U.S. Physical Therapy Reports Strong Q1 2025 Growth, Bolsters Dividend Amid Medicare Cuts

U.S. Physical Therapy (USPH) demonstrated strong financial and operational performance in Q1 2025, with revenues rising 16.4% year-over-year to $156.4 million, fueled by a 13.9% increase in patient visits. Net income grew by 23.7%, alongside a 16.5% rise in adjusted EBITDA, highlighting the company’s operational efficiency despite ongoing Medicare reimbursement cuts and economic uncertainties. The Industrial Injury Prevention (IIP) segment was a significant growth driver, with revenue increasing 28.8% to $27.4 million due to heightened demand for workplace safety programs and a strategic shift towards higher-margin workers’ compensation cases.

USPH’s management is actively negotiating rate improvements to offset Medicare cuts that have reduced profitability by an estimated $20 million annually, alongside clinic expansions and acquisitions. The addition of 14 net locations in Q1 enhances scale while maintaining disciplined balance sheet management. The company’s dividend yield stands at an attractive 2.54%, outpacing the healthcare sector average of 1.74%, with a 14-year dividend growth streak and payout ratio well below the sustainability threshold.

Despite ongoing challenges from Medicare rate cuts, USPH is diversifying its payor base and innovating service lines, with the IIP segment shifting more focus to workers’ compensation cases, now comprising 50% of its business. Expansion into higher-reimbursement home care services, including new markets such as New York, supplements revenue growth and aligns with patient demand for convenient care options.

Operational resilience was evident with a rebound in visits in March 2025 following Q1 weather disruptions. The company maintains a strong balance sheet, with $39.2 million cash, manageable debt, and a robust free cash flow supporting dividends. Management’s reference to previous recessionary playbooks underscores preparedness for economic downturns through cost control and clinic optimization.

USPH offers a compelling investment opportunity that balances income generation, growth potential, and risk management amid sector-wide healthcare volatility. Stakeholders should monitor Medicare policy changes and gross margin trends, but USPH's diversified revenue streams, dividend discipline, and strategic execution position it well to navigate ongoing industry challenges.