U.S. Physical Therapy Press Release	Page 2
February 22, 2023

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Revenue from physical therapy operations increased $6.8 million, or 6.0%, to $121.0 million for the 2022 Fourth Quarter from $114.2 million for the 2021 Fourth Quarter.  The average net patient revenue per visit was $104.28 for the 2022 Fourth Quarter as compared to $103.53 for the 2021 Fourth Quarter. Total patient visits increased 5.1% to 1,152,139 for the 2022 Fourth Quarter from 1,096,389 for the 2021 Fourth Quarter.

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Net patient revenue related to clinics opened or acquired prior to 2021 and still in operation on December 31, 2022 (“Mature Clinics”) decreased slightly. Visits for Mature Clinics (same store) for the 2022 Fourth Quarter decreased by 2.3% as compared to the 2021 Fourth Quarter while net patient revenue per visit increased by 1.1% over the comparable period.

•	IIP services revenue increased 37.6% to $18.4 million for the 2022 Fourth Quarter as compared to $13.4 million for the 2021 Fourth Quarter.  The 2022 Fourth Quarter includes revenue of $6.2 million related to the IIP Acquisition compared to $2.2 million in the 2021 Fourth Quarter.

		Three Months Ended
		December 31, 2022				December 31, 2021
Physical therapy operations		$	24,193			$	24,002
Management contracts			350				428
Industrial injury prevention services			3,288				2,753
Gross profit		$	27,831			$	27,183

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The net loss attributable to redeemable non-controlling interest (temporary equity) was $0.3 million for the 2022 Fourth Quarter as compared to net income attributable to redeemable non-controlling interest of $2.7 million for the 2021 Fourth Quarter.  Net income attributable to non-controlling interest (permanent equity) was $1.1 million for the 2022 Fourth Quarter and $1.5 million for the 2021 Fourth Quarter.  During the 2022 Fourth Quarter, $2.7 million of the goodwill impairment charge related to redeemable non-controlling interest (temporary equity).

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For the 2022 Fourth Quarter, the Company’s net income attributable to its shareholders was $2.6 million as compared to $10.2 million for the 2021 Fourth Quarter. In accordance with GAAP, the revaluation of redeemable non-controlling interest, net of taxes, is not included in net income but charged directly to retained earnings; however, the charge for this change is included in the earnings per basic and diluted share calculation. Inclusive of the charge for revaluation of noncontrolling interest, net of taxes, the amount is a loss of $0.1 million, or $0.01 per diluted share, for the 2022 Fourth Quarter, and income of $9.4 million, or $0.73 per diluted share, for the 2021 Fourth Quarter.

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For the 2022 Fourth Quarter, the Company’s Adjusted EBITDA, a non-GAAP measure, was $17.9 million as compared to $17.4 million (excluding Relief Funds) in the 2021 Fourth Quarter. See definition, explanation and calculation of Adjusted EBITDA, a non-GAAP measure, in the schedules on pages 13 and 14.

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For the 2022 Fourth Quarter, the Company’s Operating Results, a non-GAAP measure, was $7.5 million, or $0.58 per diluted share as compared to $9.3 million (excluding Relief Funds), or $0.72 per diluted share, for the 2021 Fourth Quarter. See definition, explanation and calculation of Operating Results, a non-GAAP measure, in the schedules on pages 13 and 14.

•	Reported total revenue for the 2022 Year was $553.1 million, an increase of 11.7% as compared to $495.0 million for the 2021 Year.  See table below for a detail of reported total revenue (in thousands):

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Revenue from physical therapy operations increased $26.7 million, or 6.1%, to $468.0 million for the 2022 Year from $441.3 million in the 2021 Year. The average net patient revenue per visit was $103.63 for the 2022 Year as compared to $103.88 for the 2021 Year. Total patient visits were 4,483,282 for the 2022 Year and 4,219,576 for the 2021 Year, an increase of 6.2%.

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Net patient revenue related to Mature Clinics increased $1.7 million, or 0.4%, to $421.8 million for the 2022 Year, as compared to $420.1 million for the 2021 Year. Visits for Mature Clinics (same store) for the 2022 Year increased 0.5% as compared to the 2021 Year. The increase in visits was partially offset by a 0.1% reduction in the net patient revenue per visit.

•	IIP services revenue increased 75.5% to $77.1 million for the 2022 Year as compared to $43.9 million for the 2021 Year.  The 2022 Year includes revenue of $26.7 million related to the IIP Acquisition compared to $2.2 million in the 2021 Year.

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Total operating cost was $441.1 million for the 2022 Year, or 79.7% of total revenue, as compared to $377.8 million, or 76.3% of total revenue, for the 2021 Year. Operating cost related to Mature Clinics increased by $16.7 million for the 2022 Year as compared to the 2021 Year.  Operating cost related to the IIP services business increased by $27.9 million for the 2022 Year as compared to the 2021 Year, of which $22.4 million related to the IIP Acquisition.  See table below for a detail of operating cost (in thousands):

		For the Year Ended
		December 31, 2022				December 31, 2021
Physical therapy operations		$	94,364			$	104,941
Management contracts			1,693				1,547
Industrial injury prevention services			15,967				10,694
Gross profit		$	112,024			$	117,182

•	See above discussion of the charge recorded for goodwill impairment.

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Corporate office costs were $46.1 million for the 2022 Year as compared to $46.5 million for the 2021 Year. Corporate office costs were 8.3% of total revenue for the 2022 Year as compared to 9.4% for the 2021 Year. The decrease was primarily due to lower estimated bonus expense in the 2022 Year than the 2021 Year.

•	Operating income was $56.8 million for the 2022 Year and $70.6 million for the 2021 Year.

•	The Company revalued contingent earn-out consideration related to some of its acquisitions resulting in the elimination of $2.5 million of the of liabilities previously booked.

•	The Company recognized income of $1.2 million in the 2022 Full Year related to a joint venture company that provides physical therapy services for patients at hospitals.

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For the 2022 Year, the valuation of the put-right liability remained relatively the same.  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.

•	Other and interest income amounted to $0.9 million primarily derived from a gain of $0.6 million from the sales of various clinics during the 2022 Year.  Other and interest income was $0.2 million in 2021 Year.

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Interest expense on debt and other, primarily from the $150 million term loan and revolving credit facility entered into in June 2022, amounted to $5.8 million for the 2022 Year. The effective interest rate on the Company’s debt was 3.9% for the 2022 Year. See discussion of Other Comprehensive Income below for information related to the Company’s interest rate swap agreement.  For the 2021 Year, interest expense, primarily from the Company’s revolving line of credit, was $0.9 million.

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The provision for income tax was $12.2 million for the 2022 Year and $15.3 million for the 2021 Year. The provision for income tax as a percentage of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 27.4% for the 2022 Year and  27.2% for the 2021 Year. See table below ($ in thousands):

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Net income attributable to redeemable non-controlling interest (temporary equity) was $6.9 million for the 2022 Year as compared to net income attributable to redeemable non-controlling interest (temporary equity) of $11.4 million for the 2021 Year.  Net income attributable to non-controlling interest (permanent equity) was $4.3 million for the 2022 Year and $5.7 million for the 2021 Year. During the 2022 Year, $2.7 million of the goodwill impairment charge related to redeemable non-controlling interest (temporary equity).

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The Company’s net income attributable to its shareholders was $32.2 million for the 2022 Year, and $40.8 million for the 2021 Year.  Inclusive of the charge for revaluation of non-controlling interest, net of taxes, the amount is $29.3 million, or $2.25 per diluted share, for the 2022 Year, and $31.1 million, or $2.41 per diluted share for the 2021 Year. See table on page 14.

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For the 2022 Year, the Company’s Operating Results, a non-GAAP measure, was $35.0 million, or $2.70 per diluted share, as compared to $40.8 million (excluding Relief Funds), or $3.17 per diluted share, for the 2021 Year.  For the 2021 Year, the Company’s Operating Results including Relief Funds was $43.7 million, or $3.39 per diluted share.  See table on page 14.

•	For the 2022 Year, the Company’s Adjusted EBITDA, a non-GAAP measure, was $73.7 million, as compared to $73.8 million, excluding Relief Funds, for the 2021 Year.  See definition, explanation and calculation of Adjusted EBITDA, a non-GAAP measure, in the schedule on pages 13 and 14.

The Company entered into an interest rate swap agreement in May 2022, which became effective on June 30, 2022.  The maturity date of the swap agreement is June 30, 2027.  It has a $150 million notional value adjusted concurrently with scheduled principal payments made on the term loan.  Beginning in July 2022, the Company pays a fixed one-month SOFR rate of interest of 2.815%. The total interest rate in any period also includes an applicable margin based on the Company’s consolidated leverage ratio. In the 2022 Fourth Quarter and 2022 Full Year, the Company’s interest rate including the applicable margin was 4.665%.  Unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income (loss), net of tax. The fair value of the interest rate swap at December 31, 2022, was $5.4 million, which has been included within Other assets  (current and long term) in the accompanying Consolidated Balance Sheet. The impact of the interest rate swap on the accompanying Consolidated Statements of Comprehensive Income was an unrealized loss of $0.4 million, net of tax, for the 2022 Fourth Quarter, and an unrealized gain of $4.0 million, net of tax, for the 2022 Year.

In March 2020 in response to the COVID-19 pandemic, the federal government approved the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provided additional waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic, including $100.0 billion in appropriations for the Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to the coronavirus, and for reimbursing eligible health care providers for lost revenues and health care related expenses that are attributable to COVID-19. For the 2021 Year, the Company recorded income of approximately $4.6 million of payments under the CARES Act (“Relief Funds”). Under the Company’s accounting policy, these payments were recorded as Other income – Relief Funds. These funds are not required to be repaid upon attestation and compliance with certain terms and conditions, which could change materially based on evolving grant compliance provisions and guidance provided by the U.S. Department of Health and Human Services. Currently, the Company can attest and comply with the terms and conditions.  The Company will continue to monitor the evolving guidelines and may record adjustments as additional information is released.

The CARES Act allowed for qualified healthcare providers to receive advanced payments under the existing MAAPP funds during the COVID-19 pandemic. Under this program, healthcare providers could choose to receive advanced payments for future Medicare services provided. The Company applied for and received approval to receive MAAPP Funds from Centers for Medicare & Medicaid Services in April 2020. The Company recorded the $14.1 million in advance payments received as a liability. During the quarter ended March 31, 2021, the Company repaid the MAAPP funds of $14.1 million rather than applying them to future services performed.

Management currently expects the Company’s Adjusted EBITDA for 2023 to be in the range of $75.0 million to $80.0 million.  The range considers that the previously announced 2% reduction in the Medicare rate, which we estimate to impact our revenues by $3.1 million, as well as the 2023 impact of the phase-out of sequestration relief during 2022, which we estimate to be $1.2 million, are expected to be offset by increases in commercial rates from renegotiations completed in 2022 and those anticipated to be accomplished in 2023.

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.

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 following tables provide detail 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.   

Operating Results, a non-GAAP measure, equals net income attributable to USPH shareholders per the consolidated statements of income less the change in the revaluation of the put-right liability and the change in the fair value of a contingent earn-out payment.  In accordance with GAAP, the revaluation of redeemable non-controlling interest, net of tax, is included in the earnings per basic and diluted share calculation, although it is not included in net income but charged directly to retained earnings.

Adjusted EBITDA is defined as net income attributable to USPH shareholders before interest income, interest expense, taxes, depreciation, amortization, gain on revaluation of put-right liability, equity-based awards compensation expense, change in the fair value of a contingent earn-out payment and related portion for non-controlling interests.   Management believes reporting Adjusted EBITDA is useful information for investors in comparing the Company’s period-to-period results as well as comparing with similar businesses which report adjusted EBITDA as defined by their company.

Management uses Operating Results and Adjusted EBITDA, which eliminates certain items described above that can be subject to volatility and unusual costs, as one the principal measures to evaluate and monitor financial performance period over period.  Management believes that Operating Results and Adjusted EBITDA is 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.

U. S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES

OPERATING RESULTS AND ADJUSTED EBITDA

2022 PERIODS COMPARED TO 2021 PERIODS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(unaudited)