, “expects”, “intends”, “plans”, “appear”, “should” and similar words) involve risks and uncertainties that could cause actual results to differ materially from those we expect. Included among such statements may be those relating to new clinics, availability of personnel and the reimbursement environment. The forward-looking statements are based on our current views and assumptions and actual results could differ materially from those anticipated in such forward-looking statements as a result of certain risks, uncertainties, and factors, which include, but are not limited to:

• the impact of future public health crises and epidemics/pandemics, such as was the case with the novel strain of COVID-19 and its variants;
• 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 future vaccinations 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.

Many factors are beyond our control. Given these uncertainties, you should not place undue reliance on our forward-looking statements. For additional information regarding these and other risks and uncertainties, that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on February 28, 2023 and any risk factors contained in subsequent quarterly and annual reports we file with the SEC. Our forward-looking statements represent our estimates and assumptions only as of the date of this report. Except as required by law, we are under no obligation to update any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.

GLOSSARY OF TERMS - REVENUE METRICS

Mature clinics are clinics opened or acquired prior to January 1, 2022, and are still operating as of the balance sheet date.

Net rate per patient visit is net patient revenue related to our physical therapy operations divided by total number of patient visits (defined below) during the periods presented.

Patient visits is the number of unique patient visits during the periods presented.

Average visits per day per clinic is patient visits divided by the number of days in which normal business operations were conducted during the periods presented and further divided by the average number of clinics in operation during the periods presented.

ABOUT U.S. PHYSICAL THERAPY, INC.

Founded in 1990, U.S. Physical Therapy, Inc. currently operates 662 outpatient physical therapy clinics in 41 states. The Company's clinics provide preventative and post-operative care for a variety of orthopedic-related disorders and sports-related injuries, treatment for neurologically-related injuries and rehabilitation of injured workers. In addition to owning and operating clinics, the Company manages 43 physical therapy facilities for unaffiliated third parties, including hospitals and physician groups. The Company also has an industrial injury prevention services business which provides onsite services for clients’ employees including injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations, and ergonomic assessments.

More information about U.S. Physical Therapy, Inc. is available at www.usph.com. The information included on that website is not incorporated into this press release.

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

ADJUSTED EBITDA AND OPERATING RESULTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)

The following tables provide details of the diluted earnings per share computation and reconcile net income attributable to USPH shareholders calculated in accordance with GAAP to Operating Results and Adjusted EBITDA. Management believes providing Operating Results and Adjusted EBITDA to investors is useful information for comparing the Company's period-to-period results.

Adjusted EBITDA, a non-GAAP measure, is defined as net income attributable to USPH shareholders before interest income, interest expense, taxes, depreciation, amortization, change in fair value of contingent earn-out consideration, Relief Funds, changes in revaluation of put-right liability, equity-based awards compensation expense, and related portions for non-controlling interests.

Operating Results, a non-GAAP measure, equals net income attributable to USPH diluted shareholders per the consolidated statements of income, less changes in revaluation of put-right liability, Relief Funds, changes in fair value of contingent earn-out consideration, and any allocations to non-controlling interests, all net of taxes. Operating Results per diluted share also exclude the impact of the revaluation of redeemable non-controlling interest and the associated tax impact.

Management uses Adjusted EBITDA and Operating Results, which eliminates certain items described above that can be subject to volatility and unusual costs, as the principal measures to evaluate and monitor financial performance period over period. Management believes that presenting Adjusted EBITDA and Operating Results are useful information for investors to use in comparing the Company's period-to-period results as well as for comparing with other similar businesses since most do not have redeemable instruments and therefore have different equity structures.

Operating Results and Adjusted EBITDA are not measures of financial performance under GAAP. Adjusted EBITDA and Operating Results should not be considered in isolation or as an alternative to, or substitute for, net income attributable to USPH shareholders presented in the consolidated financial statements.

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