USPH Q1 Earnings Call: Management Highlights Volume Growth and Contracting Initiatives Amid Medicare Headwinds

Outpatient physical therapy provider U.S. Physical Therapy (NYSE:USPH) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 18.1% year on year to $183.8 million. Its non-GAAP profit of $0.48 per share was 6.2% above analysts’ consensus estimates.

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StockStory’s Take

U.S. Physical Therapy’s management attributed first quarter performance to a combination of higher patient volumes, ongoing efforts to negotiate improved commercial and workers’ compensation rates, and contributions from recent acquisitions such as Metro Physical Therapy. CEO Chris Reading noted that, despite challenging weather early in the quarter, March finished with a record number of visits per clinic per day, helping offset earlier disruptions. The injury prevention division also delivered notable organic and acquired growth, with revenue and profit both rising sharply year over year. CFO Carey Hendrickson emphasized the impact of increased rates and successful payer contracting, particularly within workers’ compensation, as important contributors to overall revenue growth.

Looking ahead, management identified several themes likely to shape future results. Chris Reading cited ongoing rate negotiations with commercial payers and continued expansion of the home care offering, especially through leveraging Metro’s expertise, as areas of focus. The company expects further growth in injury prevention services, both organically and through new contracts, and is monitoring legislative developments around Medicare reimbursement rates. While Reading acknowledged that staffing remains tight and macroeconomic uncertainty could create challenges, he stated, “We have a playbook for navigating downturns and are seeing strong demand across our markets.” The company aims to provide updated guidance after monitoring trends in the coming months.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to robust demand, successful rate negotiations, and the integration of recent acquisitions, but also pointed to ongoing headwinds from Medicare rate reductions and staffing pressures.

• Volume recovery post-weather disruptions: Patient volumes rebounded strongly after weather-related closures in January and February, with March setting a new high for visits per clinic per day. This recovery was especially pronounced in long-standing markets and at Metro, the November acquisition, which saw visits per clinic per day grow from 44 to about 50 by March.

• Acquisitions and home care expansion: The Metro acquisition contributed significantly to revenue, and management is leveraging Metro’s experience as it begins to introduce home-based care to additional markets. Metro’s model, which includes physical, occupational, and speech therapy plus home care, is being introduced to other partnerships, with plans for broader reach.

• Injury prevention services momentum: The industrial injury prevention (IIP) segment posted strong organic and acquired growth, with revenue and profit up nearly 29% year over year. Management noted both new client wins and contract expansions as drivers, and sees this segment as a “greenfield” opportunity given low market penetration.

• Rate improvements despite Medicare cuts: The company achieved a net rate per visit increase of over $2 compared to last year, overcoming a 2.9% Medicare rate reduction. Workers’ compensation rates rose by about 10%, and strategic payer negotiations, particularly with large insurers like Blue Cross Blue Shield, are expected to provide ongoing support.

• Cost management and margin focus: Despite higher average salary and operating costs due to acquisitions, management is closely monitoring productivity, cost per visit, and partner-level performance. Direct involvement with top partnerships and targeted support initiatives are aimed at improving operating margins throughout the year.

Drivers of Future Performance

Management’s outlook centers on contract negotiations, expansion of home care and injury prevention, and ongoing cost controls, while monitoring headwinds from reimbursement rates and staffing.

• Payer contracting and rate negotiations: The company’s strategic focus on renegotiating commercial and workers’ compensation contracts is expected to drive rate improvements. Recent progress with large insurers, particularly in markets like Texas and New York, should support revenue growth and help offset potential future government reimbursement cuts.

• Expansion of home care and ancillary services: Management is actively introducing home care offerings, leveraging Metro’s established model, and exploring the expansion of cash-based services like laser therapy with select partnerships. This diversification aims to serve previously unaddressed patient segments—especially those unable to access clinics—and create additional revenue streams.

• Injury prevention segment growth: The industrial injury prevention business continues to secure new contracts, including with government clients, and is working to deepen relationships with existing employer partners. Management views this as an underpenetrated market with opportunities for both organic expansion and selective acquisitions, though acknowledges some contracts may carry lower margins.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely watch (1) the pace and profitability of new home care and injury prevention contract wins, (2) the progression of commercial and workers’ compensation rate negotiations, and (3) the impact of ongoing cost management efforts on operating margins. We will also monitor legislative developments that could affect Medicare reimbursement and the ability to scale ancillary services across more partnerships.

U.S. Physical Therapy currently trades at a forward P/E ratio of 29.3×. In the wake of earnings, is it a buy or sell? The answer lies in our full research report (it’s free).

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