Transcript Document

INVESTOR PRESENTATION
May 7, 2015
Forward Looking Statements
This presentation contains forward-looking statements, which involve numerous risks and
uncertainties. Included are statements relating to opening of new clinics, availability of
personnel and reimbursement environment. The forward-looking statements are based
on the Company’s current views and assumptions and the Company’s actual results
could differ materially from those anticipated as a result of certain risks, uncertainties,
and factors, which include, but are not limited to: general economic, business, and
regulatory conditions; competition; reimbursement conditions; federal and state
regulation; acquisitions; clinic closures, availability, terms, and use of capital; availability
and cost of skilled physical and occupational therapists; and weather.
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Investment Highlights
Established
Company
• 495 outpatient physical and occupational therapy clinics
across 42 states
• 3rd largest owner/operator of clinics
• Only publicly-traded, pure play provider
Attractive Market
Dynamics
• US rehab market > $15B in annual revenue
• Highly fragmented; No company with >6% market share
• Favorable demographics – aging and active population
Proven Business
Model
• Driven by organic growth and acquisitions
• Approximately 60% of clinics are de novo start-ups
• Partner with experienced physical therapists
Solid Financial
Position
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• Diversified payor mix, only 23% of revs from Medicare
• Strong cash flow and balance sheet
National Footprint
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Growth Strategy
Drive organic growth through de novo PT/OT clinic openings, utilize
true partnership model
Maximize profits of existing facilities by growing patient volume;
realize efficiencies through higher clinical productivity
Augment organic growth through strategic acquisitions
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Large and Growing Market Opportunity
• $15B+ U.S. rehab market with 3-4%
projected annual growth
• Favorable demographics – physically
active, aging and obese population
segments
• Healthcare delivery shifting towards
lower cost, high quality outpatient
providers
“Demand for physical therapy is projected to be one of the
fastest growing sectors in the U.S. economy through
2016.”
- Wall Street Journal, July 14, 2009
“Jobs in healthcare support…are projected to experience even faster growth. The increased
demand in this area stems largely from an aging population…occupations that will likely grow in
importance are physical therapists, physical therapist assistants…”
− Report from Executive Office of the President’s Council of Economic Advisors, July 2009
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Competitive Landscape
• Highly fragmented U.S. outpatient rehab market with
~16,000 clinics
• No company with >6% market share
• USPh ranks third nationally
– Select Medical
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1,023 Clinics
– Physiotherapy Associates
575 Clinics
– USPh
495 Clinics
Focused Business Model
• Specialize in trauma, sports, work-related
and pre and post surgical cases
• Partner with experienced physical
therapists
– Drive volume via referrals
– Augment sales with marketing reps
• Historical focus on organic growth via
lower cost de novo (start-up) clinics
• Strategic acquisitions structured like de
novos as partnerships with significant
ownership retained by founders
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USPH Partnership Advantages
Less Administrative
Burden
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Accounting
HR
Real Estate
Construction
Purchasing
Marketing
Compliance
Legal
IT
More Resources
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No Personal Financial Risk
Unlimited Earnings Potential
Full Benefit Package
Ongoing Guidance within
Semi-Autonomous Work
Environment
Video Placeholder
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New Clinics / Brands 2014
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As of 12/31/14
Acquisition Strategy
• Completed 20 clinic group acquisitions
since 2005
• Range in size from 3 to 52 clinics
• Acquisition criteria:
 Owner therapists continue to operate clinics
and retain significant equity interest
 Immediately accretive to earnings
 Further de novo growth opportunities
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Executive Management
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Chris Reading – Chief Executive Officer
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Joined USPh as COO in November 2003
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Promoted to CEO and Board in November 2004
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Previously Senior Vice President of Operations with HealthSouth, managed over 200
facilities including OP, ASC, DX Imaging and rehab hospital operations.
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BS & Physical Therapist
Larry McAfee – Chief Financial Officer
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Joined USPh as CFO in September 2003
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Promoted to EVP and Board in November 2004
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Previously served as CFO and President of both public and private companies
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BBA & MBA
Glenn McDowell – Chief Operating Officer
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Joined USPh as Vice President - West Region in October 2003
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Promoted to COO in January 2005
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Previously Vice President of Operations with HealthSouth, managed 165 facilities including
ASC, DX Imaging, OP and occupational medicine facilities.
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BS & Masters Physical Therapy
Diversified Payor Mix
Percentage of 2015 Net Patient Revenue
(Through March 31, 2015)
5%
20%
Private Insurance & Managed Care
50%
Medicare & Medicaid
Workers Comp
Other
25%
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Strong Cash Flow and Balance Sheet
• Both de novo clinics and acquisitions financed primarily
through free cash flow
• USPH trailing twelve months ended March 2015
adjusted EBITDA of $46.8 million; an increase of 18%
from the preceding twelve months
(1)
(1) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and equity compensation expense.
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Dividend
• In 2011 initiated quarterly dividend
• Increased dividend in 2012, 2013 and 2014
• Paid special dividend in December 2012
• Increased dividend in March 2015 by 25%
• Dividends do not impact ability to continue to grow
internally through de novo clinic development and
externally through acquisitions
• Dividend seen as additional way to increase returns to
shareholders as Company is under leveraged and has
excellent net free cash flow
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Average Annual Rate of Return to Shareholders
23.1% Per Year
$45.00
Increase in Stock Value & Dividends
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
* Current Management Team joined Company in Fall of 2003.
Total Cumulative Return through December 31, 2014 including dividends is $31.71.
Total Cumlative Return Percentage is 259.7%.
Average Annual Return - 23.1%.
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First Quarter Results*
Q1
2014
Q1
2015
Revenue
$ 69.8 M
$ 77.2 M
Gross Margin
$ 16.6 M
$ 16.8 M
Operating Income
$
9.5 M
$
9.2 M
Net Income
$
4.2 M
$
4.2 M
EPS
$
.35
$
.34
Adjusted EBITDA
$
9.5 M
$ 10.0 M
• From continuing operations
• ** Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and equity
compensation expense.
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Year Results*
December 31, 2013
December 31, 2014
Revenue
$ 264.1 M
$ 305.1 M
15.5%
Gross Margin
$ 64.7 M
$ 76.2 M
17.7%
Operating Income
$ 38.9 M
$ 45.8 M
18.1%
Net Income
$ 17.5 M
$ 20.9 M
19.2%
EPS
$
$
17.9%
Adjusted EBITDA
$ 38.6 M
1.45
1.71
$ 46.3 M
20.1%
• From continuing operations
• ** Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and equity
compensation expense.
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Summary
Only publicly-traded, pure play operator of rehab clinics
Proven business model, driven by organic growth and acquisitions
Significant scale with national footprint
Large and growing market/favorable demographics
Strong cash flow and balance sheet
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Reconciliation of Non-GAAP Financial Measures
– Adjusted EBITDA
Trailing Twelve Months Ended
March 31
(amounts in 000’s)
From Continuing Operations
2015
Net revenues
$
Net Income attributable to U.S. Physical Therapy
312,548
2014
$
271,069
20,791
17,869
Depreciation & amortization
7,160
5,597
Interest, net (income) / expense
1,075
650
Non-controlling interests
9,461
8,648
Equity/stock option expense
3,618
2,839
Provision for income taxes
14,112
12,682
Adjusted EBITDA before noncontrolling interests
56,217
48,285
Noncontrolling interests
(9,461)
(8,648)
Adjusted EBITDA
$
46,756
$
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and equity compensation expense.
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39,637
Reconciliation of Non-GAAP Financial Measures
– Adjusted EBITDA
Three Months Ended March 31, 2015
(amounts in 000’s)
2015
2014
From Continued Operations
Net revenues
$
77,241
$
69,767
Net Income attributable to U.S. Physical Therapy
4,166
4,228
Depreciation & amortization
1,807
1,387
257
252
1,985
2,095
990
735
2,777
2,939
Adjusted EBITDA before non-controlling interests
11,982
11,636
Noncontrolling interests
(1,985)
(2,095)
Interest, net (income) / expense
Non-controlling interests
Equity/grant expense
Provision for income taxes
Adjusted EBITDA
$
9,997
$
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and equity compensation expense.
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9,541
NYSE: USPH