Transcript: US Physical Therapy Q2 2026 Earnings Conference Call

On Thursday, US Physical Therapy (NYSE: USPH ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

4%. The company has made significant strides in hospital affiliation arrangements, notably with NYU Langone, transitioning 31 clinics in Q2 with more to follow in Q3, expected to positively impact future revenue. Challenges included increased self-insured healthcare costs, impacting operating profits, though efforts like the WelcomeWare rollout are expected to offset some of these costs by year-end. 6%, with record net rate per visit achieved, and the company anticipates further benefits from ongoing hospital affiliations and increased Medicare rates in 2027.

US Physical Therapy reaffirmed its full-year 2026 adjusted EBITDA guidance of $102 million to $106 million, supported by strong hospital partnerships and potential future acquisitions. Full Transcript OPERATOR Good day and thank you for standing by. Welcome to the US Physical Therapy second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode.

After the speaker's presentation, there will be a question-and-answer session. In order to ask a question during the session, please press the star key followed by the number one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero.

I'd now like to turn the call over to Chris Reading, Chairman and CEO. Please go ahead, sir. Chris Reading, Chairman and CEO Thank you. Good morning and welcome everyone to our US Physical Therapy second quarter 2026 earnings call.

With me on the line include Eric Williams, our President, Chief Operating Officer East; Jason Curtis, our Interim CFO, also serving as our Senior Vice President of Finance and Accounting; Rick Benstein, our Executive Vice President, General Counsel; Graham Reeve, our Chief Operating Officer West; and Kate Venturina, our Vice President of Accounting and our Controller. Before we make some prepared remarks on the quarter as well as the year, we need to cover a brief disclosure statement. Kate, if you would please. Kate Venturina, Vice President of Accounting and Corporate Controller Thank you, Chris.

This presentation includes forward-looking statements which involve certain risks and uncertainties. These forward-looking statements are based on the Company's current views and assumptions. The Company's actual results may vary materially from those anticipated. Please see the Company's filings with the Securities and Exchange Commission for more information.

This presentation also contains certain non-GAAP measures as defined in Regulation G and the related reconciliations can be found in the Company's earnings release and the Company's presentations on its website. Back to you, Chris. Chris Reading, Chairman and CEO Thanks, Kate. So this morning I'm going to spend a little time talking about where we are going with a heavy concentration around these hospital affiliation arrangements and try to dovetail that into our results for the quarter as well as look forward because it's all intertwined.

For starters, volumes across the company are and have been very strong. This includes our Metro partnership, now part of our long-term NYU Langone affiliation. 5 per day; for the past 24 consecutive months and 37 out of the last 42 months, we have set visit per clinic per day record volumes, including those that are hospital-affiliated clinics. They're all very strong.

This is important because part of our cost equation in Q2 is related to upfront hiring with the expectation of referral and volume translation within these partnerships. In short, the transition of our NYU-affiliated clinics has gone very well. By the end of this month we will have transitioned all 60 of our Metro clinics and will benefit from approximately 50 clinicians hired in advance, which will drive the opportunity for growth going forward. That was at the expense of some short-term cost absorption.

However, once those facilities are transitioned, that creates nothing but upside opportunity with no cost downside, based on how these agreements work with our hospital partners. And just another point of perspective, I talked with Michael earlier this morning. Our year-over-year growth at Metro from a volume perspective significantly exceeds 100,000 visits. That was before we had the support of our NYU Langone-affiliated partners, so we're looking forward to a great year ahead.

We had an opportunity to hire clinicians coming out of school who were available and we know we're going to be in a position to grow this business, so we jumped on that. 26 from the year-ago quarter and trending solidly within the quarter itself. Once these hospital clinics are fully onboarded, that will provide additional lift as we finish the year and head into 2027. Embedded in that rate lift are increases across commercial, Medicare, and workers' comp, in addition to the lift provided by the limited number of clinics transitioned inside of the quarter into our hospital affiliations.

That clinic number will grow significantly in quarter three, with approximately half of the busiest Metro clinics transitioning in the current period, as well as the Gulf Coast partnership which is expected to go forward by the end of this month. One of the areas dragging against us a bit so far this year has to do with our self-insured healthcare costs due to a small number of very significant claims across our employee base. We're running well ahead of our usual cost on our claims experience this year, and it's against a much better-than-average experience in 2025 when claim volume was lighter than normal.

2 million difference between years so far, and that we have factored into our decision to guide as we have for the remainder of the year. 4%, with industrial injury prevention revenue growing by over 9% year over year. Same-store revenue growth for PT was north of 3% for the quarter with a nice progression since early last year back to a historically strong average. Margins for our IIP business were steady, slightly above 20%, while PT margins were pressured on a combination of our internal benefits-related healthcare costs and some front loading of those hospital implementation costs that I just mentioned.

With continued WelcomeWare rollout and expected takeout staff and strong performance from our hospital-affiliated clinics, we expect that we can influence or offset some of these headwinds between now and year end. On the development front, we have just very recently announced a 12-clinic partnership acquisition in a great new state, some young hungry partners who know how to deliver great care, and that follows several earlier announced acquisitions in the PT as well as IIP areas. We continue to pursue good, accretive opportunities where care is superior and the forward trajectory looks good in both the PT and the injury prevention spaces.

On the hospital development front, our pipeline of opportunities continues to grow and we expect further relationships like the one with NYU which will positively impact 2027—our 2027 outlook—in a meaningful way. Finally, we are working on our own digital and hybrid opportunities for 2027 and have recently hired a very accomplished, well-known-to-US senior leader to work with our team to identify the right partners around which to make that happen. Our primary focus at this time is to build the foundation that we need in order to accelerate our opportunity later this year and into 2027 and forward.

With the help of an increased Medicare rate projected for 2027, in combination with continued commercial rate lift and the extraordinary lift associated with our hospital affiliations, we expect very good things in the coming year and beyond. So that concludes my prepared comments. I'll ask Jason to cover the financials in a little bit more granular detail before we open things up for questions. Jason, go ahead.

Jason Curtis, Interim CFO and SVP of Finance and Accounting Thanks, Chris, and good morning everyone. 5% increase over last year. 5% increase in mature clinics. 6 million from the initial phases of our hospital affiliation rollout.

6% increase inclusive of hospital affiliation visits. 7 in Q2 2025. 26 increase versus last year. 7% in Q2 2026.

Year-to-date 2026 Medicare revenue per visit compared to full year 2025, which provides for a longer measurement period to smooth quarterly variability, is approximately in line with our expectations. 1% increase after taking into account the mix of Medicare Advantage plans. 35 in revenue per visit lift. 0%, respectively.

4% in Q2 2025. This increase is largely attributable to higher-than-average medical costs in the current quarter compared to lower-than-average medical costs in Q2 2025. Reporting salaries and related costs as a percent of revenue replaces the Company's previous methodology of reporting salaries and related costs per visit for clinics operating as hospital affiliations. Salaries and related costs of licensed staff are fully reimbursed by the hospital systems, with the reimbursement recognized as revenue for USPH.

This structure allows USPH to invest in additional staffing without the risk of negatively impacting bottom line profitability. As a result, utilizing a percentage of Revenue is a more meaningful metric. 4% in Q2 2025. As noted, employee medical costs in Q2 2026 compared to Q2 2025 were a headwind.

During Q2 2026, the company integrated 31 existing clinics into hospital affiliations. The remaining 39 existing clinics are expected to integrate during the third quarter. 6% increase in comparable partnerships. 3% in Q2 2025.

7% in Q2 2025. The company is continuing its efforts to upgrade its finance and HR systems with an expected go live at the beginning of 2027. This upgrade will improve efficiencies throughout the organization and position US Physical Therapy for future growth. 4 million in Q2 2025.

3%. 6%. 5%, approximately in line with full-year 2026 expectations. 9 million in Q2 2025.

4 million for Q2 2025. 81 in Q2 2025. 4 million in Q2 2025. Included in net income was a loss on change in fair value of contingent earnout considerations of $992,000 in Q2 2026 compared to a gain of $790,000 in Q2 2025.

Improving results in recent acquisitions with contingent earnouts increases the associated liability, resulting in a charge to the P&L. As such, a loss on change in fair value of earnout consideration reflects improving underlying performance of impacted acquisitions. 58 in Q2 2025. Under GAAP, changes in the value of redeemable noncontrolling interest are excluded from net income but are included in the earnings per share calculation.

Improving performance in partnerships with redeemable noncontrolling interest has a dilutive impact on earnings per share. Turning to the balance sheet, cash and cash equivalents were $25 million at the end of Q2 2026 compared to $36 million at the end of year 2025. Credit facility borrowings were $221 million at the end of Q2 2026 compared to $162 million at the end of year 2025, reflecting the impact of the previously announced upsized $450 million credit facility. Revolver availability at the end of Q2 2026 was $229 million compared to $145 million prior year.

In addition to increasing revolver availability, the new credit facility also contains a $125 million accordion, providing sufficient liquidity to fund sizable future acquisitions. 8. Including share repurchases made in 2025, the company has materially concluded repurchases under its current $25 million authorization. Year-to-date Q2 2026 operating cash flow was $38 million compared to $30 million for year-to-date Q2 2025.

4 million. This practice currently generates $12 million in annual revenue and 112,000 annual visits. Including the two previously announced Q1 2026 acquisitions, the cumulative purchase price of our three announced 2026 acquisitions is $38 million, with a combined annualized revenue of $27 million. Taking into account the year-to-date 2026 results and the expected increasing benefit of hospital affiliations in the back half of the year, we are reaffirming our full-year 2026 adjusted EBITDA guidance of $102 million to $106 million.

With that, I will turn the call back to Chris. Chris Reading, Chairman and CEO Thanks, Jason. Great job. Appreciate it.

Operator, we're going to go ahead and open it up for questions. OPERATOR Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two.

Once again, that is star one to ask a question. P. Morgan. Please go ahead.

Your line is now open. Chris Reading, Chairman and CEO Hey Ben, good morning. P. Morgan Thanks for taking my questions here.

So just on the back half ramp implied for the remainder of the year, sounds like that's going to be more weighted towards 4Q once those remaining facilities have been integrated in 3Q. You also mentioned the additional 50 hires being front loaded. Can you just walk us through the specific initiatives that you're expecting to deliver margin lift during the back half of the year? And then how should we be thinking about the timing of associated costs and benefits during 3Q and 4Q?

Chris Reading, Chairman and CEO Yeah, so we have a number of things. I mean, the Welcomeware initiative we've talked about earlier that involves the semi-virtualization of a front desk and aggregation of certain functions to potentially a remote site that we know results in our ability to take out headcount at the front desk. That will continue to ramp. We're, you know, we're more than halfway through our expected ramp in there.

And then, you know, the big impact, Ben, is just the impact from getting these hospital facilities fully loaded. Jason mentioned now we have close to 40, 39, I believe, that will flow in this quarter. Some of those are already in the works. Many of them are with a few to remain here this next month.

That's going to give us a good solid lift. And then the other things, like I said, we're working on for next year, but those are the big impact things between now and year end. Great. P.

Morgan Appreciate the color there. 6 million in revenue you reported from the hospital affiliation during 2Q. Can you just walk through the mechanics of the hospital affiliation revenue recognition outflows through your P&L? And then is there any ballpark for how many visits those clinics are currently seeing?

Like for assuming those volumes are coming in at a slight premium to your consolidated revenue per visit, is it fair to think of this group currently representing maybe 50,000 patient visits or is that overstating volumes? Chris Reading, Chairman and CEO Jason, do you want to take a swing at the revenue recognition part and pieces parts associated with that? And then, yeah, Eric, maybe we can touch base on the number of, you know, the visit number of this remaining group. Sure.