US Physical Therapy to acquire 50% stake in therapy grou

HOUSTON - U.S. Physical Therapy, Inc. (NYSE: USPH), a prominent operator of outpatient physical therapy clinics, has entered into an agreement to acquire a 50% equity interest in a management services organization that oversees 50 physical therapy clinics. The transaction is expected to be finalized by October 31, 2024.

The management services organization in focus delivers management and administrative services to a network of outpatient clinics predominantly located in New York. These clinics offer a range of therapies, including physical, occupational, and speech therapy, as well as in-home patient services. The organization has demonstrated significant growth, reporting approximately $64.0 million in annual revenue and $12.0 million in annual EBITDA.

The current executive leadership of the organization, including the CEO who has been instrumental in expanding the clinic network from five to 50 locations since 2016, will remain in place post-acquisition. The CEO, along with the existing owners, will retain a 50% ownership stake in the organization.

Chris Reading, CEO of USPH, expressed enthusiasm for the partnership, highlighting the managed company's rapid growth and the leadership's ability to deliver outstanding patient care. Reading anticipates that this partnership will support the company's expansion vision for the region.

BofA Securities, Inc. served as the financial advisor to USPH for this deal, while Livingstone Partners LLC advised the management services organization.

U.S. Physical Therapy, Inc., founded in 1990, manages approximately 687 outpatient clinics across 42 states and provides a variety of services including orthopedic care, sports injury treatment, neurological injury rehabilitation, and industrial injury prevention.

This news is based on a press release statement from U.S. Physical Therapy, Inc.

In other recent news, U.S. Physical Therapy reported record-breaking clinic visits for Q2 2024, marking a significant milestone. Despite challenges like rising labor costs and potential Medicare reimbursement rate reductions, the company achieved substantial growth and financial improvements. The adjusted EBITDA for the quarter reached $22.1 million, while physical therapy revenues saw an 8.5% increase compared to the same period last year.

In addition, U.S. Physical Therapy expanded its operations in Pennsylvania through a strategic acquisition. By acquiring a 70% stake in a local practice with eight clinic locations, the company expects to generate an estimated $5.5 million in annual revenues.

However, BofA Securities revised its stance on U.S. Physical Therapy, downgrading the stock to Neutral from Buy and adjusting the price target to $90 from the previous $114. This decision comes amid concerns about increasing labor costs and a slower-than-anticipated development of new locations.

Analysts anticipate a full-year 2024 EBITDA between $80 million to $85 million. To counter potential Medicare reimbursement rate cuts and address labor shortages, U.S. Physical Therapy is actively negotiating higher rates with commercial payers and investing in recruitment and school partnerships. These are some of the recent developments surrounding U.S. Physical Therapy.

InvestingPro Insights

As U.S. Physical Therapy, Inc. (USPH) moves forward with its acquisition plans, investors may find additional context from recent financial data and expert insights valuable. According to InvestingPro, USPH's market capitalization stands at $1.18 billion, reflecting its significant presence in the outpatient physical therapy sector.

The company's revenue growth of 8.04% over the last twelve months, coupled with a 10.37% quarterly revenue growth, aligns with the expansion strategy evident in the recent acquisition announcement. This growth trajectory is further supported by an InvestingPro Tip indicating that net income is expected to grow this year, potentially bolstering the company's financial position as it integrates the new management services organization.

Despite the positive growth outlook, investors should note that USPH is trading at a high earnings multiple, with a P/E ratio of 73.55. This valuation metric suggests that the market has high expectations for the company's future performance, possibly factoring in the anticipated benefits of strategic acquisitions like the one described in the article.

Interestingly, another InvestingPro Tip reveals that USPH has maintained dividend payments for 14 consecutive years, demonstrating a commitment to shareholder returns even as it pursues growth opportunities. This could be an attractive feature for income-focused investors looking at the healthcare sector.

For those seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could provide a deeper understanding of USPH's financial health and market position. There are 11 more InvestingPro Tips available for USPH, which could offer valuable perspectives on the company's operational efficiency, debt management, and market sentiment.

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