Can you explain the mechanics of the $5.6 million hospital affiliation revenue in Q2, how it flows through the P&L, and estimate the patient visit volume?

The $5.6 million revenue comes from a per-visit fee and reimbursement for licensed clinical staff, replacing net patient revenue. Metro clinics average about 45 visits per day per clinic, and year-over-year volume growth at Metro significantly exceeds 100,000 visits. “The $5.6 million comes from 2 components of the agreement with the hospitals. One is a per visit fee. So for every visit that we see -- every patient that we see, we receive a fee and income from the hospitals. And then additionally, as Chris mentioned, we receive a reimbursement for the licensed clinical staff who are treating those patients.”

Regarding the 50 clinicians hired in advance, what was the cost impact in Q2, and will these costs be reimbursed under the alliance?

The cost per person, including benefits and sign-on bonuses, is likely in the ballpark of $100,000. This was a Q2 expense headwind, but once the clinics are rolled into the arrangement, NYU will pick up these costs. “Yes, it doesn't -- it's not going to rise our Q2 expense. But as soon as those clinics are rolled in the arrangement, that cost gets picked up and effectively supplemented by NYU.”

Was the $3.2 million higher insurance cost mostly felt in Q2, or was it already running higher in Q1?

Approximately 80% of the $3.2 million difference in self-insured healthcare costs was experienced in Q2, compared to lower-than-average costs in Q2 2025. “About 80% of the $3 million that Chris referenced was the second quarter when you think about the spread between the higher-than-average experience in the second quarter of 2026 versus lower-than-average experience in the second quarter 2025.”

USPH

U S Physical Therapy (USPH) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Health Care· Aug 6, 2026

Source: earnings call transcript

Executive summary

U.S. Physical Therapy Q2 FY26 — Strong Volumes and Hospital Affiliation Ramp-Up

U.S. Physical Therapy delivered strong Q2 FY26 results driven by record visit volumes and net rates, alongside significant progress in its hospital affiliation strategy. While short-term costs related to front-loaded hiring and higher self-insured healthcare expenses impacted Q2 margins, management reaffirmed full-year adjusted EBITDA guidance, anticipating benefits from hospital integrations and efficiency initiatives in the second half of the year. The company is also actively pursuing M&A and digital opportunities for future growth.

Highlights

Visits per clinic per day reached an all-time high of 33.5 in Q2 FY26.
Net rate achieved a best-ever $107.59, up $2.26 from the prior year quarter.
Physical Therapy revenue grew 8.4% YoY, with same-store revenue up 3.5% for the quarter.
Industrial Injury Prevention (IIP) revenue increased 9.1% YoY, with comparable partnerships growing 3.6%.
Reaffirmed full-year 2026 adjusted EBITDA guidance of $102 million to $106 million.

Concerns

Self-insured healthcare costs were approximately $3.2 million higher YoY, with about 80% of this impact in Q2 FY26.
Front-loaded hiring of approximately 50 clinicians in advance of hospital affiliations pressured Q2 FY26 margins.
Adjusted Physical Therapy gross profit margin decreased to 19.9% in Q2 FY26 from 21.4% in Q2 FY25.
Adjusted operating results per share declined to $0.75 in Q2 FY26 from $0.81 in Q2 FY25.
GAAP earnings per share decreased to $0.25 in Q2 FY26 from $0.58 in Q2 FY25, impacted by earn-out and noncontrolling interest adjustments.

Guidance & targets

Category	Target	Timeline	Confidence
Adjusted EBITDA	$102 million to $106 million high materiality	Full-year 2026 · FY26	High
Medicare rate increase	around 1.5% medium materiality	2027 · FY27	Medium
IPI factor resolution	beginning of some more positive momentum medium materiality	2028 · FY28	Low

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Physical Therapy Includes $5.6 million from initial hospital affiliation rollout. Adjusted gross profit margin pressured by higher employee medical costs and front-loaded hospital implementation costs. Same-store revenue growth: 3.5%Visits: 1,662,000Visits growth: 6.6%Average daily visits per clinic: 33.5Net rate: $107.59Net rate increase: $2.26 YoY	$182M	8.4%	—	19.9%
Industrial Injury Prevention (IIP) Margins were steady. Growth impacted by high prior-year comp and a lost auto manufacturer contract, but pipeline is strong and open positions are being filled, suggesting temporary softness. Comparable partnerships growth: 3.6%	$32M	9.1%	—	20.4%

Deals & partnerships

NYU Langone Affiliation for Metro clinics long-term

Transitioning all 60 Metro clinics, with approximately 50 clinicians hired in advance. Year-over-year volume growth at Metro significantly exceeds 100,000 visits.

Gulf Coast Hospital affiliation

Expected to go forward by the end of Q3 FY26.

Undisclosed 12-clinic physical therapy practice $16.4M

Acquisition completed subsequent to the end of Q2 FY26. Part of cumulative 2026 acquisitions totaling $38M purchase price and $27M annualized revenue.

Undisclosed 2 previously announced acquisitions

Acquisitions announced in Q1 FY26, contributing to the year's M&A activity.

Risks & headwinds

Higher self-insured healthcare costs Q2 FY26 and YTD FY26

$3.2M difference YoY, 80% of impact in Q2 FY26

Mitigation:Factored into guidance; expected to be influenced or offset by WelcomeWare rollout and strong performance from hospital-affiliated clinics.

Front-loaded hiring costs for hospital affiliations Q2 FY26

Approximately 50 clinicians hired in advance, costing ~$100k+ per person

Mitigation:Costs will be picked up and effectively supplemented by hospital partners (e.g., NYU) once clinics are fully rolled into the arrangements.

Slower pace of hospital system integrations Ongoing

Hospital systems move slower than USPH

Mitigation:Company focuses on building relationships and leveraging the long-term positive impact of these affiliations, which can accelerate cash flow without high acquisition costs.

Softness in Industrial Injury Prevention (IIP) organic growth Q2 FY26

Comparable partnerships growth of 3.6% in Q2 FY26 (compared to 18% organic growth in Q2 FY25)

Mitigation:Due to high prior-year comp and a lost auto manufacturer contract (replaced by Nissan and a large Texas grocery chain). Open positions in one IIP business are being filled, and the pipeline remains strong, suggesting temporary impact.

What to watch in Q3 FY26

Margin lift from WelcomeWare rollout

H2 FY26

Current More than halfway through expected ramp

Target Continued ramp and headcount takeouts

Why it matters

This is a key efficiency initiative expected to offset cost headwinds and improve overall profitability.

With continued WelcomeWare rollout and expected takeouts there, and strong performance from our hospital-affiliated clinics, we expect that we can influence or offset some of these headwinds between now and year-end.

Find out whether USPH delivers this. Inve re-checks your case every morning.

Q&A highlights

What specific initiatives will drive margin lift in the back half of the year, and what is the timing of associated costs and benefits for Q3 and Q4?

Management expects margin lift from the continued rollout of WelcomeWare, which is over halfway complete, and the full integration of hospital facilities. The 39 remaining clinics are expected to integrate in Q3, and the costs of the 50 front-loaded hires will be picked up by NYU Langone once clinics are rolled in.

“With continued WelcomeWare rollout and expected takeouts there, and strong performance from our hospital-affiliated clinics, we expect that we can influence or offset some of these headwinds between now and year-end.”

asked by Benjamin Rossi · answered by Christopher Reading

3 min read 6 chapters

Detailed narrative

Hospital Affiliation Strategy and Integration Progress

U.S. Physical Therapy is heavily concentrating on hospital affiliation arrangements, with the transition of its Metro clinics into the NYU Langone affiliation progressing well. By the end of Q3 FY26, all 60 Metro clinics will have transitioned, benefiting from approximately 50 clinicians hired in advance.

This strategy is expected to drive significant growth, with Metro's year-over-year volume growth already exceeding 100,000 visits before full NYU Langone support. The Gulf Coast partnership is also expected to go forward by the end of Q3 FY26, further expanding the model.

Record Volumes and Net Rate Performance

The company achieved an all-time high in visits per clinic per day at 33.5 in Q2 FY26, marking 24 consecutive months of record volumes. The net rate also reached a best-ever $107.59, up $2.26 from the prior year, with solid trends across commercial, Medicare, and workers' compensation payers.

This strong performance is expected to receive additional lift as hospital clinics are fully onboarded, contributing to positive momentum into 2027.

Cost Pressures and Mitigation Efforts

Q2 FY26 margins were pressured by two main factors: a $3.2 million year-over-year increase in self-insured healthcare costs due to significant claims (80% of which impacted Q2), and the front-loaded hiring of clinicians for hospital affiliations. Management expects to offset these headwinds through the continued rollout of the WelcomeWare initiative, which virtualizes front-desk functions, and the full integration of hospital-affiliated clinics, where licensed staff costs are reimbursed by hospital partners.

Industrial Injury Prevention (IIP) Segment Update

The IIP business reported 9.1% revenue growth year-over-year and a steady margin slightly above 20%. Comparable partnerships grew 3.6%. The segment experienced some softness due to a high prior-year comparable (18% organic growth in Q2 FY25) and the loss of one auto manufacturer contract, which has since been replaced by new contracts with Nissan Motors and a large Texas grocery chain.

Open positions in one IIP business also temporarily impacted revenue execution, but these are being filled, and the pipeline remains strong.

M&A and Development Pipeline Expansion

U.S. Physical Therapy recently acquired a 12-clinic physical therapy practice for $16.4 million, generating $12 million in annual revenue and 112,000 annual visits. This acquisition, combined with two earlier Q1 FY26 deals, brings cumulative 2026 acquisition purchase price to $38 million with $27 million in annualized revenue.

The pipeline for hospital affiliations continues to grow, with expectations for further relationships like NYU Langone to meaningfully impact the 2027 outlook. The company also noted that hospital partnerships allow for accretive acquisitions of high-volume, lower-profit practices that would not typically be targets.

Financial System Upgrades and Digital Initiatives

The company is upgrading its finance and HR systems, with an expected go-live at the beginning of 2027, aiming to improve efficiency and position for future growth. Additionally, U.S. Physical Therapy has hired a senior leader to explore digital and hybrid opportunities for 2027, focusing on building a foundation to accelerate growth in the coming years.

This includes leveraging projected Medicare rate increases and continued commercial rate lift.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.