What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-09 compared with 2021-11-09 · 296 added, 626 removed, 114 unchanged (89% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following is a discussion of our historical consolidated financial condition and results of operations, and should be read in conjunction with (i) our historical consolidated

financial statements and accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q;

(ii) our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (the “SEC”)

on March 1, 2021 (“2020 Annual Report”);

The following is a discussion of our historical consolidated financial condition and results of operations, and should be read in conjunction with (i) our historical consolidated financial statements and

accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q;

(ii) our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2022 (“2021

Annual Report”);

and (iii) our management’s discussion and analysis of financial condition and results of operations included in our 2021 Annual Report.

This discussion includes forward-looking statements that are

subject to risk and uncertainties.

This discussion includes forward-looking statements that are subject to risk and

uncertainties.

Actual results may differ substantially from the statements we make in this section due to a number of factors that are discussed in “Forward-Looking Statements” herein and in Part II, Item 1A.

Risk Factors of

Risk Factors of this report.

References to “we,” “us,” “our” and the “Company” shall mean U.S.

2 unchanged sentences

EXECUTIVE SUMMARY

We operate outpatient physical therapy clinics that provide pre- and post-operative care and treatment for a variety of orthopedic-related disorders and sports-related injuries,

neurologically-related injuries and rehabilitation of injured workers.

We also operate an industrial injury prevention services business which includes onsite injury prevention and rehabilitation, performance optimization and ergonomic

assessments services.

Business Update Related to COVID-19

As previously disclosed in a series of filings with the SEC and further described in detail in our Quarterly Reports on Form 10-Q for the first three quarters of 2020 and the 2020

Annual Report, our results were negatively impacted by the effects of the COVID-19 pandemic in 2020.

For 2021 periods as compared to 2020 periods, the increase in revenues and expenses are primarily due to the Company returning to pre-pandemic

We have put preparedness plans in place at our facilities to maintain continuity of operations, while also taking steps to keep employees and patients safe.

In line with recommendations to reduce large

gatherings and increase social distancing, we continue to allow a large number of office-based employees to work remotely.

We are monitoring the situation and will adjust work environments accordingly.

In March 2020 in response to the COVID-19 pandemic, the federal government approved the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

The CARES Act provides

numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions,

temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain

payroll tax credits associated with the retention of employees.

In 2020, we received benefits under the CARES Act including, but not limited to:

The CARES Act allowed for qualified healthcare providers to receive advanced payments under the Medicare Accelerated and Advance Payment Program (“MAAPP Funds”)

during the COVID-19 pandemic.

Under this program, healthcare providers could choose to receive advanced payments for future Medicare services provided.

We applied for and received approval from Centers for Medicare & Medicaid Services (“CMS”) in April 2020.

We recorded the $14.1 million in advance payments received as a liability.

During the 2021 First Quarter, we repaid the MAAPP Funds of $14.1 million rather than applying them to future services performed.

We elected to defer depositing the employer’s share of Social Security taxes for payments due from March 27, 2020 through December 31, 2020, interest-free and

penalty-free.

As of September 30, 2021, included in each of accrued liabilities was $4.1 million and in other long-term liabilities is $4.2 million related to these deferred payments.

The CARES Act provided additional waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic, including $100.0 billion in

appropriations for the Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to the coronavirus, and for reimbursing eligible health care

providers for lost revenues and health care related expenses that are attributable to COVID-19.

Through December 31, 2020, our consolidated subsidiaries received approximately $13.5 million of payments under the CARES Act (“Relief

Under the our accounting policy, these payments have been recorded as Other income – Relief Funds.

These funds are not required to be repaid upon attestation and compliance with certain terms and conditions, which could

change materially based on evolving grant compliance provisions and guidance provided by the U.S.

Department of Health and Human Services.

Currently, we can attest and comply with the terms and conditions.

We will continue to monitor

the evolving guidelines and may record adjustments as additional information is released.

There were no Relief Funds received in the nine months ended September 30, 2021.

We operate outpatient physical therapy clinics that provide pre- and post-operative care and treatment for a variety of orthopedic-related disorders and sports-related injuries, neurologically-related injuries and

rehabilitation of injured workers.

We also operate an industrial injury prevention services business which includes onsite injury prevention and rehabilitation, performance optimization and ergonomic assessments services.

Selected Operating and Financial Data

Our reportable segments include the physical therapy operations segment and the industrial injury prevention services segment.

Our physical operations consist of physical therapy

and occupational therapy clinics that provide pre-and post-operative care and treatment for orthopedic-related disorders, sports-related injuries, preventive care, rehabilitation of injured workers and neurological injuries.

Services provided

by industrial injury prevention services segment include onsite injury prevention and rehabilitation, performance optimization and ergonomic assessments.

At September 30, 2021, we operated 579 clinics in 39 states.

In addition to our ownership and operation of outpatient physical

therapy clinics, we also manage physical therapy facilities for third parties, such as physicians and hospitals, with 35 such third-party facilities under management as of September 30, 2021.

In March 2017, we acquired a 55% interest in an initial industrial injury prevention services business.

On April 30, 2018, we made a second acquisition and subsequently combined

the two businesses.

After the combination, we owned a 59.45% interest in the combined business, Briotix Health, Limited Partnership (“Briotix Health”).

Services provided include onsite injury and ergonomic assessments.

The majority of these

services are contracted with and paid for directly by employers, including a number of Fortune 500 companies.

Other clients include large insurers and their contractors.

We perform these services through Industrial Sports Medicine

Professionals, consisting of both physical therapists and specialized certified athletic trainers (ATCs).

On April 11, 2019, the Company acquired 100% of a third company that is a provider of industrial injury prevention services.

company specializes in delivering injury prevention and care, post offer employment testing, functional capacity evaluations and return-to-work services.

It performs these services across a network in 45 states including onsite at eleven client

The business was then combined with Briotix Health increasing the Company’s ownership position in the partnership to approximately 76.0%.

On September 30, 2021, we acquired a company that specializes in return-to-work and ergonomic services, among other offerings.

The business generates more than $2.0 million in annual revenue.

acquired the company’s assets at a purchase price of approximately $3.3 million (which includes the obligation to pay an amount up to $0.6 million in contingent payment consideration in conjunction with the acquisition if specified future

operational objectives are met), and contributed those assets to industrial injury prevention services subsidiary.

The initial purchase price, not inclusive of the $0.6 million contingent payment, was approximately $2.7 million, of which $2.4

million was paid in cash, and $0.3 million is in the form of a note payable.

The note accrues interest at 3.25% per annum and the principal and interest is payable on September 30, 2023.

Subsequent to this acquisition and the purchase of the

redeemable non-controlling interest of one of the limited partners, our ownership in Briotix Health is approximately 85%.

On June 30, 2021, the Company acquired a 65% interest in an eight-clinic physical therapy practice with the practice founder retaining 35%.

The purchase price was approximately $10.3 million, of which

$9.0 million was paid in cash, $1.0 million is payable based on the achievement of certain business criteria and $0.3 million is in the form of a note payable.

The note accrues interest at 3.25% per annum and the principal and interest is

payable on June 30, 2023.

Additionally, the Company has an obligation to pay an additional amount up to $0.8 million in contingent payment consideration in conjunction with the acquisition if specified future operational objectives are met.

Company recorded acquisition-date fair value of this contingent liability based on the likelihood of the contingent earn-out payment.

The earn-out payment will subsequently be remeasured to fair value each reporting date.

On March 31, 2021, we acquired a 70% interest in a five-clinic physical therapy practice with the practice founder retaining 30%.

When acquired, the practice was developing a sixth clinic which has

been completed.

The purchase price was approximately $12.0 million, of which $11.7 million was paid in cash and a $0.3 million note payable.

The note accrues interest at 3.25% per annum and the principal and interest is payable on March 31,

On November 30, 2020, we acquired a 75% interest in a three-clinic physical therapy practice.

The purchase price for the 75% interest was $8.9 million (net of cash acquired), of which $8.6 million was

paid in cash and $0.3 million in the form of a note payable that is payable in two principal installments totaling $162,500 each.

The first principal payment plus accrued interest is due to be paid in November 2021 with the second installment

to be paid in November 2022.

The note accrues interest at 3.25% per annum.

On September 30, 2020, we acquired a 70% interest in an entity which holds six-management contracts that have been in place for a number of years.

Currently, these contracts have a five year term.

purchase price for the 70% interest was approximately $4.2 million, with $3.7 million payable in cash and $0.5 million in two notes payable.

One of the notes payable of $0.3 million was paid in November 2020.

The remaining note payable of $0.2

million was paid on September 30, 2021.

On February 27, 2020, we acquired interests in a four-clinic physical therapy practice.

The four clinics are in four separate partnerships.

Our interests in the four partnerships range from 10.0% to

83.8%, with an overall 65.0% based on the initial purchase transaction.

The purchase price was $11.9 million, of which $11.6 million was paid in cash and a $0.3 million note payable.

The note accrues interest at 4.75% per annum and the

principal and interest is payable in February 2022.

During the nine months ended September 30, 2020, we sold two clinics.

The aggregate sales price was $0.1 million.

Our strategy to acquire physical therapy practices, develop outpatient physical therapy clinics as satellites within existing partnerships, acquire industrial injury prevention

services businesses, and to continue to support the growth of our existing businesses requires a talented workforce that can grow with us.

As of September 30, 2021, we employed approximately 5,338 people nationwide, of which approximately 2,939

were full-time employees.

Our physical operations consist of physical therapy and occupational therapy clinics

that provide pre-and post-operative care and treatment for orthopedic-related disorders, sports-related injuries, preventive care, rehabilitation of injured workers and neurological injuries.

Services provided by industrial injury prevention

services segment include onsite injury prevention and rehabilitation, performance optimization and ergonomic assessments.

At March 31, 2022, we operated 601 clinics in 39 states.

In addition to our ownership and operation of outpatient physical therapy clinics, we also manage physical therapy facilities for third parties, such as

physicians and hospitals, with 38 such third-party facilities under management as of March 31, 2022.

During the 2021 year and three months ended March 31, 2022, we completed the acquisitions of four multi-clinic practices and two industrial injury services businesses as detailed below.

March 2022 Acquisition

March 31, 2022

December 2021 Acquisition

December 31, 2021

November 2021 Acquisition

November 30, 2021

September 2021 Acquisition

September 30, 2021

June 2021 Acquisition

June 30, 2021

March 2021 Acquisition

March 31, 2021

* Industrial injury prevention services business

During the 2022 First Quarter, we closed two clinics.

Our strategy to acquire physical therapy practices, develop outpatient physical therapy clinics as satellites within existing partnerships, acquire industrial injury prevention services businesses, and to continue

to support the growth of our existing businesses requires a talented workforce that can grow with us.

As of March 31, 2022 we employed approximately 5,519 people nationwide, of which approximately 3,060 were full-time employees.

It is crucial that we continue to attract and retain top talent.

To attract and retain talented employees, we strive to make our corporate office and all of our practices and

businesses a diverse and healthy workplace, with opportunities for our employees to receive continuing education, skill development, encouragement to grow and develop their career, all supported by competitive compensation, incentives, and

Our clinical professionals are all licensed and a vast majority have advanced degrees.

Our operational leadership teams have long-standing relationships with local and regional universities, professional affiliations, and other

applicable sources that provide our practices with a talent pipeline.

To attract and retain talented employees, we strive to make our corporate office and all of our practices and businesses a diverse and healthy

workplace, with opportunities for our employees to receive continuing education, skill development, encouragement to grow and develop their career, all supported by competitive compensation, incentives, and benefits.

Our clinical professionals

are all licensed and a vast majority have advanced degrees.

Our operational leadership teams have long-standing relationships with local and regional universities, professional affiliations, and other applicable sources that provide our practices

with a talent pipeline.

We provide competitive compensation and benefits programs to help meet our employees’ needs in the practices and communities in which they serve.

These programs (which can vary by

practice and employment classification) include incentive compensation plans, a 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, education assistance, mental health, and

other employee assistance benefits.

These programs (which can vary by practice and employment

classification) include incentive compensation plans, a 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, education assistance, mental health, and other employee assistance

We invest resources to develop the talent needed to support our business strategy.

Resources include a multitude of training and development programs delivered internally and

externally, online and instructor-led, and on-the-job learning formats.

Resources include a multitude of training and development programs delivered internally and externally, online and instructor-led,

and on-the-job learning formats.

We expect to continue adding personnel in the future as we focus on potential acquisition targets and organic growth opportunities.

RESULTS OF OPERATIONS

Summary of 2021 Third Quarter and Nine Months Results

For the 2021 Third Quarter, our Operating Results, a non-Generally Accepted Accounting Principles (“non-GAAP”) measure (defined below) was $11.0 million, or

$0.85 per diluted share as compared to $11.1 million or $0.86 per diluted share (inclusive of $0.2 million, net of non-controlling interest and taxes, or $0.01 per share, of Relief Funds), for the 2020 Third Quarter.

Operating Results per

diluted share, a non-GAAP measure, for the 2021 Third Quarter was 21.4% higher than $9.0 million, or $0.71 per diluted share, for the 2019 Third Quarter.

For the 2021 Nine Months, our Operating Results was $31.6 million, or $2.45 per diluted share, an increase of 28.6%, as compared to $24.6 million (inclusive of

$4.9 million, net of non-controlling interest and taxes, or $0.38 per share of Relief Funds), or $1.92 per diluted share, for the nine months ended September 30, 2020 (“2020 Nine Months”).

Operating Results for the 2021 Nine Months was also

13.6% higher than the $27.8 million, or $2.18 per diluted share, for the nine months ended September 30, 2019 (“2019 Nine Months”).

Operating Results, a non-GAAP measure, equals net income attributable to our shareholders per the consolidated

statements of income less gain on sale of partnership interests and clinics plus charges incurred for clinic closure costs and expenses related to executive officer transitions, all net of taxes.

Operating Results per share also excludes the

impact of the revaluation of redeemable non-controlling interest and the associated tax impact.

See tables on pages 36 and 37.

For the 2021 Third Quarter, our net income attributable to our shareholders, a GAAP measure, was $10.0 million as compared to $10.9 million for the 2020 Third

Quarter and $9.0 million for the 2019 Third Quarter.

Inclusive of the charge or credit for revaluation of non-controlling interest, net of taxes, used to compute diluted earnings per diluted share in accordance with GAAP, the amount is $8.5

million, or $0.66 per diluted share, for the 2021 Third Quarter, $7.8 million, or $0.61 per diluted share, for the 2020 Third Quarter, and $8.4 million, or $0.66 per diluted share, for the 2019 Third Quarter.

For the 2021 Nine Months, our net income attributable to our shareholders was $30.6 million, as compared to $22.2 million for the 2020 Nine Months (inclusive of

$4.9 million of Relief Funds, net of non-controlling interest and taxes) and $32.1 million for the 2019 Nine Months (inclusive of a gain on sale of partnerships and clinics of $4.3 million, net of taxes).

Including the charge or credit for

revaluation of non-controlling interest, net of taxes, used to compute earnings per diluted share in accordance with GAAP, the amount is $21.8 million, or $1.69 per diluted share, for the 2021 Nine Months and $23.0 million, or $1.80 per diluted

share, for the 2020 Nine Months, and $24.2 million, or $1.90 per diluted share, for the 2019 Third Quarter.

In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of taxes, is not included

in net income but charged directly to retained earnings;

however, the charge or credit for this change is included in the earnings per basic and diluted share calculation.

See the schedules on pages 36 and 37 for the computation of earnings

per diluted share.

In the 2021 Third Quarter, 2021 Nine Months, 2020 Third Quarter, 2019 Third Quarter and 2019 Nine Months, the valuations increased therefore there was a charge to retained earnings.

In the 2020 Nine Months, the valuation

of redeemable non-controlling interest decreased due to the results associated with the pandemic resulting in a credit to retained earnings.

As previously disclosed in a series of filings with the SEC and further described in detail in our Quarterly Reports on Form 10-Q for the

first three quarters of 2020 and our 2020 Annual Report, the Company’s results were negatively impacted by the effects of the COVID-19 pandemic in 2020.

For 2021 periods as compared to 2020 periods, the increase in revenues and expenses are

largely due to the Company returning to pre-pandemic patient volumes.

We believe providing Operating Results is useful to investors for comparing the Company’s period-to-period results and for comparing with

other similar businesses since most do not have redeemable instruments and therefore have different equity structures.

We use Operating Results, which eliminates certain items described above that can be subject to volatility and unusual costs,

as one of the principal measures to evaluate and monitor financial performance.

Additionally, in the information presented below, we purposefully defined Gross profit less closure costs (a non-GAAP measure) and Operating cost less closure

costs (a non-GAAP measure) as a metric to see the business through the eyes of Management excluding the variability of closure costs.

Although closure costs are a recurring cost of our business, due to the business environment in 2020

(primarily the COVID-19 pandemic), we determined that a number of clinics needed to be closed resulting in unusually high closure costs.

Presenting Gross profit less closure costs and Operating cost less closure costs allows the reader to

evaluate our revenue generation performance relative to direct costs of revenue.

A reconciliation between the Gross Profit in accordance with GAAP to Gross profit less closure costs and Operating cost in accordance with GAAP to Operating cost

less closure costs has also been included.

Operating Results, Gross profit less closure costs, and Operating cost less closure costs are not measures of financial performance under

GAAP and should not be considered in isolation or as an alternative to, or substitute for, net income attributable to USPH shareholders, Gross profit and Operating cost presented in the consolidated financial statements.

The following tables provide detail of the diluted earnings per share computation and reconcile net income attributable to USPH

shareholders calculated in accordance with GAAP to Operating Results (in thousands, except per share data):

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

EARNINGS PER SHARES AND OPERATING RESULTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended September 30,

Computation of earnings per share - USPH shareholders:

Net income attributable to USPH shareholders

Credit (charges) to retained earnings:

Revaluation of redeemable non-controlling interest

Tax effect at statutory rate (federal and state) of 25.55% and 26.25%, respectively

Earnings per share (basic and diluted)

Closure costs

Expenses related to executive officer transitions

Gain on sale of partnership interest and clinics

Allocation to non-controlling interest

Revaluation of redeemable non-controlling interest

Tax effect at statutory rate (federal and state) of 25.55%, 26.25% and 26.25%, respectively

Operating Results (excluding Relief Funds) (a non-GAAP measure)

Allocation to non-controlling interest

Tax effect at statutory rate (federal and state) of 25.55%, 26.25% and 26.25%, respectively

Operating Results (including Relief Funds) (a non-GAAP measure)

Basic and diluted Operating Results per share (excluding Relief Funds) (a non-GAAP measure)

Basic and diluted Operating Results per share (including Relief Funds) (a non-GAAP measure)

Shares used in computation - basic and diluted

EARNINGS PER SHARES AND OPERATING RESULTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Nine Months Ended September 30,

Summary of 2022 First Quarter Compared to the 2021 First Quarter Results

For the three months ended March 31, 2022 (“2022 First Quarter”), our net income attributable to our shareholders was $8.8 million as compared to $8.2 million for the three months ended March

31, 2021 (“2021 First Quarter”).

In accordance with current GAAP accounting guidance, the revaluation of redeemable non-controlling interest, net of taxes, is not included in net income but charged directly to retained earnings;

charge for this change is included in the earnings per basic and diluted share calculation.

Inclusive of the charge for revaluation of non-controlling interest, net of taxes, the amount is $8.2 million, or $0.64 per diluted share, for the 2022

First Quarter, and $2.8 million, or $0.21 per diluted share, for the 2021 First Quarter.

For the 2022 First Quarter, our Operating Results, were $8.7 million, or $0.67 per diluted share, an increase of 2.0%, as compared to $8.2 million, or $0.64 per diluted share, for the 2021

First Quarter.

Operating Results, a non-GAAP measure, equals net income attributable to our shareholders per the consolidated statements of income, less the gain on the revaluation of the put-right liability.

In accordance with GAAP, the

revaluation of redeemable non-controlling interest, net of tax, is included in the earnings per basic and diluted share calculation, although it is not included in net income but charged directly to retained earnings.

See table on page 30.

We believe providing Operating Results is useful to investors for comparing the Company’s period-to-period results and for comparing with other similar businesses since most do not have

redeemable instruments and therefore have different equity structures.

We use Operating Results, which eliminates certain items described above that can be subject to volatility and unusual costs, as one of the principal measures to evaluate and

monitor financial performance.

Operating Results is not a measure of financial performance under GAAP and should not be considered in isolation or as an alternative to, or substitute for, net income attributable to our

shareholders presented in the consolidated financial statements.

The following tables provide detail of the diluted earnings per share computation and reconcile net income attributable to our shareholders calculated in accordance with GAAP to Operating

Results (in thousands, except per share data):

Three Months Ended March 31,

Computation of earnings per share - USPH shareholders:

2 unchanged sentences

Revaluation of redeemable non-controlling interest

Tax effect at statutory rate (federal and state) of 25.55%, 26.25% and 26.25%, respectively

Tax effect at statutory rate (federal and state) of 25.55%

Earnings per share (basic and diluted)

Closure costs

Expenses related to executive officer transitions

Gain on sale of partnership interest and clinics

Allocation to non-controlling interest

Gain on revaluation of put-right liability

Revaluation of redeemable non-controlling interest

Tax effect at statutory rate (federal and state) of 25.55%, 26.25% and 26.25%, respectively

Operating Results (excluding Relief Funds) (a non-GAAP measure)

Allocation to non-controlling interest

Tax effect at statutory rate (federal and state) of 25.55%, 26.25% and 26.25%, respectively

Operating Results (including Relief Funds) (a non-GAAP measure)

Basic and diluted Operating Results per share (excluding Relief Funds) (a non-GAAP measure)

Basic and diluted Operating Results per share (including Relief Funds) (a non-GAAP measure)

Tax effect at statutory rate (federal and state)

Operating Results (a non-GAAP measure)

Basic and diluted Operating Results per share (a non-GAAP measure)

Shares used in computation - basic and diluted

Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020

The following table summarizes financial data by segment for the periods indicated and reconciles the data to our consolidated financial statements (in thousands):

Three Months Ended September 30,

Three Months Ended March 31,

Net operating revenue:

3 unchanged sentences

Gross profit:

Physical therapy operations (less closure costs) (a non-GAAP measure)

Physical therapy operations

Industrial injury prevention services

Physical therapy operations - closure costs

Total Assets:

2 unchanged sentences

Total Company

Reported net revenue for the 2021 Third Quarter was $125.9 million, an increase of 15.6% as compared to $108.9 million for the 2020 Third Quarter.

below for a detail of reported net revenue (in thousands):

Reported total revenue for the 2022 First Quarter was $131.7 million, an increase of 17.2% as compared to $112.4 million for the 2021 First Quarter.

See table below for a detail of reported total revenue (in

Three Months Ended

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Revenue related to Mature Clinics

8 unchanged sentences

Industrial injury prevention services

Net patient revenue from physical therapy operations increased $15.9 million, or 16.5%, to $112.3 million for the 2021 Third Quarter from $96.4 million for the 2020 Third Quarter.

Included in net patient revenue is revenue related to clinics sold or closed in 2021 and 2020 of $99,000 for the 2021 Third Quarter and $0.6 million for the 2020 Third Quarter.

During the full year of 2020, we sold our interest in 14 clinics

and closed 34 clinics.

For comparison purposes, net patient revenue from physical therapy operations, excluding revenue from the clinics sold or closed, was approximately $112.2 million for Third Quarter 2021, inclusive of $10.3 million

related to clinics opened or acquired in the 2021 Nine Months (“2021 Clinic Additions”) and 2020 year (“2020 Clinic Additions”), together referred to as “Clinic Additions”, and $95.8 million for the Third Quarter 2020, inclusive of $2.9

million for 2020 Clinic Additions.

Net patient revenue related to clinics opened or acquired prior to 2020 and still in operation at September 30, 2021 (“Mature Clinics”) increased $9.0 million, or 9.7%, to $102.0 million for the 2021 Third

Quarter compared to $92.9 million for the 2020 Third Quarter.

The average net patient revenue per visit was $102.93 for the 2021 Third Quarter as compared to $105.91 for the 2020 Third Quarter,

including all clinics operational during such periods.

The Company’s net rate in 2021 reflects the previously disclosed Medicare rate reduction of approximately 3.5% effective January 1, 2021, a decrease in higher-rate workers compensation

visits, and an increase in lower-rate Medicare visits.

Total patient visits increased 19.9% to 1,091,329 for the 2021 Third Quarter from 910,155 for the 2020 Third Quarter.

Net patient revenue is based on established billing rates less

allowances for patients covered by contractual programs and workers’ compensation.

Net patient revenue is determined after contractual and other adjustments relating to patient discounts from certain payors.

Payments received under

contractual programs and workers’ compensation are based on predetermined rates and are generally less than the established billing rates.

Visits for Mature Clinics (same store) for the 2021 Third Quarter increased 13.7% as compared to the 2020 Third Quarter while the net rate per

visit decreased 3.5%.

Revenue from physical therapy management contracts increased 15.4% to $2.3 million for the 2021 Third Quarter as compared to $2.0 million for the 2020 Third Quarter.

miscellaneous revenue was $0.8 million for the 2021 Third Quarter and $0.5 million for the 2020 Third Quarter.

Other miscellaneous revenue includes a variety of services, including athletic trainers provided for schools and athletic events.

Total Revenue

Revenue from physical therapy operations increased $10.6 million, or 10.5%, to $110.4 million for the 2022 First Quarter from $99.8 million for the 2021 First Quarter.

Net patient revenue related to clinics opened

or acquired prior to 2021 and still in operation at March 31, 2022 (“Mature Clinics”) increased $3.7 million, or 3.7%, to $102.3 million for the 2022 First Quarter compared to $98.6 million for the 2021 First Quarter.

The average net patient revenue per visit was $103.00 for the 2022 First Quarter as compared to $104.72 for the 2021 First Quarter.

Total patient visits increased 12.2% to 1,063,519 for the 2022 First Quarter from

947,788 for the 2021 First Quarter.

Net patient revenue is based on established billing rates less allowances for patients covered by contractual programs and workers’ compensation.

Net patient revenue is determined after contractual and other

adjustments relating to patient discounts from certain payors.

Payments received under contractual programs and workers’ compensation are based on predetermined rates and are generally less than the established billing rates.

Visits for Mature Clinics (same store) for the 2022 First Quarter increased 5.9% as compared to the 2021 First Quarter.

Revenue from physical therapy management contracts decreased 13.0% to $2.2 million for the 2022 First Quarter as compared to $2.6 million for the 2021 First Quarter.

Other miscellaneous revenue was $0.9 million for

the 2022 First Quarter and $0.5 million for the 2021 First Quarter.

Other miscellaneous revenue includes a variety of services, including athletic trainers provided for schools and athletic events.

Revenue from the industrial injury prevention services business increased 4.8% to $10.5 million for the 2021 Third Quarter as compared to $10.0 million for the

2020 Third Quarter.

Other miscellaneous revenue includes a variety

of services, including athletic trainers provided for schools and athletic events.

Revenue from the industrial injury prevention services business increased 90.5% to $19.1 million for the 2022 First Quarter as compared to $10.0 million for the 2021 First Quarter.

Excluding $6.8 million of revenue

related to the industrial injury prevention services acquisition in November 2021, industrial injury prevention services revenue increased 22.4% in the 2022 First Quarter as compared to the 2021 First Quarter.

Operating Cost

Total operating cost, less closure costs, a non-GAAP measure was $96.1 million for the 2021 Third Quarter, or 76.3% of net revenue, as compared to $78.5 million

for the 2020 Third Quarter, or 72.1% of net revenue.

We took a number of steps throughout 2020 to reduce costs as our patient volumes were negatively impacted by the effects of the COVID-19 pandemic, including temporary salary reductions,

furloughs, and similar measures.

For comparison purposes, total operating cost, less closure costs, was 76.7% of net revenue in the pre-pandemic third quarter of 2019, and was 76.9% and 73.0% of net revenue in the first and second quarters of

2021, respectively.

Included in operating cost for the 2021 Third Quarter and 2020 Third Quarter was $8.8 million and $2.2 million, respectively, related to Clinic Additions.

Operating cost for Mature Clinics increased by $10.5 million for

the 2021 Third Quarter compared to the 2020 Third Quarter.

In addition, operating cost related to the industrial injury prevention services business increased by $0.7 million.

See table below for a detail of operating cost, less closure costs

(in thousands):

Total operating cost was $105.1 million for the 2022 First Quarter, or 79.8% of total revenue, as compared to $86.5 million, or 77.0% of total revenue, for the 2021 First Quarter.

Operating cost related to Mature

Clinics increased by $4.8 million for the 2022 First Quarter compared to the 2021 First Quarter.

On a per visit basis, operating cost related to Mature Clinics increased 0.4% from $80.78 in the 2021 First Quarter to $81.08 in the 2022 First

In addition, operating cost related to the industrial injury prevention services business increased by $7.6 million of which $5.6 million related to the recent industrial injury prevention services acquisition in November 2021.

table below for a detail of operating cost (in thousands):

Three Months Ended

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Operating cost related to Mature Clinics

3 unchanged sentences

Operating cost related to clinics sold or closed in 2021

Closure costs

Physical therapy operations

Physical therapy management contracts

Industrial injury prevention services

Operating cost related to physical therapy operations

Operating cost related to management contracts

Operating cost related to industrial injury prevention services

Total operating cost

Physical therapy operations - closure costs

Total operating cost less closure costs (a non-GAAP measure)

Each component of operating cost is discussed below:

Operating Cost—Salaries and Related Costs

Salaries and related costs, including physical therapy operations and the industrial injury prevention services business, was 56.0% of net revenue for the 2021 Third Quarter versus

52.8% for the 2020 Third Quarter.

For comparison purposes, total salaries and related costs was 56.9% of net revenue in the pre-pandemic 2019 Third Quarter, and was 56.8% and 54.3% of net revenue in the first and

second quarters of 2021, respectively.

Salaries and related costs for the physical therapy operations was $62.4 million in the 2021 Third Quarter, or 55.2% of physical therapy operations revenue, as compared to $49.9 million in the 2020 Third

Quarter, or 51.6% of physical therapy operations revenue.

Included in salaries and related costs for the physical therapy operations for the 2021 Third Quarter was $6.1 million related to 2021 and 2020 Clinic Additions.

Adjusted for the

salaries and related costs for clinics closed or sold in 2021 and 2020, salaries and related costs related to Mature Clinics increased by $7.7 million in the 2021 Third Quarter compared to the 2020 Third Quarter.

Salaries and related costs

related to management contracts increased by $0.1 million for the 2021 Third Quarter.

Salaries and related costs for the industrial injury prevention services business was $6.4 million in the 2021 Third Quarter, or 60.8% of industrial injury prevention services

revenue, as compared to $5.9 million in the 2020 Third Quarter, or 59.0% of industrial injury prevention services revenue.

Salaries and related costs, including physical therapy operations and the industrial injury prevention services business, was 57.1% of net revenue for the 2022 First Quarter versus 56.8% for the 2021 First Quarter.

Salaries and related costs for the physical therapy operations was $62.4 million in the 2022 First Quarter, or 56.6% of physical therapy operations revenue, as compared to $55.6 million in the 2021 First Quarter, or 55.7% of physical therapy

operations revenue.

Included in salaries and related costs for the physical therapy operations for the 2022 First Quarter was $3.7 million related to 2022 and 2021 Clinic Additions.

Adjusted for the salaries and related costs for clinics closed

or sold in 2022 and 2021, salaries and related costs related to Mature Clinics increased by $3.4 million in the 2022 First Quarter compared to the 2021 First Quarter.

Salaries and related costs related to management contracts decreased by $0.3

million for the 2022 First Quarter.

Salaries and related costs for the industrial injury prevention services business was $11.1 million in the 2022 First Quarter, or 58.2% of industrial injury prevention services revenue, as compared to $6.3 million

in the 2021 First Quarter, or 62.5% of industrial injury prevention services revenue.

Operating Cost—Rent, Supplies, Contract Labor and Other

Rent, supplies, contract labor and other costs, including physical therapy operations and the industrial injury prevention services business, was19.3% of net revenue in the 2021

Third Quarter versus 18.1% in the 2020 Third Quarter.

Rent, supplies, contract labor and other costs for the physical therapy operations was $22.2 million in the 2021 Third Quarter, or 19.6% of physical therapy operations revenue, as compared

to $19.0 million in the 2020 Third Quarter, or 19.6% of physical therapy operations revenue.

Included in rent, supplies, contract labor and other costs related to physical therapy operations for the 2021 Third Quarter was $2.6 million related

to 2021 and 2020 Clinic Additions.

Adjusted for the rent, supplies, contract labor and other costs for clinics related to the clinics closed or sold in 2021 and 2020 of $0.2 million in the 2021 Third Quarter and $0.1 million in the 2020 Third

Quarter, rent, supplies, contract labor and other costs for Mature Clinics increased by $1.4 million in the 2021 Third Quarter compared to the 2020 Third Quarter.

Rent, supplies, contract labor and other costs, related to management contracts

increased $0.9 million in the 2021 Third Quarter.

Rent, supplies, contract labor and other costs for the industrial injury prevention services business was $1.4 million in the 2021 Third Quarter, or 13.7% of

industrial injury prevention services revenue, as compared to $1.1 million in the 2020 Third Quarter, or 11.1% of net industrial injury prevention services revenue.

Rent, supplies, contract labor and other costs, including physical therapy operations and the industrial injury prevention services business, was 21.8% of net revenue in the 2022 First Quarter versus 19.1% in the

2021 First Quarter.

Rent, supplies, contract labor and other costs for the physical therapy operations was $24.6 million in the 2022 First Quarter, or 22.3% of physical therapy operations revenue, as compared to $20.1 million in the 2021 First

Quarter, or 20.1% of physical therapy operations revenue.

Included in rent, supplies, contract labor and other costs related to physical therapy operations for the 2022 First Quarter was $3.2 million related to 2022 and 2021 Clinic Additions.

Adjusted for the rent, supplies, contract labor and other costs for clinics related to the clinics closed or sold in 2022 and 2021 of $0.1 million in the 2022 First Quarter and $0.3 million in the 2021 First Quarter, rent, supplies, contract

labor and other costs for Mature Clinics increased by $1.4 million in the 2022 First Quarter compared to the 2021 First Quarter.

Rent, supplies, contract labor and other costs, related to management contracts increased $0.1 million in the 2022

First Quarter.

Rent, supplies, contract labor and other costs for the industrial injury prevention services business was $3.8 million in the 2022 First Quarter, or 20.1% of industrial injury prevention

services revenue, as compared to $1.0 million in the 2021 First Quarter, or 10.3% of net industrial injury prevention services revenue.

Operating Cost—Provision for Credit Losses

The provision for credit losses as a percentage of net revenue was 1.1% in the 2021 Third Quarter and 1.2% for the comparable period in

Our provision for credit losses for patient accounts receivable as a percentage of total patient accounts receivable was 5.0% at September 30, 2021, as compared to 4.5% at December

Our days’ sales outstanding was 33 days at September 30, 2021 and 32 days at December 31, 2020.

Gross profit for the 2021 Third Quarter, less closure costs, a non-GAAP measure was $29.8 million, a decrease of $0.6 million, or approximately 2.1%, as compared to $30.4 million

for the 2020 Third Quarter.

The gross profit percentage, less closure costs, was 23.7% of net revenue for the 2021 Third Quarter as compared to 27.9% for the 2020 Third Quarter.

The gross profit percentage for the Company’s physical therapy

operations, less closure costs, was 23.8% for the 2021 Third Quarter as compared to 28.0% for the 2020 Third Quarter.

The gross profit percentage on physical therapy management contracts was 11.6% for the 2021 Third Quarter as compared to 19.8%

for the 2020 Third Quarter.

The gross profit percentage for the industrial injury prevention services business was 25.5% for the 2021 Third Quarter as compared to 28.6% for the 2020 Third Quarter.

The table below details the gross profit, less closure costs (in thousands):

The provision for credit losses as a percentage of net revenue was 1.0% in the 2022 First Quarter and 1.1% for the comparable period in 2021.

Our provision for credit losses for patient accounts receivable as a percentage of total patient accounts receivable was 5.37% at March 31, 2022, as compared to 5.64% at December 31, 2021.

Our days’ sales

outstanding was 34 days at March 31, 2022 and 32 days at December 31, 2021.

Gross profit for the 2022 First Quarter, was $26.6 million, an increase of $0.7 million, or approximately 2.7%, as compared to $25.9 million for the 2021 First Quarter.

The gross profit percentage was 20.2% of

total revenue for the 2022 First Quarter as compared to 23.0% for the 2021 First Quarter.

The gross profit percentage for physical therapy operations was 20.0% for the 2022 First Quarter as compared to 22.9% for the 2021 First Quarter.

profit percentage on management contracts was 17.7% for the 2022 First Quarter as compared to 12.3% for the 2021 First Quarter.

The gross profit percentage for industrial injury prevention services was 21.8% for the 2022 First Quarter as

compared to 27.2% for the 2021 First Quarter.

The table below details the gross profit (in thousands):

Three Months Ended

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Physical therapy operations

1 unchanged sentence

Industrial injury prevention services

Physical therapy operations - closure costs

Gross profit, less closure costs (a non-GAAP measure)

Corporate Office Costs

Corporate office cost was $12.9 million for the 2021 Third Quarter compared to $10.4 million for the 2020 Third Quarter.

The 2021 Third Quarter included $1.3

million in equity compensation expense related to the accelerated vesting of restricted stock previously granted to the Company’s Chief Operations Officer-West upon his retirement in July 2021.

Corporate office cost was 10.2% of net revenue

for the 2021 Third Quarter as compared to 9.6% for the 2020 Third Quarter.

Excluding the equity compensation expense related to the retirement of the Chief Operations Officer – West, Corporate office cost was 9.2% of net revenue for the 2021

Third Quarter.

Resolution of Payor Matter

Other income includes $1.2 million of income related to the positive resolution of a payor matter during the 2021 Third Quarter.

Corporate office costs were $11.6 million for the 2022 First Quarter compared to $10.9 million for the 2021 First Quarter.

Corporate office costs were 8.8% of total revenue for the 2022 First Quarter as compared to

9.7% for the 2021 First Quarter.

Operating Income

Operating income for the 2021 Third Quarter was $16.9 million, a decrease of $3.0 million, or 15.1%, as compared to $19.9 million for the 2020 Third Quarter.

Operating income as a

percentage of net revenue was 18.3% for the 2020 period as compared to 13.4% for the 2021 period.

Interest Expense

Interest expense was $268,000 for the 2021 Third Quarter and $351,000 for the 2020 Third Quarter.

At September 30, 2021, $33.0 million was outstanding under our Amended Credit Agreement (as defined below).

See “—Liquidity and Capital Resources” below for a discussion of the

terms of our Amended Credit Agreement.

Operating income for the 2022 First Quarter and 2021 First Quarter was $15.0 million.

Operating income as a percentage of total revenue was 11.4% for the 2022 First Quarter as compared to 13.4% for the 2021 First

Gain on Revaluation of Put-Right Liability

The gain on revaluation of put-right liability was $603,000.

As part of the industrial injury prevention services business acquisition on November 30,

2021, the Company also agreed to the potential future purchase of a separate company under the same ownership that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area.

owners have the right to put this transaction to us in approximately five years, with such right having a $2.9 million value on March 31, 2022, as reflected on the Company's consolidated balance sheet in Other long-term liabilities.

of this right will continue to be adjusted in future periods, as appropriate.

Provision for Income Taxes

The provision for income tax was $3.8 million for the 2021 Third Quarter and $4.3 million for the 2020 Third Quarter.

The provision

for income tax as a percentage of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 27.6% for the 2021 Third Quarter and 28.2% for the 2020 Third Quarter.

See table below detailing calculation of the provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling

interest ($ in thousands):

The provision for income tax was $3.5 million for the 2022 First Quarter and $2.9 million for the 2021 First Quarter.

The provision for income tax as a percentage of income before taxes less net income attributable

to non-controlling interest (effective tax rate) was 28.4% for the 2022 First Quarter and 26.5% for the 2021 First Quarter.

See table below detailing calculation of the provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling interest ($ in thousands):

Three Months Ended

September 30, 2021

September 30, 2020

Income before taxes

net income attributable to non-controlling interest:

Redeemable non-controlling interest - temporary equity

Non-controlling interest - permanent equity

Income before taxes less net income attributable to non-controlling interest

Provision for income taxes

Effective tax rate

Net Income Attributable to Non-controlling Interest

Net income attributable to redeemable non-controlling interest (temporary equity) was $2.6 million for the 2021 Third Quarter and

$3.0 million for the 2020 Third Quarter.

Net income attributable to non-controlling interest (permanent equity) was $1.5 million for the 2021 Third Quarter and $1.8 million for the 2020 Third Quarter.

Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

The following table summarizes financial data by segment for the periods indicated and reconciles the data to our consolidated financial statements (in thousands):

Nine Months Ended September 30,

Net operating revenue:

Physical therapy operations

Industrial injury prevention services

Total Company

Gross profit:

Physical therapy operations (less closure costs) (a non-GAAP measure)

Industrial injury prevention services

Physical therapy operations - closure costs

Total Assets:

Physical therapy operations

Industrial injury prevention services

Total Company

Reported net revenue for the 2021 Nine Months increased $59.7 million, or 19.5% to $365.2 million as compared

to $305.5 million for the 2020 Nine Months.

See table below for a detail of reported net revenue (in thousands):

For the Nine Months Ended

September 30, 2021

September 30, 2020

Revenue related to Mature Clinics

Revenue related to 2021 Clinic Additions

Revenue related to 2020 Clinic Additions

Revenue from clinics sold or closed in 2021

Revenue from clinics sold or closed in 2020

Net patient revenue from physical therapy operations

Other revenue

Revenue from physical therapy operations

Management contract revenue

Industrial injury prevention services

Net patient revenue from physical therapy operations increased $56.0 million, or 20.8%, to $324.8 million for the 2021 Nine Months

from $268.8 million for the 2020 Nine Months.

Included in net patient revenue is revenue related to clinics sold or closed in 2021 and 2020 of $0.5 million for the 2021 Nine Months and $5.1 million for the 2020 Nine Months.

During 2021 Nine

Months, the Company sold its interest in 2 clinics and closed 3 clinics.

During the full year of 2020, we sold our interest in 14 clinics and closed 34 clinics.

For comparison purposes, excluding revenue from the clinics sold or closed, net

patient revenue from physical therapy operations was approximately $324.3 million for the 2021 Nine Months, inclusive of $23.5 million related Clinic Additions and $263.7 million for the 2020 Nine Months, inclusive of $5.8 million for 2020

Clinic Additions.

Revenue related to Mature Clinics increased $42.9 million, or 16.6%, for the 2021 Nine Months compared to the 2020 Nine Months.

The average net patient revenue per visit was $104.00 for the 2021 Nine Months as compared to $105.13 for the 2020 Nine Months, including all clinics

operational during such periods.

Total patient visits were 3,123,187 for the 2021 Nine Months and 2,556,879 for the 2020 Nine Months, an increase of 22.1%.

Net patient revenue are based on established billing rates less allowances for

patients covered by contractual programs and workers’ compensation.

Net patient revenue is determined after contractual and other adjustments relating to patient discounts from certain payors.

Payments received under contractual programs and

workers’ compensation are based on predetermined rates and are generally less than the established billing rates.

Visits for Mature Clinics (same store) for the 2021 Nine Months increased 18.1% as compared to the 2020 Nine Months while the net rate per visit decreased 1.3%.

Revenue from physical therapy management contracts was $7.6 million for the 2021 Nine Months, an increase of 32.5%, as compared to $5.7 million for the 2020

Revenue from the industrial injury prevention services business increased 3.3% to $30.5 million for the 2021 Nine Months as compared to $29.5 million for the

2020 Nine Months.

Other miscellaneous revenue was $2.2 million for the 2021 Nine Months and $1.4 million for the 2020 Nine Months.

Other miscellaneous

revenue includes a variety of services, including athletic trainers provided for schools and athletic events.

Operating Cost

Total operating cost, less closure costs, a non-GAAP measure was $275.2 million for the 2021 Nine Months, or 75.4% of net revenue, as compared to $236.2 million

for the 2020 Nine Months, or 77.3% of net revenue.

We took a number of steps throughout 2020 to reduce costs as our patient volumes were negatively impacted by the effects of the COVID-19 pandemic, as previously noted, including temporary

salary reductions, furloughs and other similar measures.

For comparison purposes, total operating cost less closures costs, was 76.2% of net revenue in the pre-pandemic 2019 Nine Months.

Included in operating cost for the 2021 Nine Months was

$20.7 million related to Clinic Additions, of which $14.7 million is associated with 2020 Clinic Additions.

Included in operating cost for the 2020 Nine Months was $4.5 million related to 2020 Clinic Additions.

Operating cost related to Mature

Clinics increased by $25.8 million for the 2021 Nine Months compared to the 2020 Nine Months.

In addition, operating cost related to the industrial injury prevention services business increased by $0.8 million.

See table below for a detail of

operating cost, less closure costs (in thousands):

For the Nine Months Ended

September 30, 2021

September 30, 2020

Operating cost related to Mature Clinics

Operating cost related to 2021 Clinic Additions

Operating cost related to 2020 Clinic Additions

Operating cost related to clinics sold or closed in 2021

Operating cost related to clinics sold or closed in 2020

Closure costs

Physical therapy operations

Physical therapy management contracts

Industrial injury prevention services

Total operating cost

Physical therapy operations - closure costs

Total operating cost less closure costs (a non-GAAP measure)

Each component of operating cost is discussed below:

Operating Cost—Salaries and Related Costs

Salaries and related costs, including physical therapy operations and the industrial injury prevention services business, was 55.6% of net revenue for the 2021 Nine Months and 2020

For comparison purposes, total salaries and related costs was 56.6% of net revenue in the pre-pandemic 2019 Nine Months.

Salaries and related costs for the physical therapy operations was $178.6 million in the 2021 Nine Months, or

54.6% of physical therapy operations revenue, as compared to $147.6 million in the 2020 Nine Months, or 56.4% of physical therapy operations revenue.

Included in salaries and related costs for our physical therapy operations for the 2021 Nine

Months was $14.3 million related to Clinic Additions.

Adjusted for the salaries and related costs for clinics closed or sold in 2021 and 2020, salaries and related costs for Mature Clinics increased by $22.6 million in the 2021 Nine Months

compared to the 2020 Nine Months.

Salaries and related costs related to management contracts increased by $1.7 million for the 2021 Nine Months.

Salaries and related costs for our industrial injury prevention services business was $18.8 million in the 2021 Nine Months, or 61.8% of industrial injury prevention services

revenue, as compared to $18.3 million in the 2020 Nine Months, or 62.1% of net industrial injury prevention services revenue.

Operating Cost—Rent, Supplies, Contract Labor and Other

Rent, supplies, contract labor and other costs, including physical therapy operations and the industrial injury prevention services business, was 18.6% of net revenue in the 2021

Nine Months versus 20.6% in the 2020 Nine Months.

Rent, supplies, contract labor and other costs for our physical therapy operations was $65.6 million in the 2021 Nine Months, or 20.1% of physical therapy operations revenue, as compared to

$60.6 million in the 2020 Nine Months, or 22.4% of physical therapy operations revenue.

Included in rent, supplies, contract labor and other costs related to physical therapy operations for the 2021 Nine Months was $6.0 million related to

Clinic Additions.

Adjusted for the rent, supplies, contract labor and other costs for clinics related to the clinics closed or sold in 2021 and 2020, rent, supplies, contract labor and other costs for Mature Clinics increased by $3.2 million

in the 2021 Nine Months compared to the 2020 Nine Months.

Rent, supplies, contract labor and other costs, related to management contracts decreased $0.2 million in the 2021 Nine Months.

Rent, supplies, contract labor and other costs for our industrial injury prevention services business was $3.7 million in the 2021 Nine Months and $3.3 million in the 2020 Nine

Months, or 12.2% and 11.4%, respectively, of industrial injury prevention services revenue.

Operating Cost—Provision for Credit Losses

Our provision for credit losses as a percentage of net revenue was 1.1% in both the 2021 Nine Months and 2020 Nine Months.

Our provision for credit losses for patient accounts receivable as a percentage of total patient accounts receivable was 5.0% at September 30, 2021, as compared to 4.5% at December

Our days’ sales outstanding was 33 days at September 30, 2021 and 32 days in December 31, 2020.

Gross profit for the 2021 Nine Months, less closure costs, a non-GAAP measure, was $90.0 million, an increase of $20.8 million, or 30.0%, as compared to $69.3 million for the 2020

The gross profit percentage, less closure costs, was 24.6% of net revenue for the 2021 Nine Months, an increase of 190 basis points as compared to 22.7% for the 2020 Nine Months.

The gross profit percentage for our physical therapy

operations, less closure costs, was 24.8% for the 2021 Nine Months, an increase of 250 basis points compared to 22.3% for the 2020 Nine Months.

The gross profit percentage on physical therapy management contracts was 14.7% for the 2021 Nine

Months compared to 20.2% for the 2020 Nine Months.

The gross profit percentage for our industrial injury prevention services business was 26.0% for the 2021 Nine Months as compared to 26.1% for the 2020 Nine Months.

The table below details the gross profit, less closure costs (in thousands) (a non-GAAP measure):

For the Nine Months Ended

September 30, 2021

September 30, 2020

Physical therapy operations

Management contracts

Industrial injury prevention services

Physical therapy operations - closure costs

Gross profit, less closure costs (a non-GAAP measure)

Corporate Office Costs

Corporate office cost was $35.8 million for the 2021 Nine Months compared to $31.1 million for the 2020 Nine Months.

Corporate office cost was 9.8% of net

revenue for the 2021 Nine Months as compared to 10.2% for the 2020 Nine Months.

The 2020 Nine Months included temporary salary reductions and furloughs related to the pandemic.

The 2021 Nine Months included $1.3 million in equity compensation

expense related to the accelerated vesting of restricted stock previously granted to the Chief Operating Officer – West upon his retirement in July 2021.

Excluding the equity compensation related to the Chief Operating Officer – West, Corporate

office cost was 9.5% of net revenue for the 2021 Nine Months.

Operating Income

Operating income for the 2021 Nine Months was $54.2 million, an increase of $20.0 million, or 58.4%, as compared to $34.2 million for the 2020 Nine Months.

Operating income as a

percentage of net revenue increased 360 basis points from 11.2% for the 2020 period to 14.8% for the 2021 period.

Interest Expense

Interest expense was $0.8 million for the 2021 Nine Months and $1.4 million for the 2020 Nine Months due to reduced borrowings under the Company’s revolving credit line.

September 30, 2021, $33.0 million was outstanding under our Amended Credit Agreement (as defined below).

See “—Liquidity and Capital Resources” below for a discussion of the terms of our Amended Credit Agreement.

Provision for Income Taxes

The provision for income tax was $11.3 million for the 2021 Nine Months and $8.5 million for the 2020 Nine Months.

The provision for income tax as a percentage

of income before taxes less net income attributable to non-controlling interest (effective tax rate) was 27.0% for the 2021 Nine Months and 27.6% for the 2020 Nine Months.

See table below detailing calculation of the provision for income taxes as a percentage of income before taxes less net income attributable to non-controlling

interest ($ in thousands):

Nine Months Ended

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Income before taxes

4 unchanged sentences

Provision for income taxes

Effective tax rate

Net Income Attributable to Non-controlling Interest

Net income attributable to redeemable non-controlling interest (temporary equity) was $8.7 million for the 2021 Nine Months and

$7.8 million for the 2020 Nine Months.

Net income attributable to non-controlling interest (permanent equity) was $4.2 million for the 2021 Nine Months and $3.9 million for the 2020 Nine Months.

Net income attributable to redeemable non-controlling interest (temporary equity) was $2.6 million for the 2022 First Quarter and $2.5 million for the 2021 First Quarter.

Net income attributable to non-controlling

interest (permanent equity) was $0.6 million for the 2022 First Quarter and $1.3 million for the 2021 First Quarter.

LIQUIDITY AND CAPITAL RESOURCES

We believe that our business has sufficient cash to allow us to meet our short-term cash requirements.

At September 30, 2021 and December 31, 2020, we had $19.2 million and $32.9

million, respectively, in cash.

We believe that our cash and cash equivalents and availability under our revolving credit facility are sufficient to fund the working capital needs of our operating subsidiaries through at least September 30,

Cash and cash equivalents decreased by $13.7 million from December 31, 2020 to September 30, 2021.

During the 2021 Nine Months, $60.5 million was provided by operations and $17.0

million from proceeds on our Amended Credit Agreement (described below).

At March 31, 2022 and December 31, 2021, we had $24.2 million and $28.6 million, respectively, in cash.

believe that our cash and cash equivalents and availability under our revolving credit facility are sufficient to fund the working capital needs of our operating subsidiaries through at least March 31, 2022.

Cash and cash equivalents decreased by $4.3 million from December 31, 2021 to March 31, 2022.

During the 2022 Three Months, $11.6 million was provided by operations and $35.0 million from proceeds on our Amended

Credit Agreement (described below).

The major uses of cash for investing and financing activities included:

repayment of MAAPP funds ($14.1 million), distributions to non-controlling interests inclusive of

those classified as redeemable non-controlling interest ($14.3 million), cash dividends to our shareholders ($13.9 million), purchase of business and non-controlling interest ($38.6 million), principal payments on notes payable ($4.6 million)

and purchase of fixed assets ($6.0 million).

distributions to non-controlling interests inclusive of those classified as redeemable non-controlling interest ($2.2 million), purchase

of business and non-controlling interest ($11.3 million), and purchase of fixed assets ($3.0 million).

Effective December 5, 2013, we entered into an Amended and Restated Credit Agreement with a commitment for a $125.0 million revolving credit facility.

This agreement was amended

and/or restated in August 2015, January 2016, March 2017, November 2017 and January 2021 (hereafter referred to as “Amended Credit Agreement”).

The Amended Credit Agreement is unsecured and has loan covenants, including requirements that we

comply with a consolidated fixed charge coverage ratio and consolidated leverage ratio.

Proceeds from the Amended Credit Agreement may be used for working capital, acquisitions, purchases of our common stock, dividend payments to our common

stockholders, capital expenditures and other corporate purposes.

The pricing grid is based on our consolidated leverage ratio with the applicable spread over LIBOR ranging from 1.25% to 2.0% or the applicable spread over the Base Rate ranging

from 0.1% to 1%.

Fees under the Amended Credit Agreement include an unused commitment fee of 0.3% of the amount of funds outstanding under the Amended Credit Agreement.

The 2021 amendment to the Amended Credit Agreement allows for cash and noncash consideration for acquisitions permitted under the Amended Credit Agreement of up to $50,000,000 for any fiscal year, and

allows for payments in cash dividends to shareholders in an aggregate amount not to exceed $50,000,000 in any fiscal year.

The commitment remains at $125 million, however the accordion feature in the agreement

was expanded to provide for capacity up to $150 million, and has a maturity date of November 30, 2025.

The Amended Credit Agreement is unsecured and includes certain financial covenants which include a consolidated fixed charge coverage ratio

and a consolidated leverage ratio, as defined in the agreement.

On September 30, 2021, $33.0 million was outstanding on the Amended Credit Agreement resulting in $92.0 million of availability.

As of September 30, 2021, we were in compliance

with all of the covenants thereunder.

This agreement was amended and/or restated in August 2015,

January 2016, March 2017, November 2017 and January 2021 (hereafter referred to as “Amended Credit Agreement”).

In November 2021, the Company exercised the accordion feature in the Amended Credit Agreement to increase the limit on the facility

from $125.0 million to $150.0 million, with an updated accordion feature providing for additional capacity of $25.0 million, therefore increasing the availability up to $175.0 million.

The Amended Credit Agreement is unsecured and has loan covenants, including requirements that we comply with a consolidated fixed charge coverage ratio and consolidated leverage ratio.

Proceeds from the Amended

Credit Agreement may be used for working capital, acquisitions, purchases of our common stock, dividend payments to our common stockholders, capital expenditures and other corporate purposes.

The pricing grid is based on our consolidated

leverage ratio with the applicable spread over LIBOR ranging from 1.25% to 2.0% or the applicable spread over the Base Rate ranging from 0.1% to 1%.

Fees under the Amended Credit Agreement include an unused commitment fee of 0.3% of the amount of

funds outstanding under the Amended Credit Agreement.

payments in cash dividends to shareholders in an aggregate amount not to exceed $50,000,000 in any fiscal year.

The Amended Credit Agreement is unsecured and includes certain financial covenants which include a consolidated fixed charge coverage

ratio and a consolidated leverage ratio, as defined in the agreement.

On March 31, 2022, $118.0 million was outstanding on the Amended Credit Agreement resulting in $32.0 million of availability.

As of March 31, 2022, we were in compliance with all of the covenants thereunder.

On March 31, 2022, we acquired a 70% interest in a six-clinic physical therapy practice in South Central Pennsylvania – Madden and Gilbert Physical Therapy, LLC.

The practice’s owners retained 30% of the equity

The purchase price for the 70% equity interest was approximately $11.5 million.

of which $11.2 million was paid in cash and $0.3 million in the form of a note payable.

The note accrues interest at 3.5% per annum and the principal and

interest are payable on March 31, 2024.

On December 31, 2021, we acquired a 75% interest in a three-clinic physical therapy practice with the practice founder retaining 25%.

The purchase price for the 75% interest was approximately $3.7 million, of which

$3.5 million was paid in cash and $0.2 million in the form of a note payable.

The note accrues interest at 3.25% per annum and the principal and interest are payable on December 31, 2023.

On November 30, 2021, we acquired an approximate 70% interest in a leading provider of industrial injury prevention services.

The previous owners retained the remaining

The initial purchase price for the 70% equity interest, not inclusive of the $2.0 million contingent payment in conjunction with the acquisition if specified future operational objectives are met, was approximately $63.2 million, of

which $62.2 million was paid in cash, and $1.0 million is in the form of a note payable.

The note accrues interest at 3.25% and the principal and interest is payable on November 30, 2023.

The business generates approximately $27.0 million in

annual revenue at a margin of approximately 20%.

As part of the transaction, we also agreed to the future purchase of a separate company under the same ownership that provides physical therapy and rehabilitation services to hospitals and other

ancillary providers in a distinct market area.

The current owners have the right to put this transaction to us in approximately five years, with such right having an initial $3.5 million fair value at December 31, 2021, as reflected on the

Company’s consolidated balance sheet in Other long-term liabilities.

The value of this right will be adjusted in future periods, as appropriate, with any change in fair value reflected in the Company’s consolidated statement of income.

On September 30, 2021, the Company acquired a company that specializes in return-to-work and ergonomic services, among other offerings.

The business generates more than $2.0 million in annual revenue.

USPH acquired the company’s assets at a purchase price of approximately $3.3 million (which includes the obligation to pay an amount up to $0.6 million in contingent payment consideration in conjunction with the acquisition if specified future

operational objectives are met), and contributed those assets to industrial injury prevention services subsidiary.

The initial purchase price, not inclusive of the $0.6 million contingent payment, was approximately $2.7 million, of which $2.4

million was paid in cash, and $0.3 million is in the form of a note payable.

The note accrues interest at 3.25% per annum and the principal and interest is payable on September 30, 2023.

the company’s assets at a purchase price of approximately $3.3 million (which includes the obligation to pay an amount up to $0.6 million in contingent payment consideration in conjunction with the acquisition if specified future operational

objectives are met) and contributed those assets to industrial injury prevention services subsidiary.

The initial purchase price, not inclusive of the $0.6 million contingent payment, was approximately $2.7 million, of which $2.4 million was paid

in cash, and $0.3 million is in the form of a note payable.

The note accrues interest at 3.25% per annum and the principal and interest are payable on September 30, 2023.

On June 30, 2021, the Company acquired a 65% interest in an eight-clinic physical therapy practice with the practice founder retaining 35%.

The purchase price was approximately $10.3 million, of which

$9.0 million was paid in cash, $1.0 million is payable based on the achievement of certain business criteria and $0.3 million is in the form of a note payable.

The note accrues interest at 3.25% per annum and the principal and interest is

payable on June 30, 2023.

The purchase price was approximately $10.3 million, of which $9.0 million

was paid in cash, $1.0 million is payable based on the achievement of certain business criteria and $0.3 million is in the form of a note payable.

The note accrues interest at 3.25% per annum and the principal and interest are payable on June 30,

Company recorded acquisition-date fair value of this contingent liability based on the likelihood of the contingent earn-out payment.

The Company recorded

acquisition-date fair value of this contingent liability based on the likelihood of the contingent earn-out payment.

The earn-out payment will subsequently be remeasured to fair value each reporting date.

On March 31, 2021, the Company acquired a 70% interest in a five-clinic physical therapy practice with the practice founder retaining 30%.

When acquired, the practice was developing a sixth clinic

which has been completed.

When acquired, the practice was developing a sixth clinic which has been

The purchase price for the 70% interest was approximately $12.0 million, of which $11.7 million was paid in cash and $0.3 million in the form of a note payable.

The note accrues interest at 3.25% per annum and the

principal and interest is payable on March 31, 2023.

On November 30, 2020, we acquired a 75% interest in a three-clinic physical therapy practice.

The purchase price for the 75% interest was $8.9 million (net of cash acquired), of

which $8.6 million was paid in cash and $0.3 million in the form of a note payable that is payable in two principal installments totaling $162,500 each.

The first principal payment plus accrued interest is due to be paid in November 2021 with

the second installment to be paid in November 2022.

The note accrues interest at 3.25% per annum.

On September 30, 2020, we acquired a 70% interest in an entity which holds six-management contracts that have been in place for a number of years.

Currently, these contracts have a five year term.

purchase price for the 70% interest was approximately $4.2 million, with $3.7 million payable in cash and $0.5 million in two notes payable.

One of the notes payable of $0.3 million was paid in November 2020.

The remaining note payable of $0.2

million was paid on September 30, 2021.

On February 27, 2020, we acquired interests in a four-clinic physical therapy practice.

The four clinics are in four separate partnerships.

Our interests in the four partnerships

range from 10.0% to 83.8%, with an overall 65.0% based on the initial purchase transaction.

The aggregate purchase price was $11.9 million, of which $11.6 million was paid in cash and $0.3 million in a note payable.

The note accrues interest

at 4.75% per annum and the principal and interest is payable on February 2022.

The note accrues interest at 3.25% per annum and the principal and

interest are payable on March 31, 2023.

On March 27, 2020, in response to the COVID-19 pandemic, the federal government approved the Coronavirus Aid,

Relief, and Economic Security Act (“CARES Act”).

The CARES Act provided waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 pandemic, including $100.0

billion in appropriations for the Public Health and Social Services Emergency Fund, also referred to as the Provider Relief Fund, to be used for preventing, preparing, and responding to the coronavirus, and for reimbursing eligible health care

providers for lost revenues and health care related expenses that are attributable to COVID-19.

The CARES Act allowed for qualified healthcare providers to receive advanced payments under the Medicare Accelerated and Advance

Payment Program (“MAAPP Funds”) during the COVID-19 pandemic.

Under this program, healthcare providers could choose to receive advanced payments for future Medicare services provided.

applied for and received approval from Centers for Medicare & Medicaid Services (“CMS”) in April 2020.

Company recorded the $14.1 million in advance payments received as a liability.

During the 2021 First Quarter, the Company repaid the MAAPP Funds of $14.1 million rather than applying them to future

services performed.

Historically, we have generated sufficient cash from operations to fund our development activities and to cover operational needs.

We plan to continue developing new clinics and making additional acquisitions.

have from time to time purchased the non-controlling interests of limited partners in our Clinic Partnerships.

We may purchase additional non-controlling interests in the future.

Generally, any acquisition or purchase of non-controlling interests

is expected to be accomplished using a combination of cash and financing.

Any large acquisition would likely require financing.

We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts, in a consistent manner for all payor types.

Claims are submitted to payors daily, weekly or monthly in accordance with our policy or payor’s requirements.

Claims are submitted to payors daily,

weekly or monthly in accordance with our policy or payor’s requirements.

When possible, we submit our claims electronically.

The collection process is time consuming and typically involves the submission of

claims to multiple payors whose payment of claims may be dependent upon the payment of another payor.

The collection process is time consuming and typically involves the submission of claims to multiple payors whose payment

of claims may be dependent upon the payment of another payor.

Claims under litigation and vehicular incidents can take a year or longer to collect.

Medicare and other payor claims relating to new clinics

awaiting Medicare Rehab Agency status approval initially may be delayed for a relatively short transition period.

When all reasonable internal collection efforts have been exhausted, accounts are written off prior to sending them to outside

collection firms.

With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs after the accounts receivable has been outstanding for at least 120 days.

Medicare and other payor claims relating to new clinics awaiting payor credentialing approval

initially may be delayed for a relatively short transition period.

When all reasonable internal collection efforts have been exhausted, accounts are written off prior to sending them to outside collection firms.

With managed care, commercial

health plans and self-pay payor type receivables, the write-off generally occurs after the accounts receivable has been outstanding for at least 120 days.

We generally enter into various notes payable as a means of financing our acquisitions.

Our outstanding notes payable as of September 30, 2021 relate to certain of the acquisitions

of businesses and purchases of redeemable non-controlling interest that occurred in 2018 through September 2021.

Our outstanding notes payable as of March 31, 2022 relate to certain of the acquisitions of businesses and purchases of

redeemable non-controlling interest that occurred in 2018 through March 2022.

Typically, the notes are payable over two years plus any accrued and unpaid interest.

Interest accrues at various interest rates

ranging from 3.25% to 5.5% per annum, subject to adjustment.

At September 30, 2021, the balance on these notes payable was $2.9 million.

Interest accrues at various interest rates ranging from 3.25% to 5.5% per annum,

subject to adjustment.

At March 31, 2022, the balance on these notes payable was $4.9 million.

In addition, we assumed leases with remaining terms of 1 month to 6 years for the operating facilities.

In conjunction with the above mentioned acquisitions, in the event that a limited minority partner’s employment ceases at any time after a specified date that is typically between

three and five years from the acquisition date, we have agreed to certain contractual provisions which enable such minority partners to exercise their right to trigger our repurchase of that partner’s non-controlling interest at a predetermined

multiple of earnings before interest and taxes.

As of September 30, 2021, we have accrued $6.4 million related to credit balances due to patients and payors.

In conjunction with the above-mentioned acquisitions, in the event that a limited minority partner’s employment ceases at any time after a specified date that is typically between three and five years from the

acquisition date, we have agreed to certain contractual provisions which enable such minority partners to exercise their right to trigger our repurchase of that partner’s non-controlling interest at a predetermined multiple of earnings before

interest and taxes.

As of March 31, 2022, we have accrued $6.8 million related to credit balances due to patients and payors.

This amount is expected to be paid in the next twelve months.

From September 2001 through December 31, 2008, our Board of Directors (“Board”) authorized us to purchase, in the open market or in privately negotiated transactions, up to

2,250,000 shares of our common stock.

In March 2009, the Board authorized the repurchase of up to 10% or approximately 1,200,000 shares of our common stock (“March 2009 Authorization”).

Our Amended Credit Agreement permits share repurchases of

up to $15,000,000, subject to compliance with covenants.

From September 2001 through December 31, 2008, our Board of Directors (“Board”) authorized us to purchase, in the open market or in privately negotiated transactions, up to 2,250,000 shares of our common stock.

March 2009, the Board authorized the repurchase of up to 10% or approximately 1,200,000 shares of our common stock (“March 2009 Authorization”).

Our Amended Credit Agreement permits share repurchases of up to $15,000,000, subject to compliance

with covenants.

We are required to retire shares purchased under the March 2009 Authorization.

There is no expiration date for the share repurchase program.

As of September 30, 2021, there are currently an additional estimated 135,624 shares (based on the closing price of

$110.60 on September 30, 2021) that may be purchased from time to time in the open market or private transactions depending on price, availability and our cash position.

We did not purchase any shares of our common stock during the three months

ended September 30, 2021.

As of March 31, 2022, there are currently an additional estimated 150,830 shares (based on the closing price of $99.45 on March 31, 2022) that may be

purchased from time to time in the open market or private transactions depending on price, availability and our cash position.

We did not purchase any shares of our common stock during the three months ended March 31, 2022.

FACTORS AFFECTING FUTURE RESULTS

The risks related to our business and operations include:

the multiple effects of the impact of public health crises and epidemics/pandemics, such as the novel strain of COVID-19, for which the financial magnitude cannot be

currently estimated;

changes as the result of government enacted national healthcare reform;

• the multiple effects of the impact of public health crises and epidemics/pandemics, such as the novel strain of COVID-19 and its variants, for which the total financial

magnitude cannot be currently estimated;

• changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status;

• revenue we receive from Medicare and Medicaid being subject to potential retroactive reduction;

business and regulatory conditions including federal and state regulations;

governmental and other third party payor inspections, reviews, investigations and audits, which may result in sanctions or reputational harm and increased costs;

• changes in reimbursement rates or payment methods from third party payors including government agencies, and changes in the deductibles and co-pays owed by patients;

• compliance with federal and state laws and regulations relating to the privacy of individually identifiable patient information, and associated fines and penalties for

failure to comply;

changes in reimbursement rates or payment methods from third party payors including government agencies, and changes in the deductibles and co-pays owed by patients;

• competitive, economic or reimbursement conditions in our markets which may require us to reorganize or close certain clinics and thereby incur losses and/or closure costs

including the possible write-down or write-off of goodwill and other intangible assets;

• the impact of COVID-19 related vaccination and/or testing mandates at the federal, state and/or local level, which could have an adverse impact on staffing,

revenue, costs and the results of operations;

• changes as the result of government enacted national healthcare reform;

• business and regulatory conditions including federal and state regulations;

• governmental and other third party payor inspections, reviews, investigations and audits, which may result in sanctions or reputational harm and increased costs;

• revenue and earnings expectations;

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• personnel productivity and retaining key personnel;

competitive, economic or reimbursement conditions in our markets which may require us to reorganize or close certain clinics and thereby incur losses and/or closure costs

including the possible write-down or write-off of goodwill and other intangible assets;

competitive environment in the industrial injury prevention services business, which could result in the termination or non-renewal of contractual service arrangements

and other adverse financial consequences for that service line;

• competitive environment in the industrial injury prevention services business, which could result in the termination or nonrenewal of contractual service arrangements and

other adverse financial consequences for that service line;

• acquisitions, and the successful integration of the operations of the acquired businesses;

impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interest (minority

• impact on the business and cash reserves resulting from retirement or

resignation of key partners and resulting purchase of their non-controlling interest (minority interests);

• maintaining our information technology systems with adequate safeguards to protect against cyber-attacks;

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violation of the Health Insurance Portability and Accountability Act of 1996 of the Health Information Technology for Economic and Clinical Health Act;

• maintaining clients for which we perform management and other services, as a breach or termination of those contractual arrangements by such clients could cause operating

results to be less than expected;

• maintaining adequate internal controls;

• maintaining necessary insurance coverage;

availability, terms, and use of capital; and

• availability, terms, and use of capital;

• weather and other seasonal factors.

See also Risk Factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 and our subsequent current and periodic reports, including

the additional risk factor noted below:

On September 9, 2021, President Biden announced a new rule requiring all employers of at least 100 employees to require their employees to be fully vaccinated or

tested weekly.

Department of Labor’s Occupational Safety and Health Administration (“OSHA”) has announced its intention to promulgate regulations that would carry out this mandate.

In addition, CMS recently announced that it is in

the process of preparing regulations that would require certain health care providers receiving reimbursement from the Medicare or Medicaid programs to require their employees to be vaccinated as a condition of participation.

At this time it

is not possible to predict the impact of these proposed regulations on the Company or its workforce.

The proposed new regulations, if implemented, may result in employee attrition and could have a material adverse effect on our business,

including future revenue, costs and results of operations.

See also Risk Factors in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 and our subsequent current and periodic reports.

Forward-Looking Statements

We make statements in this report that are considered to be forward-looking statements within the meaning given such term under Section 21E of the Securities Exchange Act of 1934,

as amended (the “Exchange Act”).

We make statements in this report that are considered to be forward-looking statements within the meaning given such term under Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

These statements contain forward-looking information relating to the financial condition, results of operations, plans, objectives, future performance and business of our Company.

These statements (often using

words such as “believes”, “expects”, “intends”, “plans”, “appear”, “should” and similar words) involve risks and uncertainties that could cause actual results to differ materially from those we project.

Included among such statements are those

relating to opening new clinics, availability of personnel and the reimbursement environment.

The forward-looking statements are based on our current views and assumptions and actual results could differ materially from those anticipated in

such forward-looking statements as a result of certain risks, uncertainties, and factors, which include, but are not limited to the risks listed above.

These statements (often using words such as “believes”, “expects”,

“intends”, “plans”, “appear”, “should” and similar words) involve risks and uncertainties that could cause actual results to differ materially from those we project.

Included among such statements are those relating to opening new clinics,

availability of personnel and the reimbursement environment.

The forward-looking statements are based on our current views and assumptions and actual results could differ materially from those anticipated in such forward-looking statements as a

result of certain risks, uncertainties, and factors, which include, but are not limited to the risks listed above.

Many factors are beyond our control.

Given these uncertainties, you should not place undue reliance on our forward-looking statements.

Please see the other sections of this report

and our other periodic reports filed with the Securities and Exchange Commission (the “SEC”) for more information on these factors.

Please see the other sections of this report and our other periodic reports

filed with the Securities and Exchange Commission (the “SEC”) for more information on these factors.

Our forward-looking statements represent our estimates and assumptions only as of the date of this report.

Except as required by law, we are under no obligation to update any forward-looking statement, regardless of the reason the statement may no longer be accurate.

Except as required by law, we are

under no obligation to update any forward-looking statement, regardless of the reason the statement may no longer be accurate.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis