USPH Q2 Deep Dive: Volume Growth and Cost Controls Support Upbeat Outlook

August 11, 2025 at 09:37 AM EDT

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Outpatient physical therapy provider U.S. Physical Therapy (NYSE: USPH) announced better-than-expected revenue in Q2 CY2025, with sales up 18% year on year to $197.3 million. Its non-GAAP profit of $0.81 per share was 16.7% above analysts’ consensus estimates.

Is now the time to buy USPH? Find out in our full research report (it’s free).

U.S. Physical Therapy (USPH) Q2 CY2025 Highlights:

Revenue: $197.3 million vs analyst estimates of $189.4 million (18% year-on-year growth, 4.2% beat)
Adjusted EPS: $0.81 vs analyst estimates of $0.69 (16.7% beat)
Adjusted EBITDA: $26.86 million vs analyst estimates of $24.69 million (13.6% margin, 8.8% beat)
EBITDA guidance for the full year is $95 million at the midpoint, above analyst estimates of $91.17 million
Operating Margin: 12.6%, in line with the same quarter last year
Sales Volumes rose 16.7% year on year (5.4% in the same quarter last year)
Market Capitalization: $1.33 billion

StockStory’s Take

U.S. Physical Therapy’s second quarter saw a strong market reaction, reflecting positive surprise on both revenue and profitability. Management attributed the momentum to robust visit growth, driven by higher patient satisfaction and referrals, and successful execution in its injury prevention segment. CEO Christopher Reading highlighted that the company’s Net Promoter Score reached 93.5, indicating exceptional patient advocacy, while the industrial injury prevention business posted double-digit revenue growth. Operational efficiency initiatives and disciplined cost management also contributed, with average visits per clinic per day hitting a company record.

Looking ahead, management expects continued growth in both core physical therapy and injury prevention, supported by targeted investments in recruitment, retention, and new clinic openings. CFO Carey Hendrickson pointed to ongoing contract negotiations to improve reimbursement rates and highlighted early progress from cash-based service offerings. Reading emphasized that the introduction of AI-powered clinical documentation tools and semi-virtualized front desk operations are expected to further enhance productivity and margins, while the recently announced share repurchase program provides flexibility without diverting capital from priority growth investments.

Key Insights from Management’s Remarks

Management credited the quarter’s outperformance to higher patient volumes, expanded service offerings, and improved operational discipline, while new AI initiatives and cost controls set the stage for future margin gains.

Record patient volumes: The company set a new benchmark for average daily visits per clinic. Management attributed this to strong patient satisfaction, high referral rates, and increased demand from returning patients, particularly those recovering from injuries associated with activities such as pickleball.
Injury prevention segment strength: Industrial injury prevention (IIP) revenue and operating margins both grew significantly, with organic growth supported by large new contracts in the auto and manufacturing sectors. Management noted that these contracts have not fully ramped, suggesting further upside.
Operational cost reductions: Total operating cost per patient visit decreased year-over-year, achieved through modest wage increases, lower staff turnover, and better scheduling. Management credited efficiency improvements, particularly in recruiting and retention, for helping offset ongoing Medicare reimbursement headwinds.
Acquisition and de novo expansion: The integration of the Metro PT acquisition contributed to higher average visit volumes and better rates in the New York market, while a record pace of de novo (new clinic) openings is underway. Management emphasized that higher rates in certain markets and more efficient small-format clinics are supporting network growth.
AI and technology adoption: Early deployment of AI-driven clinical documentation tools and a semi-virtualized front desk model are helping reduce administrative burden and labor costs. Management expects these initiatives to support further margin expansion and staff retention.

Drivers of Future Performance

Management’s outlook is anchored in expanding service offerings, continued volume growth, and efficiency gains from technology and scale.

Reimbursement rate improvements: Management expects a modest tailwind from proposed Medicare rate increases in 2026, estimating a 1% to 1.75% benefit to overall revenue. Ongoing contract negotiations and growth in higher-rate workers’ compensation business are targeted to further lift average net rates.
Staffing and clinic expansion: A focus on recruitment, mentorship, and retention is expected to support a record year for new clinic openings, helping to meet rising demand. Management noted that incremental visit growth remains highly accretive to margins, given existing clinic capacity and improved labor efficiency.
Technology-driven productivity: Broader rollout of AI-powered documentation and semi-virtual front desk solutions are projected to enhance clinician productivity, reduce administrative costs, and improve staff retention, supporting margin expansion even amid ongoing wage and payer pressure.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be monitoring (1) the pace of new clinic openings and the ability to maintain high visit volumes per clinic, (2) the full-scale rollout and effectiveness of AI-driven documentation and virtual front desk technologies in lowering costs, and (3) the ramp of large new injury prevention contracts. Progress on reimbursement negotiations and continued expansion in higher-rate markets will also be key for sustaining margin improvements.

U.S. Physical Therapy currently trades at $87.34, up from $73.12 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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