U S PHYSICAL THERAPY INC /NV 10-K

ITEM 3. LEGAL PROCEEDINGS We are a party to various legal actions, proceedings, and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of our business. We cannot predict the ultimate outcome of pending litigation, proceedings, regulatory and other governmental audits and investigations. These matters could potentially subject the Company to sanctions, damages, recoupments, fines, and other penalties. The Department of Justice, CMS, or other federal and state enforcement and regulatory agencies may conduct additional investigations related to our businesses in the future that may, either individually or in the aggregate, have a material adverse effect on our business, financial position, results of operations, and liquidity. 27 Table of Contents Healthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act. Qui tam lawsuits typically remain under seal for some time while the government decides whether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation. These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. We have been a defendant in these cases in the past and may be named as a defendant in similar cases from time to time in the future. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock has traded on the New York Stock Exchange (“NYSE”) since August 14, 2012, under the symbol “USPH”. As of March 3, 2025, there were 85 holders of record of our outstanding common stock. DIVIDENDS Our Board of Directors declared the following dividends during the year ended December 31, 2024: Declaration Date Record Date Payment Date Dividend Per Share Aggregate Amount (In thousands) 2/27/2024 3/12/2024 4/5/2024 $ 0.44 $ 6,630 5/7/2024 5/23/2024 6/14/2024 $ 0.44 6,634 8/12/2024 8/23/2024 9/13/2024 $ 0.44 6,634 11/4/2024 11/15/2024 12/6/2024 $ 0.44 6,642 There is no assurance that future dividends will be declared. The declaration and payment of dividends in the future are at the discretion of our Board of Directors after taking into account various factors, including, but not limited to, our financial condition, operating results, available cash and current and anticipated cash needs, and the terms of our Credit Agreement (as defined in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”). We are currently restricted from paying dividends on our common stock in excess of $50,000,000 in any fiscal year on our common stock under the Credit Agreement. FIVE YEAR PERFORMANCE GRAPH The following performance graph compares the cumulative total stockholder return of our common stock to The NYSE Composite Index and the NYSE Health Care Index for the period from December 31, 2019 through December 31, 2024. The graph assumes that $100 was invested in our common stock and the common stock of each of the companies listed on The NYSE Composite Index and The NYSE Health Care Index on December 31, 2019 and that any dividends were reinvested. 28 Table of Contents Comparison of Five Years Cumulative Total Return for the Year Ended December 31, 2024 12/19 12/20 12/21 12/22 12/23 12/24 U. S. Physical Therapy, Inc. 100 105 84 71 81 78 NYSE Healthcare Index 100 111 135 130 134 135  The foregoing performance graph and related description shall not be deemed incorporated by reference into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference. In addition, the performance graph and the related description shall not be deemed “soliciting material” or “filed” with the SEC or subject to Regulation 14A or 14C. ITEM 6. RESERVED 29 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of U.S. Physical Therapy, Incl and its subsidiaries (herein referred to as “we”, “us”, “our” or the “Company”) should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” and “Forward-Looking Statements” sections of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. This section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024. EXECUTIVE SUMMARY U.S. Physical Therapy, Inc. and our subsidiaries (collectively, “we”, “us”, “our” or the “Company”), operate our business through two reportable business segments. Our reportable segments consist of the physical therapy operations segment and the industrial injury prevention services (“IIP”) segment. Through our subsidiaries, we operate and/or manage outpatient physical therapy clinics that provide pre-and post-operative care for a variety of orthopedic-related disorders and sports-related injuries, treatment for neurological-related injuries and rehabilitation of injured workers. We also have a majority interest in businesses which are leading providers of industrial injury prevention services. Services provided in this business include onsite injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations and ergonomic assessments. The majority of the IIP 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. These services are performed through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers. During the last three years, we completed the following acquisitions of outpatient physical therapy practices, companies that manage and/or provide administrative services to outpatient physical therapy practices, and IIP businesses detailed below: Acquisition Date % Interest Acquired Number of Clinics November 2024 Acquisition November 30, 2024 75% 8 October 2024 Acquisition October 31, 2024 50% 50 August 2024 Acquisition August 31, 2024 70% 8 April 2024 Acquisition April 30, 2024 ** * March 2024 Acquisition March 29, 2024 50% 9 October 2023 Acquisition October 31, 2023 *** * September 2023 Acquisition 1 September 29, 2023 70% 4 September 2023 Acquisition 2 September 29, 2023 70% 1 July 2023 Acquisition July 31, 2023 70% 7 May 2023 Acquisition May 31, 2023 45% 4 February 2023 Acquisition February 28, 2023 80% 1 November 2022 Acquisition November 30, 2022 80% 13 October 2022 Acquisition October 31, 2022 60% 14 September 2022 Acquisition September 30, 2022 80% 2 August 2022 Acquisition August 31, 2022 70% 6 March 2022 Acquisition March 31, 2022 70% 6 * IIP business ** On April 30, 2024, one of our primary IIP businesses, Briotix Health Limited Partnership, acquired 100% of an IIP business. *** On October 31, 2023, we concurrently acquired 100% of an IIP business and a 55% equity interest in an ergonomics software business (“October 2023 Acquisition”). 30 Table of Contents The following table provides a roll forward of our clinic count for the periods presented. Clinic Count Roll Forward (1) For the Year Ended December 31, 2024 December 31, 2023 Number of clinics owned or managed, beginning of period 671 640 Additions (2) 103 46 Closed or sold (45 ) (15 ) Number of clinics owned or managed, end of period 729 671 (1) The Company also manages clinics owned by third parties through management contracts. In addition to the clinic count shown above, as of December 31, 2024, the Company managed 39 clinics bringing the total owned/managed clinics to 768. As of December 31, 2023, the Company managed 43 clinics bringing the total owned/managed clinics to 714. (2) Includes clinics added through acquisitions. Our strategy is to continue acquiring outpatient physical therapy practices, develop outpatient physical therapy clinics as satellites in existing partnerships, and continue acquiring companies that manage outpatient physical therapy clinics or provide or serve our IIP sector. In May 2023, we completed a secondary offering of 1,916,667 shares of its common stock at an offering price of $90.00 per share. Upon completion of the offering, we received net proceeds of approximately $163.6 million, after deducting an underwriting discount of $8.6 million and recognizing related fees and expenses of $0.2 million. A portion of the net proceeds was used to repay the $35.0 million then outstanding under our credit agreement while the remainder was used primarily for additional acquisitions. On February 3, 2025, we completed the sales process that began in 2024 for a business unit within the physical therapy operations segment. In connection with the sales process, the assets and liabilities of the clinics sold were revalued as of December 31, 2024, and an impairment of approximately $2.4 million was included in the accompanying Consolidated Statements of Net Income in Item 8. The sale closed at a price of $0.7 million. On February 25, 2025, our Board of Directors raised our quarterly dividend rate from $0.44 per share to $0.45 per share and declared a quarterly dividend for the first quarter of 2025 at the higher rate. The dividend will be payable on April 11, 2025, to shareholders of record on March 14, 2025. On February 28, 2025, we acquired a 65% interest in a physical therapy practice with three clinic locations. The prior owners retained a 35% ownership interest. Medicare Reimbursement The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). Outpatient rehabilitation providers may enroll in Medicare as institutional outpatient rehabilitation facilities (i.e., rehab agencies) or individual physical or occupational therapists in private practice. The majority of our clinicians are enrolled as individual physical or occupational therapists in private practice while the remaining balance of providers are reimbursed through enrolled rehab agencies. 31 Table of Contents For calendar years 2021, 2022 and 2023, Centers for Medicare and Medicaid Services (“CMS”) expected decreases in Medicare reimbursement were partially offset by one-time increases in payments as a result of other legislation passed by Congress, resulting in decreases of approximately 3.5%, 0.75% and 2.0% in each of these years, respectively. For January 1 through March 8 of 2024, CMS’s final rule resulted in an approximate 3.5% decrease in Medicare payments for the therapy specialty. However, effective as of March 9, 2024, pursuant to the Consolidated Appropriations Act, 2024, Congress minimized the reduction in Medicare payments for therapy services for the balance of 2024, resulting in an approximate 1.8% reduction in Medicare payments for therapy services (rather than the 3.5% decrease). The MPFS proposed by CMS for 2025 will decrease Medicare reimbursement for therapy services by approximately 2.9% as compared to the reimbursement rates in effect for most of 2024. In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy alongside the physical therapist, an identification of the PTA’s participation (as denoted by a “CQ modifier”) is not required. Also, when the same service (code) is furnished separately by the physical therapist and PTA, CMS applies the de minimis standard to each 15-minute unit of codes, not on the total physical therapist and PTA time of the service. For dates of service on and after January 1, 2022, CMS pays for physical therapy and occupational therapy services provided by PTAs and occupational therapist assistants (“OTAs”) at 85% of the otherwise applicable Part B payment amount. CMS allows a timed service to be billed without a CQ (for PTA’s) or CO (for OTA’s) modifier when a PTA or OTA participates in providing care, but the physical therapist or occupational therapist meets the Medicare billing requirements without including the PTA’s or OTA’s minutes. This occurs when the physical therapist or occupational therapist provides more minutes than the 15-minute midpoint. The proposed 2025 MPFS final rule does not contain any policy changes concerning the modifiers for services provided by physical therapy and occupational therapist assistants. RESULTS OF OPERATIONS The defined terms with their respective description used in the following discussion are listed below: Mature clinics are clinics opened or acquired prior to January 1, 2023, and are still operating as of the balance sheet date. Net rate per patient visit is net patient revenue related to our physical therapy operations divided by total number of patient visits (defined below) during the periods presented. Patient visits is the number of unique patient visits during the periods presented. Average daily visits per clinic is patient visits divided by the number of days in which normal business operations were conducted during the periods presented and further divided by the average number of clinics in operation during the periods presented. Clinics are outpatient physical therapy clinics that are either owned or managed by the Company or one of its subsidiaries. 2024 Year period covering the twelve months ended December 31, 2024. 2023 Year period covering the twelve months ended December 31, 2023. 32 Table of Contents Full Year 2024 versus Full Year 2023 For the Year Ended Variance December 31, 2024 December 31, 2023 $ % (In thousands, except percentages) Net patient revenue $ 560,553 83.5 % $ 514,556 85.1 % $ 45,997 8.9 % Other revenue 110,792 16.5 % 90,246 14.9 % 20,546 22.8 % Net revenue 671,345 100.0 % 604,802 100.0 % 66,543 11.0 % Operating Cost: Salaries and related costs 399,394 59.5 % 353,390 58.4 % 46,004 13.0 % Rent, supplies, contract labor and other 118,910 17.7 % 108,596 18.0 % 10,314 9.5 % Depreciation and amortization 17,853 2.7 % 14,960 2.5 % 2,893 19.3 % Provision for credit losses 6,912 1.0 % 6,172 1.0 % 740 12.0 % Clinic closure costs - lease and other 4,355 0.6 % 175 0.0 % 4,180 * Total operating cost 547,424 81.5 % 483,293 79.9 % 64,131 13.3 % Gross Profit 123,921 18.5 % 121,509 20.1 % 2,412 2.0 % Corporate office costs 58,290 8.7 % 51,953 8.6 % 6,337 12.2 % Impairment of goodwill and other intangible assets - 0.0 % 17,495 2.9 % (17,495 ) * Impairment of assets held for sale 2,418 0.4 % - * 2,418 * Operating Income 63,213 9.4 % 52,061 8.6 % 11,152 21.4 % Other (expense) income: Interest expense, debt and other (8,015 ) -1.2 % (9,303 ) -1.5 % 1,288 -13.8 % Interest income from investments 3,941 0.6 % 3,774 0.6 % 167 4.4 % Change in fair value of contingent earn-out consideration (219 ) 0.0 % (1,550 ) -0.3 % 1,331 -86 % Change in revaluation of put-right liability (82 ) 0.0 % 2,582 0.4 % (2,664 ) -103.2 % Equity in earnings of unconsolidated affiliate 1,014 0.2 % 955 0.2 % 59 6.2 % Relief Funds - 0.0 % 467 0.1 % (467 ) * Other 357 0.1 % 390 0.1 % (33 ) -8.5 % Total other expense (3,004 ) -0.4 % (2,685 ) -0.4 % (319 ) 11.9 % Income before taxes 60,209 9.0 % 49,376 8.2 % 10,833 21.9 % Provision for income taxes 14,609 2.2 % 12,156 2.0 % 2,453 20.2 % Net income 45,600 6.8 % 37,220 6.2 % 8,380 22.5 % Less: Net income attributable to non-controlling interest: Redeemable non-controlling interest - temporary equity (10,044 ) -1.5 % (4,426 ) -0.7 % (5,618 ) 126.9 % Non-controlling interest - permanent equity (4,132 ) -0.6 % (4,555 ) -0.8 % 423 -9.3 % (14,176 ) -2.1 % (8,981 ) -1.5 % (5,195 ) 57.8 % Net income attributable to USPH shareholders $ 31,424 4.7 % $ 28,239 4.7 % $ 3,185 11.3 % * Not meaningful Total net revenue 2024 Year increased $66.5 million, or 11.0%, to $671.3 million from $604.8 million for the 2023 Year while operating costs increased $64.1 million, or 13.3%, to $547.4 million from $483.3 million over the same periods, respectively. These increases were primarily due to the increase in visits from the 58 net new clinic additions during 2024 Year. Gross profit, which included $4.4 million of costs associated with the 45 clinic closures, was $123.9 million, or 18.5% of net revenue, during the 2024 Year compared to $121.5 million, or 20.1% of net revenue, for the 2023 Year. Excluding the clinic closure costs, Adjusted gross profit (1) , for the 2024 Year was $128.3 million, or 19.1% of net revenue, compared to $121.7 million, or 20.1% of net revenue, for the 2023 Year. USPH Net Income was $31.4 million for the 2024 Year compared to $28.2 million for the 2023 Year. For the 2024 Year, USPH Net Income included a charge of $4.4 million (prior to allocation of the related minority interest and income taxes) related to the closure of 45 underperforming clinics, a non-cash charge of $2.4 million (prior to allocation of income taxes) related to the impairment of assets held for sale and a $1.0 million true-up of income tax expense. For the 2023 Year, USPH Net Income included a charge of $17.5 million (prior to the allocation of minority interest and income taxes) related to the impairment of goodwill and other intangible assets. In accordance with GAAP, the revaluation of noncontrolling interest, net of taxes, is not included in net income but is charged directly to retained earnings; however, this change is included in the computation of earnings per share. Earnings per share, was $1.84 for the 2024 Year compared to $1.28 in the 2023 Year. (1) These are non-GAAP Measures. See below for the definition and reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 33 Table of Contents The table below shows the calculation of earnings per share for the periods presented. For the Year Ended December 31, 2024 December 31, 2023 (In thousands, except per share data) Computation of earnings per share - USPH shareholders: Net income attributable to USPH shareholders $ 31,424 $ 28,239 Charges to retained earnings: Revaluation of redeemable non-controlling interest (4,964 ) (13,565 ) Tax effect at statutory rate (federal and state) 1,268 3,466 $ 27,728 $ 18,140 Earnings per share (basic and diluted) $ 1.84 $ 1.28 Shares used in computation: Basic and diluted earnings per share - weighted-average shares 15,064 14,188 Non-GAAP Measures The following tables provide details of the basic and diluted earnings per share computation and reconcile net income attributable to USPH shareholders calculated in accordance with GAAP to Adjusted EBITDA, Operating Results and other non-GAAP measures. Management believes providing Adjusted EBITDA, Operating Results, and other non-GAAP measures to investors is useful information for comparing the Company’s period-to-period results as well as for comparing with other similar businesses since most do not have redeemable instruments and therefore have different equity structures. Additionally, management believes that these non-GAAP measures provide useful supplemental information to investors, analysts, and other stakeholders in assessing the Company’s operational performance and financial trends. Management uses Adjusted EBITDA, Operating Results and other non-GAAP measures, which eliminate certain items described above that can be subject to volatility and unusual costs, as the principal measures to evaluate and monitor financial performance period over period. Adjusted EBITDA, a non-GAAP measure, is defined as net income attributable to our shareholders before interest income, interest expense, taxes, depreciation, amortization, change in fair value of contingent earn-out consideration, payments received from the federal government under the Corona virus Aid, Relief and Economic Security Act (“Relief Funds”), non-cash impairment charges, changes in revaluation of put-right liability, equity-based awards compensation expense, clinic closure costs, business acquisition related costs and other income and related portions for non-controlling interests. Operating Results, a non-GAAP measure, equals net income attributable to our shareholders less, changes in revaluation of a put-right liability, Relief Funds, non-cash impairment charges, clinic closure costs, changes in fair value of contingent earn-out consideration, business acquisition related costs and any allocations to non-controlling interests, 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. Adjusted EBITDA, Operating Results and other non-GAAP measures presented are not measures of financial performance under GAAP. Adjusted EBITDA, Operating Results and other non-GAAP measures 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. 34 Table of Contents The tables below define and reconcile non-GAAP Adjusted EBITDA and non-GAAP Operating Results to the most directly comparable GAAP measure. For the Year Ended December 31, 2024 December 31, 2023 (In thousands, except per share data) Adjusted EBITDA (a non-GAAP measure) Net income attributable to USPH shareholders $ 31,424 $ 28,239 Adjustments: Provision for income taxes 14,609 12,156 Depreciation and amortization 18,681 15,695 Interest expense, debt and other, net 8,015 9,303 Interest income from investments (3,941 ) (3,774 ) Impairment of goodwill and other intangible assets - 17,495 Impairment of assets held for sale 2,418 - Equity-based awards compensation expense 7,823 7,236 Change in revaluation of put-right liability 82 (2,582 ) Change in fair value of contingent earn-out consideration 219 1,550 Clinic closure costs (1) 4,355 175 Business acquisition related costs (2) 819 - Relief Funds - (467 ) Other income (357 ) (390 ) Allocation to non-controlling interests (2,379 ) (6,724 ) $ 81,768 $ 77,912 Operating Results (a non-GAAP measure) Net income attributable to USPH shareholders $ 31,424 $ 28,239 Adjustments: Impairment of goodwill and other intangible assets - 17,495 Impairment of assets held for sale 2,418 - Change in fair value of contingent earn-out consideration 219 1,550 Change in revaluation of put-right liability 82 (2,582 ) Clinic closure costs (1) 4,355 175 Business acquisition related costs (2) 819 - Relief Funds - (467 ) Allocation to non-controlling interest (521 ) (5,196 ) Tax effect at statutory rate (federal and state) (1,884 ) (2,804 ) $ 36,912 $ 36,410 Operating Results per share (a non-GAAP measure) $ 2.45 $ 2.57 (1) Costs associated with the closure of 45 clinics during the 2024 Year. Closure costs in the 2023 Year were not material. (2) Primarily consists of legal and consulting expenses related to the acquisition of 50% equity interest in a management services organization that provides management and administrative services to 50 physical therapy clinics. Adjusted EBITDA (1) , a non-GAAP measure, was $81.8 million for the 2024 Year, an increase of $3.9 million, from $77.9 million for the 2023 Year. 35 Table of Contents Operating Results (1) , a non-GAAP measure, was $36.9 million for 2024 Year, an increase of $0.5 million, from $36.4 million in the 2023 Year. On a per share basis, Operating Results were $2.45 in the 2024 Year compared to $2.57 in the 2023 Year due to the increase in the number of shares outstanding associated with the Company’s secondary offering completed in May 2023. In addition, the 2024 Year includes a $1.0 million true-up of income tax expense recorded during the three months ended December 31, 2024. The tables below reconcile other non-GAAP measures to the most directly comparable GAAP measures. For the Year Ended December 31, 2024 December 31, 2023 As Reported (GAAP) Closure Costs (1) Non-Cash Impairment (2) As Adjusted (Non-GAAP) As Reported (GAAP) Closure Costs (1) Non-Cash Impairment (2) As Adjusted (Non-GAAP) (in thousands, except per share data, and percentages) Operating costs $ 547,424 $ (4,355 ) $ - $ 543,069 $ 483,293 $ (175 ) $ - $ 483,118 Gross profit 123,921 4,355 - 128,276 121,509 175 - 121,684 Gross margin 18.5 % * * 19.1 % 20.1 % * * 20.1 % Operating income 63,213 4,355 2,418 69,986 52,061 175 17,495 69,731 Provision for taxes 14,609 (1,113 ) (618 ) 12,878 12,156 (45 ) (3,129 ) 8,982 Minority interest (14,176 ) 492 - (13,684 ) (8,981 ) 20 (5,249 ) (14,210 ) USPH Net Income 31,424 3,734 1,800 36,958 28,239 150 9,117 37,506 Earnings per share $ 1.84 0.25 0.12 $ 2.21 $ 1.28 0.01 $ 0.64 $ 1.93 Segment information - Physical Therapy Operations Operating costs $ 470,485 $ (4,355 ) $ - $ 466,130 $ 421,484 $ (175 ) $ - $ 421,309 Gross profit 103,948 4,355 - 108,303 105,064 175 - 105,239 Gross margin 18.1 % * * 18.9 % 20.0 % * * 20.0 % (1) Costs associated with the closure of 45 clinics during the 2024 Year. Closure costs for the comparable prior year periods were not material. We believe that presenting this information will allow investors to evaluate the performance of the Company's business more objectively. (2) A non-cash impairment charge of $2.4 million was recognized during the three months ended December 31, 2024, related to the impairment of assets held for sale, while $17.5 million of a non-cash impairment charge was recognized during the three months ended December 31, 2023, related to a reporting unit in the Company’s IIP segment. * Not meaningful 36 Table of Contents Physical Therapy Operations For the Year Ended Variance December 31, 2024 December 31, 2023 $ % (In thousands, except percentages) Revenue related to: Mature Clinics (1) $ 501,304 $ 489,233 $ 12,071 2.5 % Clinic additions (2) 52,943 12,406 40,537 326.8 % Clinics sold or closed (3) 6,306 12,917 (6,611 ) (51.2 )% Net Patient Revenue 560,553 514,556 45,997 8.9 % Other (4) 13,880 11,992 1,888 15.7 % Total 574,433 526,548 47,885 9.1 % Operating costs (4) 470,485 421,484 49,001 11.6 % Gross profit $ 103,948 $ 105,064 $ (1,116 ) (1.1 )% Financial and operating metrics (not in thousands): Net rate per patient visit (1) $ 104.71 $ 102.80 $ 1.91 1.9 % Patient visits (1) 5,353,189 5,005,426 347,763 6.9 % Average daily visits per clinic (1) 30.4 30.0 0.4 1.3 % Gross margin 18.1 % 20.0 % Gross margin excluding closure costs, non-GAAP (6) 18.9 % 20.0 % Salaries and related costs per visit, clinics (5) $ 61.66 $ 59.19 $ 2.47 4.2 % Operating costs per visit, clinics (5) $ 86.43 $ 82.79 $ 3.64 4.4 % Operating costs per visit, clinics, excluding closure costs, non-GAAP (6) $ 85.61 $ 82.75 $ 2.86 3.5 % Number of clinics at the end of the period 729 671 58.0 8.6 % (1) See defined terms above for definitions. (2) Clinic additions during the years ended 2024 and 2023. (3) Revenue from closed clinics includes revenue from the 45 and 15 clinics closed during the full year December 31, 2024 and 2023, respectively. (4) Includes revenues and costs from management contracts. (5) Per visit costs excludes management contract costs. (6) Excludes closure costs during the twelve months ended; refer to reconciliation of non-GAAP measured to most comparable GAAP measures for more information. Revenues Revenues from physical therapy operations increased $47.9 million, or 9.1%, to $574.4 million in the 2024 Year compared to $526.5 million in the 2023 Year. This increase was primarily due to the increase in volume from the 58 net clinics added since the comparable prior year period, a 1.5% increase in volume at mature clinics and an increase in net rate per patient visit to $104.71 for the 2024 Year from $102.80 for the 2023 Year. The increase in net rate per patient visit was mainly driven by higher reimbursement rates from commercial and other payors as a result of contract negotiations as well as an increase in workers compensation as a percent of our total net patient revenues. Other revenue was $13.9 million for the 2024 Year and $12.0 million for the 2023 Year, of which management contracts was $9.8 million for the 2024 Year as compared to $8.6 million for the 2023 Year. Operating costs Operating costs increased by $49.0 million or 11.6% to $470.4 million for the 2024 Year from $421.4 million in the 2023 Year. The increase was primarily due to the higher volume from the new clinics added since the comparable year period as well as increased patient visits in Mature Clinics. On a per visit basis (excluding management contracts), operating costs increased to $86.43 for the 2024 Year compared to $82.79 for the 2023 Year. Salaries and related costs, clinics (excluding management contracts) increased to $330.1 million in the 2024 Year from $296.3 million in the 2023 Year, an increase of $33.8 million, or 11.4% mostly due to the new clinics added year over year as well as increased volume from Mature Clinics. Salaries and related costs per visit (excluding management contracts), related to clinics increased to $61.66 for the 2024 Year from 59.19 for the 2023 Year. Rent, supplies, contract labor and other costs, related to clinics (excluding management contracts) increased to $104.6 million in the 2024 Year from $97.2 million in the 2023 Year, an increase of $7.4 million, or 7.6% mostly due to clinic additions. Rent, supplies, contract labor and other per visit (excluding management contracts), related to clinics increased slightly to $19.53 for the 2024 Year from 19.43 for the 2023 Year. Depreciation and amortization increased to $16.7 million in 2024 Year from $14.5 million in the 2023 Year, an increase of $2.2 million, or 15.1% primarily due to additional clinics in the 2024 Year compared to the 2023 Year. Clinic closure costs increased to $4.4 million in the 2024 Year from $0.2 million in the 2023 Year, due to the closure of 45 underperforming clinics in the 2024 Year. 37 Table of Contents The provision for credit losses was $6.9 million for the 2024 Year and $6.2 million for the 2023 Year. As a percentage of net revenues, the provision for credit losses were 1.0% for both 2024 and 2023. Gross Profit Gross profit from physical therapy operations, which included $4.4 million of costs associated with the 45 clinic closures, was $103.9 million, or 18.1% of net revenue, for the 2024 Year compared to $105.1 million, or 20.0% of net revenue, for the 2023 Year. Excluding the clinic closure costs, adjusted physical therapy gross profit (1) was $108.3 million, or 18.9% of net revenue, in the 2024 Year compared to $105.2 million, or 20.0% of net revenue, in the 2023 Year. Industrial Injury Prevention Services For the Year Ended Variance December 31, 2024 December 31, 2023 $ % (In thousands, except percentages) Net revenue $ 96,912 $ 78,254 $ 18,658 23.8 % Operating costs 76,939 61,809 15,130 24.5 % Gross profit $ 19,973 $ 16,445 $ 3,528 21.5 % Gross margin 20.6% 21.0% Revenues from IIP increased $18.7 million, or 23.8%, to $96.9 million for the 2024 Year from $78.3 million for the 2023 Year. Gross profit from IIP operations increased $3.5 million, or 21.5%, to $20.0 million for the 2024 Year from $16.4 million for the 2023 Year while the gross profit margin from IIP operations was 20.6% for the 2024 Year compared to 21.0% for the 2023 Year. Corporate Office Costs Corporate office costs were $58.3 million, or 8.7% of net revenue, in the 2024 Year, compared to $52.0 million, or 8.6% of net revenue, in the 2023 Year. The increase in corporate office costs was primarily due to higher salaries and related costs to support the larger number of clinics. Impairment of Goodwill and Other Intangible Assets, and Assets Held for Sale A non-cash impairment charge of $2.4 million was recognized during the 2024 Year related to the impairment of assets held for sale while a non-cash impairment charge of $17.5 million was recognized during the 2023 Year related to the reporting unit in the Company’s IIP segment. Operating Income Operating income was $63.2 million for the 2024 Year compared to $52.1 million for the 2023 Year. Excluding the clinic closure costs and non-cash impairment charges, adjusted operating income (1) was $70.0 million during the 2024 Year compared to $69.7 million during the 2023 Year. Other (Expenses) Income Interest Expense, Debt and Other Interest expense, debt and other was $8.0 million compared to $9.3 million in the 2023 Year, with the decrease primarily due to lower outstanding borrowings with proceeds from the Company’s secondary offering completed in May 2023. The interest rate on the Company’s term loan was 4.7% for the 2024 Year and 4.9% for the 2023 Year, with an all-in effective interest rate on the credit facility including all associated costs, of 5.5% and 5.3% over the same periods, respectively. 38 Table of Contents Interest income from investment Interest income from investment amounted to $3.9 million for the 2024 Year and $3.8 million for 2023 Year. This interest income is a result of investing excess cash associated with proceeds from our secondary offering completed in May 2023. Change in fair value of contingent earn-out consideration and put-right liabilities We revalued contingent earn-out consideration related to certain acquisitions resulting in an expense of $0.2 million for the 2024 Year compared to $1.6 million for the 2023 Year. For the 2024 Year, we recorded a loss of $0.1 million on the valuation of the put-right liability compared to a $2.6 million gain for the 2023 Year. The put-right relates to the potential future purchase of a company that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area. Equity in earnings of unconsolidated affiliate We recognized income of $1.0 million for both the 2024 Year and the 2023 Year from a joint venture which provides physical therapy services for patients at hospitals. Since we are deemed to not have a controlling interest in the joint venture, our investment is accounted for using the equity method of accounting. Provision for Income Taxes The provision for income tax was $14.6 million for the 2024 Year and $12.2 million for the 2023 Year while the effective tax rate was 31.7% and 30.1% over the same periods, respectively. The 2024 Year includes a $1.0 million true-up of income tax expense. The following table shows the calculation of our effective tax rate for the periods presented. For the Year Ended December 31, 2024 December 31, 2023 (In thousands, except percentages) Income before taxes $ 60,209 $ 49,376 Less: Net income attributable to non-controlling interest: Redeemable non-controlling interest - temporary equity (10,044 ) (4,426 ) Non-controlling interest - permanent equity (4,132 ) (4,555 ) $ (14,176 ) $ (8,981 ) Income before taxes less net income attributable to non-controlling interest $ 46,033 $ 40,395 Provision for income taxes $ 14,609 $ 12,156 Effective income tax rate 31.7 % 30.1 % Net Income Attributable to Non-controlling Interest Net income attributable to redeemable non-controlling interest (temporary equity) was $10.0 million for the 2024 Year and $4.4 million for the 2023 Year. Net income attributable to non-controlling interest (permanent equity) was $4.1 million for the 2024 Year and $4.6 million for the 2023 Year. 39 Table of Contents Other Comprehensive Income We entered into an interest rate swap agreement in May 2022, which became effective on June 30, 2022. The maturity date of the swap agreement is June 30, 2027. It has a $150 million notional value adjusted concurrently with scheduled principal payments made on the term loan. Beginning in July 2022, we pay a fixed one-month Secured Overnight Financing Rate (“SOFR”) of interest of 2.815%. The total interest rate in any period also includes an applicable margin based on the Company’s consolidated leverage ratio. In the 2024 Year, our interest rate including the applicable margin was 4.7%. Unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income (loss), net of tax. The fair value of the interest rate swap was $3.8 million, and $3.7 million at December 31, 2024 and December 31, 2023 respectively, which has been included within other assets (current and long term) in the Consolidated Balance Sheet. The impact of the interest rate swap on the accompanying Consolidated Statements of Comprehensive Income was an unrealized gain of less than $0.1 million, net of tax, for the 2024 Year and an unrealized loss of $1.2 million, net of tax, for the 2023 Year. (1) These are Non-GAAP Measures. Please see above in the “Non-GAAP Measures” section for the definition and reconciliation of Non-GAAP measures to the most directly comparable GAAP measure. LIQUIDITY AND CAPITAL RESOURCES We believe that our business has sufficient cash to allow us to meet our short-term cash requirements. Total cash and cash equivalents were $41.4 million as of December 31, 2024, compared to $152.8 million as of December 31, 2023. Additionally, we had $151.6 million of outstanding borrowings and $164.0 million in available credit under our credit facilities as of December 31, 2024, compared to $144.4 million of outstanding borrowings and $175.0 million in available credit under our credit facilities as of December 31, 2023. On May 30, 2023, we completed a secondary offering of our common stock resulting in net proceeds of $163.6 million after deducting fees associated with the transaction. A portion of the net proceeds was used to repay the $35.0 million then outstanding under our Credit Agreement while the remainder was used primarily for acquisitions from May 2023 through December 2024. Prior to using the cash, our cash was invested in a high-yield savings account which generated interest income of approximately 3.9 million and $3.8 million in the Year 2024 and Year 2023, respectively. We believe that our cash and cash equivalents and availability under our Credit Facilities are sufficient to fund the working capital needs of our operating subsidiaries through at least March 3, 2026. As of December 31, 2024, we had $41.4 million of cash on hand, a significant portion of which is available for deployment into development and other growth initiatives. We plan to continue developing new clinics and making additional acquisitions. We have, from time to time, purchased from or sold to non-controlling interests of limited partners in our existing partnerships. We may purchase or sell additional non-controlling interests in the future. Generally, any acquisition or purchase of non-controlling interests is expected to be accomplished using our cash, financing, or a combination of the two. We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts. 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. Claims under litigation and vehicular incidents can take a year or longer to collect. Medicare and other payor claims relating to new clinics awaiting CMS approval initially may not be submitted for six months or more. 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 balance has been outstanding for 120 days or longer. As of December 31, 2024, we have accrued $6.4 million related to credit balances (including in accrued expenses), a portion of which is due to patients and payors. The credit balances are expected to be resolved or paid in the next twelve months. 40 Table of Contents The average accounts receivable days outstanding was 31 days on December 31, 2024, and 29 days on December 31, 2023. Net patient receivables in the amounts of $6.1 million and $6.3 million were written off in 2024 and 2023, respectively. Cash Flow A summary of our operating, investing, and financing activities is discussed below. Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Net cash provided by operating activities $ 74,940 $ 81,978 $ 58,537 Net cash used in financing activities (149,450 ) (45,015 ) (81,269 ) Net cash (used in) provided by financing activities (36,953 ) 84,268 25,759 Operating Activities Cash provided by operating activities decreased $7.0 million to $74.9 million for the year ended December 31, 2024, as compared to $82.0 million for the year ended December 31, 2023. Investing Activities Cash used in investing activities during the year ended December 31, 2024, totaled $149.5 million and consisted of $142.1 million used in the purchase of majority interests in businesses and non-controlling interest, temporary and permanent equity, and $9.2 million of fixed assets purchases. These were partially offset by $1.0 million in distributions from an unconsolidated affiliate. Financing Activities Cash used in financing activities during the year ended December 31, 2024, totaled $37.0 million and primarily consisted of $26.5 million of dividends paid to our shareholders, $11.8 million of net payments under our revolving credit facility, and $14.7 million of distributions to non-controlling interests. These uses were partially offset by new borrowings of $19.0 million on our Senior Credit Facilities. Senior Credit Facilities On 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.On June 17, 2022, we entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”) among Bank of America, N.A., as administrative agent (“Administrative Agent”) and the lenders from time-to-time party thereto. The Credit Agreement, which matures on June 17, 2027, provides for loans in an aggregate principal amount of $325 million. Such loans will be available through the following facilities (collectively, the “Senior Credit Facilities”): 1) Revolving Facility: $175 million, five-year, revolving credit facility (“Revolving Facility”), which includes a $12 million sublimit for the issuance of standby letters of credit and a $15 million sublimit for swingline loans (each, a “Swingline Loan”). 2) Term Facility: $150 million term loan facility (the “Term Facility”). The Term Facility amortizes in quarterly installments of: (a) 0.625% in each of the first two years, (b) 1.250% in the third and fourth year, and (c) 1.875% in the fifth year of the Credit Agreement. The remaining outstanding principal balance of all term loans is due on the maturity date. 41 Table of Contents The proceeds of the Revolving Facility have been and shall continue to be used by us for working capital and other general corporate purposes of our Company and its subsidiaries, including to fund future acquisitions and invest in growth opportunities. The proceeds of the Term Facility were used by us to refinance the indebtedness outstanding under the Second Amended and Restated Credit Agreement, to pay fees and expenses incurred in connection with the loan facilities transactions, for working capital and other general corporate purposes. We are permitted to increase the Revolving Facility and/or add one or more tranches of term loans in an aggregate amount not to exceed the sum of (i) $100 million plus (ii) an unlimited additional amount, provided that (in the case of clause (ii)), after giving effect to such increases, the pro forma Consolidated Leverage Ratio (as defined in the Credit Agreement) would not exceed 2.0:1.0, and the aggregate amount of all incremental increases under the Revolving Facility does not exceed $50,000,000. The interest rates per annum applicable to the Senior Credit Facilities (other than in respect of Swingline Loans) will be Term SOFR as defined in the agreement plus an applicable margin or, at our option, an alternate base rate plus an applicable margin. We also pay to the Administrative Agent, for the account of each lender under the Revolving Facility, a commitment fee equal to the actual daily excess of each lender’s commitment over its outstanding credit exposure under the Revolving Facility (“unused fee”). We may prepay and/or repay the revolving loans and the term loans, and/or terminate the revolving loan commitments, in whole or in part, at any time without premium or penalty, subject to certain conditions. The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends, and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets. The Credit Agreement includes certain financial covenants which include the Consolidated Fixed Charge Coverage Ratio and the Consolidated Leverage Ratio, as defined in the Credit Agreement. The Credit Agreement also contains customary events of default. Our obligations under the Credit Agreement are guaranteed by our wholly owned material domestic subsidiaries (each, a “Guarantor”), and our obligations and any Guarantors are secured by a perfected first priority security interest in substantially all of our existing and future personal property and each Guarantor, subject to certain exceptions. As of December 31, 2024, $140.6 million was outstanding on the Term Facility while $11.0 million was outstanding under the Revolving Facility, resulting in $164.0 million of credit availability. As of December 31, 2024, we were in compliance with all of the covenants contained in the Credit Agreement. The interest rate for the 2024 Year on our Senior Credit Facilities, net of savings from the interest rate swap described below, was 4.7%, with an all-in interest rate, including all associated costs, of 5.5%. Interest is payable at the end of the selected interest period but no less frequently than quarterly and on the date of maturity. Interest Rate Swap In May 2022, we entered into an interest rate swap agreement, effective on June 30, 2022, with Bank of America, N.A, which became effective on June 30, 2022. It has a $150 million notional value adjusted concurrently with scheduled principal payments made on the term loan and has a maturity date of June 30, 2027. Beginning in July 2022, we receive 1-month SOFR, and pay a fixed rate of interest of 2.815% on 1-month SOFR on a quarterly basis. The total interest rate in any period also includes an applicable margin based on our consolidated leverage ratio. In connection with the swap, no cash was exchanged between us and the counterparty. We designated our interest rate swap as a cash flow hedge and structured it to be highly effective. Consequently, unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulate other comprehensive income (loss), net of tax. 42 Table of Contents As of December 31, 2024, the fair value of the interest rate swap was $3.8 million, an increase of $0.1 million, net of any income tax effect, as compared to December 31, 2023. The fair value of the interest rate swap is included in other assets (current and long term) in our consolidated balance sheet while the increase in fair value is presented as unrealized loss in our consolidated statements of comprehensive income. The interest rate swap arrangement generated $3.4 million in interest savings for the 2024 Year. The average interest rate for the term facility, net of the savings from the swap in the 2024 Year was 4.7%. Notes Payable and Deferred Payments Related to Acquisitions We generally enter into various notes payable as a means of financing our acquisitions. Our present outstanding notes payable primarily relate to the acquisitions of a business or acquisitions of majority interests in such businesses. At December 31, 2024, our remaining outstanding balance on these notes aggregated $3.0 million, of which $2.0 million are payable in 2025, $0.9 million are payable in 2026, and $0.1 million are payable in 2027. Notes are generally payable in equal annual installments of principal over two years plus any accrued and unpaid interest. Interest accrues at various interest rates ranging from 4.0% to 8.5% per annum. On November 30, 2024, we acquired a 75% equity interest in an eight-clinic physical therapy practice. The owner of the practice retained 25% of the equity interests. The purchase price for the 75% equity interest was approximately $15.9 million, of which $15.7 million was paid in cash, and $0.2 million was in the form of a note payable. The note accrues interest at 5.0% per annum and the principal and interest is payable in one installment which is due on December 1, 2026. On October 31, 2024, we acquired a 50% interest in MSO Metro, LLC (“Metro”) pursuant to a Equity Interest Purchase Agreement (the “Purchase Agreement”) dated October 7, 2024 among U.S. Physical Therapy, Ltd. (a subsidiary of the Company), Metro, the members of Metro, and Michael G. Mayrsohn, as Sellers’ Representative. We also became the managing member of Metro. We paid a purchase price of approximately $76.5 million, $75.0 million of which was funded by our cash on hand and the remaining $1.5 million through the issuance of 18,358 shares of the Company’s common stock based on a trailing five-day average as of the day immediately prior to closing. The shares of the Company’s common stock were issued in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act. The Purchase Agreement also included an earnout where the sellers can earn up to another $20.0 million of additional consideration if certain performance criteria relating to the Metro business are achieved. The value of the contingent consideration at December 31, 2024 was $11.3 million. On August 31, 2024, we acquired a 70% equity interest in an eight-clinic practice physical therapy and the original practice owners retained a 30% equity interest. The purchase price for the 70% equity interest was approximately $2.0 million. As part of the transaction, we agreed to additional contingent consideration if future operational and financial objectives are met. The maximum amount of additional contingent consideration due under this agreement is $3.6 million. The contingent consideration was valued at $3.2 million on December 31, 2024. On April 30, 2024, we acquired 100% of an IIP business through one of its primary IIP businesses, Briotix Health Limited Partnership, for a purchase price of approximately $24.0 million, of which $0.5 million was in the form of a note payable. The note accrues interest at 5.0% per annum and the principal and the interest are payable on May 1, 2025. As part of the transaction, we agreed to additional contingent consideration if future operational objectives are met by the business. The maximum amount of additional contingent consideration due under this agreement is $10.0 million. The contingent consideration was valued at $2.5 million as of December 31, 2024. On March 29, 2024, we acquired a 50% equity interest in a nine-clinic physical therapy and hand therapy practice. The original owners of the practice retained the remaining 50%. The purchase price for the 50% equity interest was approximately $16.4 million, of which $0.5 million was in the form of a note payable. The note accrues interest at 4.5% per annum and the principal and the interest are payable on March 29, 2026. As part of the transaction, we agreed to additional contingent consideration if future operational and financial objectives are met. There is no maximum payout. The contingent consideration was valued at $0.2 million on December 31, 2024. On September 29, 2023, we acquired a 70% equity interest in a four-clinic physical therapy practice. The owner of the practice retained 30% of the equity interests. The purchase price for the 70% equity interest was approximately $6.0 million, of which $5.4 million was paid in cash, and $0.6 million was in the form of a note payable. The note accrues interest at 5.0% per annum and the principal and interest are payable in two installments. The first payment of principal and interest of $0.3 million was paid in January 2024, and the second installment of $0.3 million is due on September 30, 2025. 43 Table of Contents In a separate transaction, on September 29, 2023, we acquired a 70% equity interest in a single clinic physical therapy practice. The owner of the practice retained 30% of the equity interests. The purchase price for the 70% equity interest was approximately $7.8 million, of which $7.4 million was paid in cash and $0.4 million is a deferred payment due on June 30, 2025. On July 31, 2023, we acquired a 70% equity interest in a five-clinic practice. The practice’s owners retained a 30% equity interest. The purchase price for the 70% equity interest was approximately $2.1 million, of which $1.8 million was paid in cash and $0.3 million is a deferred payment due on June 30, 2025. On May 31, 2023, we and a local partner together acquired a 75% interest in a four-clinic physical therapy practice. After the transaction, our ownership interest is 45%, our local partner’s ownership interest is 30%, and the practice’s pre-acquisition owners have a 25% ownership interest. The purchase price for the 75% equity interest was approximately $3.1 million, of which $1.7 million was paid in cash by us, $1.1 million was paid in cash by the local partner, and $0.3 million was in the form of a note payable (of which $0.2 million was to be paid by us and $0.1 million was to be paid by the local partner). The note was paid in full on July 1, 2024. On February 28, 2023, we acquired 80% interest in a one-clinic physical therapy practice. The practice’s owners retained 20% of the equity interests. The purchase price for 80% equity interest was approximately $6.2 million, of which $5.8 million was paid in cash and $0.4 million in the form of a note payable. The note accrues interest at 4.5% per annum and the principal and interest were paid on February 28, 2025. Redeemable Non-Controlling Interest Certain of our limited partnership agreements and operating agreements provide that, upon the triggering events, we have a call right and the selling entity or individual has a put right for the purchase and sale of the limited partnership interest held by the partner. Once triggered, the put right and the call right do not expire, even upon an individual partner’s death, and contain no mandatory redemption feature. In addition, in certain of these limited partnership agreements and operating agreements, the selling entity or individual also has a put right that can be exercised after the passage of a designated period of time or upon a termination of employment. The purchase price of the underlying equity interest upon the exercise of either the put right or the call right is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets. The fair value of the redeemable non-controlling interest at December 31, 2024 was $269.0 million. Contractual Obligations We have future obligations for debt repayments and associated interest payments as well as future minimum lease payments under our non-cancellable operating leases. The obligations as of December 31, 2024, are summarized as follows: Total 2025 2026 2027 2028 2029 Thereafter (In thousands) Company's Senior Credit Facilities (1) $ 151,625 $ 9,375 $ 9,375 $ 132,875 $ - $ - $ - Notes payable (2) 2,952 2,047 894 11 - - - Interest expense on Senior Credit Facilities and notes payable (3) 18,739 6,456 6,182 6,101 - - - Operating leases (4) 188,799 55,557 45,020 33,718 22,556 13,389 18,559 $ 362,115 $ 73,435 $ 61,471 $ 172,705 $ 22,556 $ 13,389 $ 18,559 (1) Amounts due under our Senior Credit Facilities discussed above. (2) Amounts due related to certain acquisitions discussed above. (3) Interest on our Senior Credit Facilities was estimated using the average outstanding balance for the respective periods and our effective interest rate on our Term Facility and Revolving Facility at December 31, 2024. Interest on our other debt was estimated using the stated rate in the debt agreement. (4) Includes variable non-lease components, including but not limited to common area maintenance. 44 Table of Contents CRITICAL ACCOUNTING POLICIES Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires estimates and judgments that affect the reported amounts of our assets, liabilities, net sales and expenses, and disclosure of contingent assets and liabilities. Management bases estimates on historical experience and other assumptions it believes to be reasonable given the circumstances and evaluates these estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. We believe that the following critical accounting policies involve a higher degree of judgment and complexity. See Note 2, Significant Accounting Policies, to our audited consolidated financial statements which are included elsewhere in this Annual Report on Form 10-K for a complete discussion of our significant accounting policies. The following reflect the significant estimates and judgments used in the preparation of our consolidated financial statements. Revenue Recognition Patient revenue Revenues are recognized in the period in which services are rendered. Net patient revenue consists of revenues from physical therapy and occupational therapy clinics that provide pre-and post-operative care and treatment for orthopedic related disorders, sports-related injuries, preventative care, rehabilitation of injured workers and neurological-related injuries. Net patient revenue (patient revenues less estimated contractual adjustments – described below) is recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Separate contractual arrangements exist between us and third-party payors (e.g. insurers, managed care programs, government programs, and workers’ compensation programs) which establish the amounts the third parties pay on behalf of the patients for covered services rendered. While these agreements are not considered contracts with the customer, they are used for determining the transaction price for services provided to the patients covered by the third-party payors. The payor contracts do not indicate performance obligations for us but indicate reimbursement rates for patients who are covered by those payors when the services are provided. At that time, we are obligated to provide services for the reimbursement rates stipulated in the payor contracts. The execution of the contract alone does not indicate a performance obligation. For self-paying customers, the performance obligation exists when we provide the services at established rates. The difference between our established rate and the anticipated reimbursement rate is accounted for as an offset to revenue—contractual allowance. Other Revenues Revenue derived from management agreements with physicians and hospitals is included in other revenue in the consolidated statements of net income. We do not have any ownership interest in these clinics. Typically, revenues are determined based on the number of visits conducted at the clinic and recognized at the point in time when services are performed. Costs, typically salaries for our employees, are recorded when incurred. Revenues from the IIP business, which are included in other revenues in the consolidated statements of net income, are derived from onsite services we provide to clients’ employees including injury prevention, rehabilitation, ergonomic assessments, and performance optimization. Revenue from the IIP business is recognized when obligations under the terms of the contract are satisfied. Revenues are recognized at an amount equal to the consideration we expect to receive in exchange for providing injury prevention services to our clients. The revenue is determined and recognized based on the number of hours and respective rate for services provided in a given period. Additionally, other revenue includes services we provide on-site at locations such as schools and industrial worksites for physical or occupational therapy services, athletic trainers and gym membership fees. Contract terms and rates are agreed to in advance between us and the third parties. Services are typically performed over the contract period and revenue is recorded at the point of service. If the services are paid in advance, revenue is recorded as a contract liability over the period of the agreement and recognized at the point in time when the services are performed. 45 Table of Contents We determine allowances for credit losses based on the specific agings of receivables and payor classifications at each clinic. The provision for credit losses is included in clinic operating costs in the statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and provision for credit losses, includes only those amounts we estimate to be collectible. Our provision for credit losses was 1.0% of total net revenue for each years ended December 31, 2024, 2023 and 2022, respectively. Management believes that this is reasonable because the majority of our payors consist of highly solvent, highly regulated, commercial insurance companies as well as government programs, including Medicare. Contractual Allowances Contractual allowances result from the differences between the rates charged for services performed and expected reimbursements by both insurance companies and government sponsored healthcare programs for such services. Medicare regulations and the various third-party payors and managed care contracts are often complex and may include multiple reimbursement mechanisms payable for the services provided in our clinics. We estimate contractual allowances based on our interpretation of the applicable regulations, payor contracts and historical calculations. Each month we estimate our contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and apply an appropriate contractual allowance reserve percentage to the gross accounts receivable balances for each payor of the clinic. Based on our historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow us to provide the necessary detail and accuracy with our collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from our estimates. Payor terms are periodically revised necessitating continual review and assessment of the estimates made by management. Our billing systems may not capture the exact change in our contractual allowance reserve estimate from period to period. Therefore, in order to assess the accuracy of our revenues and hence our contractual allowance reserves, our management regularly compares our cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis. In the aggregate, the historical difference between net revenues and corresponding cash collections in any given fiscal year has generally reflected a difference within approximately 1.0% to 1.5% of net revenues. Additionally, analysis of subsequent period’s contractual write-offs on a payor basis reflects a difference within approximately 1.0% to 1.5% between the actual aggregate contractual reserve percentage as compared to the estimated contractual allowance reserve percentage associated with the same period end balance. As a result, we believe that a reasonable likely change in the contractual allowance reserve estimate would not be more than 1.0% to 1.5% of gross billings in accounts receivable at December 31, 2024. For purposes of demonstrating the sensitivity of this estimate on our Company’s financial condition, a 1.0% to 1.5% increase or decrease in our aggregate contractual allowance reserve percentage would decrease or increase, respectively, net patient revenue by approximately $1.0 million to $1.5 million for the year ended December 31, 2024. Management believes the changes in the estimate of the contractual allowance reserve for the periods ended December 31, 2024, and 2023 have not been material to the statements of income. Goodwill and Other Indefinite-Lived Intangible Assets Goodwill represents the excess of the amount paid and fair value of the non-controlling interests over the fair value of the acquired business assets, which include certain identifiable intangible assets. Historically, goodwill has been derived from acquisitions and, prior to 2009, from the purchase of some or all of a particular local management’s equity interest in an existing clinic. Effective January 1, 2009, if the purchase price of a non-controlling interest by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic impairment evaluations. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditions and are written down to fair value if considered impaired. These events or conditions include but are not limited to a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating, or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. We evaluate indefinite-lived tradenames in conjunction with our annual goodwill impairment test. 46 Table of Contents Impairment of Goodwill, Other Indefinite-Lived Intangible Assets and Long-Lived Assets We operate our business through two segments consisting of our physical therapy clinics and our IIP business. For purposes of goodwill impairment analysis, each of our segments is further broken down into reporting units. Reporting units within our physical therapy business comprise of regions primarily based on each clinic’s location. In addition to the six regions, in 2024 and 2023, the IIP business consisted of two reporting units. As part of the impairment analysis, we are first required to assess qualitatively if we can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, we are then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount. In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we consider relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. We consider both the income and market approach in determining the fair value of its reporting units when performing a quantitative analysis. An impairment loss generally would be recognized when the carrying amount of the net assets of a reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit. Additionally, we review property and equipment and intangible assets with finite lives for impairment upon the occurrence of certain events or circumstances that indicate the related amounts may be impaired. We recorded a non-cash impairment charge of $2.4 million related to assets held for sale during the year-ended December 31, 2024 and $17.5 million related to a reporting unit in our IIP business during the year ended December 31, 2023. We will continue to monitor for any triggering events or other indicators of impairment. Redeemable Non-Controlling Interest The non-controlling interests that are reflected as redeemable non-controlling interest in our consolidated financial statements consist of those owners, including us, that have certain redemption rights, whether currently exercisable or not, and which currently, or in the future, require that we purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are met and the owners request the purchase (“Put Right”). We also have a call right (“Call Right”). Most of the Put Rights or Call Rights may be triggered by the owner or us, respectively, at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction, typically three to five years, as defined in the limited partnership agreement. Other Put Rights may be triggered at the discretion of the owner after a set period of time has passed. The Put Rights and Call Rights are not automatic (even upon death) and require either the owner or us to exercise our rights when the conditions triggering the Put or Call Rights have been satisfied. The purchase price is derived at a predetermined formula based on a multiple of trailing twelve months earnings performance as defined in the respective limited partnership agreements. On the date we acquire a controlling interest in a Subsidiary and the limited partnership agreement or operating agreement, as applicable, for such Subsidiary contains redemption rights not under our control, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption— Redeemable non-controlling interest . Then, in each reporting period thereafter until it is purchased by us, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial value, based on the predetermined formula defined in the respective limited partnership agreement. As a result, the value of the non-controlling interest is not adjusted below its initial value. We record any adjustment in the redemption value, net of tax, directly to retained earnings and not in the consolidated statements of net income. Although the adjustments are not reflected in the consolidated statements of net income, current accounting rules require that we reflect the adjustments, net of tax, in the earnings per share calculation. The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statement of income. We believe the redemption value (i.e. the carrying amount) and fair value are the same. 47 Table of Contents Non-Controlling Interest We recognize non-controlling interests, in which we have no obligation but the right to purchase the non-controlling interests, as equity in the consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the consolidated statements of net income. Operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner. When we purchase a non-controlling interest and the purchase differs from the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We maintain an interest rate swap arrangement which is considered a derivative instrument. Our indebtedness as of December 31, 2024, was the outstanding balance of seller notes from our acquisitions of $2.9 million, and an outstanding balance on our Credit Facilities of $151.6 million. The Revolving Facility within our Credit Facilities has a balance of $11.0 million as of December 31, 2024, and is subject to fluctuating interest rates. A 1% change in the interest rate would yield an additional $0.1 million of interest expense. See Note 11 to our consolidated financial statements included in Item 8. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND RELATED INFORMATION Reports of Independent Registered Public Accounting Firm—Grant Thornton LLP (PCAOB ID Number 248 ) 49 Audited Financial Statements: Consolidated Balance Sheets as of December 31, 2024 and 2023 52 Consolidated Statements of Net Income for the years ended December 31, 2024, 2023 and 2022 53 Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022 54 Consolidated Statements of Changes in Equity for the years ended December 31, 2024, 2023 and 2022 55 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 56 Notes to Consolidated Financial Statements 57 48 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders U.S. Physical Therapy, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of U.S. Physical Therapy, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of net income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 3, 2025 expressed an unqualified opinion. Basis for opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 49 Table of Contents Measurement of Patient Revenue Net of Contractual Adjustments As further discussed in Note 2 to the consolidated financial statements, revenues are recognized in the period in which services are rendered. Net patient revenues (patient revenues less estimated contractual adjustments) are recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. The Company has agreements with third-party payors that provide for payments at amounts different from its established rates. Each month the Company estimates its contractual adjustment for each clinic based on the terms of third-party payor contracts and the historical collection and write-off experience of the clinic and applies a contractual adjustment reserve percentage to the gross accounts receivable balances. The Company then performs a comparison of cash collections to corresponding net revenues for the prior twelve months. We identified the measurement of contractual adjustments as a critical audit matter. The principal consideration for our determination that the measurement of contractual adjustments is a critical audit matter is that the estimate requires a high degree of auditor subjectivity in evaluating management’s assumptions related to developing future collection patterns across the various clinic locations. Our audit procedures related to the Company’s measurement of contractual adjustments included the following, among others. • We tested the design and operating effectiveness of controls relating to billing and cash collections, net rate trend analysis and cash collections versus net revenue trend analysis. • For a sample of patient visits, we inspected and compared underlying documents for each transaction, which included gross billing rates and cash collected (net revenue). • For a sample of patient visits, we traced gross billings and net revenue to net revenue recorded in the general ledger and to each report used in determining and assessing the contractual adjustment calculation. • We compared cash collections to recorded net revenue for the twelve month period ended December 31, 2024 and again for the twelve month period ended in the first month subsequent to period end, to identify whether there were unusual trends that would indicate that the usage of historical collection patterns would no longer be reasonable to predict future collection patterns. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2004. Houston, Texas March 3, 2025 50 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders U.S. Physical Therapy, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of U.S. Physical Therapy, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2024, and our report dated March 3, 2025 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of MSO Metro, LLC, a consolidated subsidiary, whose financial statements reflect total assets and revenues constituting 3.6 and 1.5 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2024. As indicated in Management’s Report, MSO Metro, LLC was acquired during 2024. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of MSO Metro, LLC. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Houston, Texas March 3, 2025 51 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ( IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS ) December 31, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 41,362 $ 152,825 Patient accounts receivable, less provision for credit losses of $ 3,506 and $ 2,736 , respectively 59,040 51,866 Accounts receivable - other 26,626 17,854 Other current assets 10,555 10,830 Total current assets 137,583 233,375 Fixed assets: Furniture and equipment 68,128 63,982 Leasehold improvements 51,105 46,941 Fixed assets, gross 119,233 110,923 Less accumulated depreciation and amortization ( 87,093 ) ( 84,821 ) Fixed assets, net 32,140 26,102 Operating lease right-of-use assets 133,936 103,431 Investment in unconsolidated affiliate 12,190 12,256 Goodwill 667,152 509,571 Other identifiable intangible assets, net 179,311 109,682 Other assets 5,155 2,821 Total assets $ 1,167,467 $ 997,238 LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTEREST Current liabilities: Accounts payable - trade $ 5,936 $ 3,898 Accrued expenses 59,513 55,344 Current portion of operating lease liabilities 39,835 35,252 Current portion of term loan and notes payable 10,999 7,691 Total current liabilities 116,283 102,185 Notes payable, net of current portion 903 1,289 Revolving facility 11,000 - Term loan, net of current portion and deferred financing costs 130,627 137,702 Deferred taxes 29,465 24,815 Operating lease liabilities, net of current portion 101,868 76,653 Other long-term liabilities 18,275 2,356 Total liabilities 408,421 345,000 Redeemable non-controlling interest - temporary equity 269,025 174,828 Commitments and Contingencies U.S. Physical Therapy, Inc. (“USPH”) shareholders’ equity: Preferred stock, $ 0.01 par value, 500,000 shares authorized, no shares issued and outstanding - - Common stock, $ 0.01 par value, 20,000,000 shares authorized, 17,309,120 and 17,202,291 shares issued, respectively 172 172 Additional paid-in capital 290,321 281,096 Accumulated other comprehensive gain 2,799 2,782 Retained earnings 227,265 223,772 Treasury stock at cost, 2,214,737 shares ( 31,628 ) ( 31,628 ) Total USPH shareholders’ equity 488,929 476,194 Non-controlling interest - permanent equity 1,092 1,216 Total USPH shareholders’ equity and non-controlling interest - permanent equity 490,021 477,410 Total liabilities, redeemable non-controlling interest, USPH shareholders’ equity and non-controlling interest - permanent equity $ 1,167,467 $ 997,238 The accompanying notes are an integral part of these Consolidated Financial Statements. 52 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET INCOME ( IN THOUSANDS, EXCEPT PER SHARE AMOUNTS ) For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Net patient revenue $ 560,553 $ 514,556 $ 464,590 Other revenue 110,792 90,246 88,554 Net revenue 671,345 604,802 553,144 Operating cost: Salaries and related costs 399,394 353,390 319,191 Rent, supplies, contract labor and other 118,910 108,596 102,370 Depreciation and amortization 17,853 14,960 13,939 Provision for credit losses 6,912 6,172 5,548 Clinic closure costs - lease and other 4,355 175 72 Total operating cost 547,424 483,293 441,120 Gross profit 123,921 121,509 112,024 Corporate office costs 58,290 51,953 46,111 Impairment of goodwill and other intangible assets - 17,495 9,112 Impairment of assets held for sale 2,418 - - Operating income 63,213 52,061 56,801 Other (expense) income Interest expense, debt and other ( 8,015 ) ( 9,303 ) ( 5,779 ) Interest income from investments 3,941 3,774 - Change in fair value of contingent earn-out consideration ( 219 ) ( 1,550 ) 2,520 Change in revaluation of put-right liability ( 82 ) 2,582 ( 5 ) Equity in earnings of unconsolidated affiliate 1,014 955 1,175 Relief Funds - 467 - Other 357 390 859 Total other expense ( 3,004 ) ( 2,685 ) ( 1,230 ) Income before taxes 60,209 49,376 55,571 Provision for income taxes 14,609 12,156 12,164 Net income 45,600 37,220 43,407 Less: Net income attributable to non-controlling interest: Redeemable non-controlling interest - temporary equity ( 10,044 ) ( 4,426 ) ( 6,902 ) Non-controlling interest - permanent equity ( 4,132 ) ( 4,555 ) ( 4,347 ) ( 14,176 ) ( 8,981 ) ( 11,249 ) Net income attributable to USPH shareholders $ 31,424 $ 28,239 $ 32,158 Basic and diluted earnings per share attributable to USPH shareholders $ 1.84 $ 1.28 $ 2.25 Shares used in computation - basic and diluted 15,064 14,188 12,985 Dividends declared per common share $ 1.76 $ 1.72 $ 1.64 The accompanying notes are an integral part of these Consolidated Financial Statements. 53 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS) Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Net income $ 45,600 $ 37,220 $ 43,407 Other comprehensive income Unrealized gain (loss) on cash flow hedge 23 ( 1,642 ) 5,378 Tax effect at statutory rate (federal and state) ( 6 ) 420 ( 1,374 ) Comprehensive income $ 45,617 $ 35,998 $ 47,411 Comprehensive income attributable to non-controlling interest ( 14,176 ) ( 8,981 ) ( 11,249 ) Comprehensive income attributable to USPH shareholders $ 31,441 $ 27,017 $ 36,162 The accompanying notes are an integral part of these Consolidated Financial Statements. 54 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ( IN THOUSANDS ) U.S. Physical Therapy, Inc. Common Stock Additional Accumulated Other Retained Treasury Stock Total Shareholders’ Non-Controlling Shares Amount Paid-In Capital Comprehensive Gain Earnings Shares Amount Equity Interests Total Balance January 1, 2022 15,126 $ 151 $ 102,688 $ - $ 224,395 ( 2,215 ) $ ( 31,628 ) $ 295,606 $ 1,575 $ 297,181 Net income attributable to USPH shareholders - - - - 32,158 - - 32,158 - 32,158 Net income attributable to non-controlling interest - permanent equity - - - - - - - - 4,347 4,347 Issuance of restricted stock, net of cancellations 90 1 - - - - - 1 - 1 Revaluation of redeemable non-controlling interest - - - - ( 2,896 ) - - ( 2,896 ) - ( 2,896 ) Purchase of non-controlling interest - - ( 353 ) - - - - ( 353 ) ( 101 ) ( 454 ) Compensation expense - equity-based awards - - 7,264 - - - - 7,264 - 7,264 Transfer of compensation liability for certain stock - - 707 - - - - 707 - 707 Dividends paid to USPH shareholders - - - - ( 21,321 ) - - ( 21,321 ) - ( 21,321 ) Distributions to non-controlling interest partners - permanent equity - - - - - - - - ( 5,246 ) ( 5,246 ) Deferred taxes related to redeemable non-controlling interest - temporary equity - - - - 613 - - 613 - 613 Other comprehensive gain - - - 4,004 - - - 4,004 - 4,004 Other - - 11 - ( 1 ) - - 10 685 695 Balance December 31, 2022 15,216 $ 152 $ 110,317 $ 4,004 $ 232,948 ( 2,215 ) $ ( 31,628 ) $ 315,793 $ 1,260 $ 317,053 U.S. Physical Therapy, Inc. Common Stock Additional Accumulated Other Retained Treasury Stock Total Shareholders’ Non-Controlling Shares Amount Paid-In Capital Comprehensive Gain Earnings Shares Amount Equity Interests Total Balance January 1, 2023 15,216 $ 152 $ 110,317 $ 4,004 $ 232,948 ( 2,215 ) $ ( 31,628 ) $ 315,793 $ 1,260 $ 317,053 Net income attributable to USPH shareholders - - - - 28,239 - - 28,239 - 28,239 Net income attributable to non-controlling interest - permanent equity - - - - - - - - 4,555 4,555 Issuance of restricted stock, net of cancellations 70 - - - - - - - - - Issuance of common stock, pursuant to the secondary public offering, net of issuance costs 1,916 20 163,626 - - - - 163,646 - 163,646 Revaluation of redeemable non-controlling interest - - - - ( 13,564 ) - - ( 13,564 ) - ( 13,564 ) Compensation expense - equity-based awards - - 7,236 - - - - 7,236 - 7,236 Sale of non-controlling interest - - - - - - - - 4 4 Purchase of partnership interests - non-controlling interest - - ( 83 ) - - - - ( 83 ) ( 36 ) ( 119 ) Dividends payable to USPH shareholders - - - - ( 24,128 ) - - ( 24,128 ) - ( 24,128 ) Distributions to non-controlling interest partners - permanent equity - - - - - - - - ( 4,567 ) ( 4,567 ) Deferred taxes related to redeemable non-controlling interest - temporary equity - - - - 587 - - 587 - 587 Other comprehensive loss - - - ( 1,222 ) ( 2 ) - - ( 1,224 ) - ( 1,224 ) Other - - - - ( 308 ) - - ( 308 ) - ( 308 ) Balance December 31, 2023 17,202 $ 172 $ 281,096 $ 2,782 $ 223,772 ( 2,215 ) $ ( 31,628 ) $ 476,194 $ 1,216 $ 477,410 U.S. Physical Therapy, Inc. Common Stock Additional Accumulated Other Retained Treasury Stock Total Shareholders’ Non-Controlling Shares Amount Paid-In Capital Comprehensive Loss Earnings Shares Amount Equity Interests Total Balance January 1, 2024 17,202 $ 172 $ 281,096 $ 2,782 $ 223,772 ( 2,215 ) $ ( 31,628 ) $ 476,194 $ 1,216 $ 477,410 Net income attributable to USPH shareholders - - - - 31,424 - - 31,424 - 31,424 Net income attributable to non-controlling interest - permanent equity - - - - - - - - 4,132 4,132 Issuance of restricted stock, net of cancellations 107 - 1,500 - - - - 1,500 - 1,500 Issuance of common stock, pursuant to the secondary public offering, net of issuance costs - - - - - - - - - - Revaluation of redeemable non-controlling interest - - - - ( 4,964 ) - - ( 4,964 ) - ( 4,964 ) Compensation expense - equity-based awards - - 7,656 - - - - 7,656 - 7,656 Sale of non-controlling interest - - 229 - - - - 229 - 229 Purchase of partnership interests - non-controlling interest - - ( 760 ) - - - - ( 760 ) ( 124 ) ( 884 ) Dividends payable to USPH shareholders - - - - ( 26,540 ) - - ( 26,540 ) - ( 26,540 ) Distributions to non-controlling interest partners - permanent equity - - - - - - - - ( 4,133 ) ( 4,133 ) Deferred taxes related to redeemable non-controlling interest - temporary equity - - - - 540 - - 540 - 540 Other comprehensive gain - - - 17 - - - 17 - 17 Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans - - 600 - - - - 600 - 600 Transfer of RNCI due to separation agreement - - - - 3,033 - - 3,033 - 3,033 Other - - - - - - - - 1 1 Balance December 31, 2024 17,309 $ 172 $ 290,321 $ 2,799 $ 227,265 ( 2,215 ) $ ( 31,628 ) $ 488,929 $ 1,092 $ 490,021 The accompanying notes are an integral part of these Consolidated Financial Statements . 55 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ( IN THOUSANDS ) Year Ended December 31, 2024 December 31, 2023 December 31, 2022 OPERATING ACTIVITIES Net income including non-controlling interest $ 45,600 $ 37,220 $ 43,407 Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: Depreciation and amortization 18,681 15,695 14,743 Provision for credit losses 6,912 6,172 5,548 Equity-based awards compensation expense 7,823 7,236 7,264 Amortization of debt issue costs 422 420 305 Change in deferred income taxes 5,365 4,490 4,309 Change in revaluation of put-right liability 82 ( 2,582 ) 5 Change in fair value of contingent earn-out consideration 219 1,550 ( 2,520 ) Equity of earnings in unconsolidated affiliate ( 1,014 ) ( 955 ) ( 1,175 ) Loss (gain) on sale of clinics and fixed assets 836 166 ( 643 ) Impairment of goodwill and other intangible assets - 17,495 9,112 Impairment of assets held for sale 2,418 - - Other - - ( 83 ) Changes in operating assets and liabilities: Increase in patient accounts receivable ( 5,346 ) ( 5,645 ) ( 10,279 ) Increase in accounts receivable - other ( 6,548 ) ( 356 ) ( 307 ) Increase in other current and long term assets ( 818 ) ( 197 ) ( 5,940 ) Decrease (increase) in accounts payable and accrued expenses 1,713 15 ( 7,755 ) (Increase) decrease in other long-term liabilities ( 1,405 ) 1,254 2,546 Net cash provided by operating activities 74,940 81,978 58,537 INVESTING ACTIVITIES Purchase of fixed assets ( 9,186 ) ( 9,294 ) ( 8,248 ) Purchase of majority interest in businesses, net of cash acquired ( 133,087 ) ( 26,582 ) ( 59,788 ) Purchase of redeemable non-controlling interest, temporary equity ( 8,052 ) ( 10,986 ) ( 14,987 ) Purchase of non controlling interest, permanent equity ( 1,004 ) ( 281 ) ( 280 ) Proceeds on sale of non-controlling interest, permanent equity 26 102 - Proceeds on sale of partnership interest - redeemable non-controlling interest, temporary equity 79 875 402 Distributions from unconsolidated affiliate 1,080 830 1,259 Proceeds on sale of partnership interest, clinics and fixed assets - - 373 Other 694 321 - Net cash used in investing activities ( 149,450 ) ( 45,015 ) ( 81,269 ) FINANCING ACTIVITIES Proceeds from issuance of common stock pursuant to the secondary public offering, net of issuance costs - 163,646 - Proceeds from revolving facility 19,000 24,000 101,000 Distributions to non-controlling interest, permanent and temporary equity ( 14,711 ) ( 16,100 ) ( 15,348 ) Cash dividends paid to shareholders ( 26,540 ) ( 24,128 ) ( 21,321 ) Payments on revolving facility ( 8,000 ) ( 55,000 ) ( 184,000 ) Principal payments on notes payable ( 2,952 ) ( 4,400 ) ( 930 ) Payments on term loan ( 3,750 ) ( 3,750 ) ( 1,875 ) Proceeds from term loan - - 150,000 Payment of deferred financing costs - - ( 1,779 ) Other - - 12 Net cash (used in) provided by financing activities ( 36,953 ) 84,268 25,759 Net (decrease) increase in cash and cash equivalents ( 111,463 ) 121,231 3,027 Cash and cash equivalents - beginning of period 152,825 31,594 28,567 Cash and cash equivalents - end of period $ 41,362 $ 152,825 $ 31,594 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Income taxes $ 4,832 $ 4,926 $ 7,615 Interest paid 7,209 8,655 5,687 Non-cash investing and financing transactions during the period: Purchase of businesses - seller financing portion 2,060 1,815 1,574 Liabilities assumed associated with a purchase of a business 670 524 - Fair market value of initial contingent consideration related to purchase of businesses 17,672 200 3,357 Notes payable related to purchase of redeemable non-controlling interest, temporary equity 71 1,087 1,074 Notes payable related to the purchase of non-controlling interest, permanent equity - 200 296 Notes receivable related to sale of redeemable non-controlling interest 1,890 4,136 1,580 Notes receivable related to the sale of non-controlling interest, permanent equity 282 458 - Offset to notes receivable associated with purchase of redeemable non-controlling interest 726 - - Issuance of restricted stock related to purchase of business 1,500 - - The accompanying notes are an integral part of these Consolidated Financial Statements. 56 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2024, 2023 and 2022 1. Organization, Nature of Operations and Basis of Presentation The consolidated financial statements include the accounts of U.S. Physical Therapy, Inc., its subsidiaries, and variable interest entities for which the Company has determined it is the primary beneficiary (the “Company”). All significant intercompany transactions and balances have been eliminated. The Company operates its business through two reportable business segments. The Company’s reportable segments include the physical therapy operations segment and the industrial injury prevention services (“IIP”) segment. The Company’s physical therapy 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 the IIP segment include onsite injury prevention and rehabilitation, performance optimization and ergonomic assessments. During the last three years, the Company completed the acquisitions of the following clinic practices and IIP businesses detailed below: % Interest Number of Acquisition Date Acquired Clinics November 2024 Acquisition November 30, 2024 75 % 8 October 2024 Acquisition October 31, 2024 50 % 50 August 2024 Acquisition August 31, 2024 70 % 8 April 2024 Acquisition April 30, 2024 ** * March 2024 Acquisition March 29, 2024 50 % 9 October 2023 Acquisition October 31, 2023 *** * September 2023 Acquisition 1 September 29, 2023 70 % 4 September 2023 Acquisition 2 September 29, 2023 70 % 1 July 2023 Acquisition July 31, 2023 70 % 7 May 2023 Acquisition May 31, 2023 45 % 4 February 2023 Acquisition February 28, 2023 80 % 1 November 2022 Acquisition November 30, 2022 80 % 13 October 2022 Acquisition October 31, 2022 60 % 14 September 2022 Acquisition September 30, 2022 80 % 2 August 2022 Acquisition August 31, 2022 70 % 6 March 2022 Acquisition March 31, 2022 70 % 6 * IIP business. ** On April 30, 2024, one of our IIP businesses, Briotix Health Limited Partnership, acquired 100 % of an IIP business. *** On October 31, 2023, we concurrently acquired 100 % of an IIP business and a 55 % equity interest in an ergonomics software business. Besides the multi-clinic acquisitions referenced in the table above, during 2024 and 2023, the Company purchased the assets and businesses of eight and nine physical therapy clinics, respectively, in separate transactions. In May 2023, the Company completed a secondary offering of 1,916,667 shares of its common stock at an offering price of $ 90.00 per share. Upon completion of the offering, the Company received net proceeds of approximately $ 163.6 million, after deducting an underwriting discount of $ 8.6 million and recognizing related fees and expenses of $ 0.2 million. A portion of the net proceeds was used to repay the $ 35.0 million then outstanding under the Company’s credit facility while the remainder was used primarily for additional acquisitions. 57 Table of Contents 2. Significant Accounting Policies Cash Equivalents The Company maintains its cash and cash equivalents at financial institutions. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The combined account balances at several institutions typically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Management believes that this risk is not significant. Long-Lived Assets Fixed assets are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. Estimated useful lives for furniture and equipment range from three to eight years and for software purchased from three to seven years . Leasehold improvements are amortized over the shorter of the related lease term or estimated useful lives of the assets, which is generally three to five years . Goodwill and Other Indefinite-Lived Intangible Assets Goodwill represents the excess of the amount paid and fair value of the non-controlling interests over the fair value of the acquired business assets, which include certain identifiable intangible assets. Historically, goodwill has been derived from acquisitions and, prior to 2009 , from the purchase of some or all of a particular local management’s equity interest in an existing clinic. Effective January 1, 2009 , if the purchase price of a non-controlling interest by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic impairment evaluations. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditions and are written down to fair value if considered impaired. These events or conditions include but are not limited to a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating, or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. The Company evaluates indefinite-lived tradenames in conjunction with our annual goodwill impairment test and upon the occurrence of certain events and conditions mentioned above. 58 Table of Contents Impairment of Goodwill, Other Indefinite-Lived Intangible Assets and Long-Lived Assets The Company operates its business through two segments consisting of physical therapy clinics and an IIP business. For the purposes of goodwill impairment analysis, the segments are further broken down into reporting units. Reporting units within our physical therapy business are comprised of six regions primarily based on each clinic’s location. In addition to the six regions, in 2024 and 2023, the IIP business consisted of two reporting units. As part of the impairment analysis, the Company is first required to assess qualitatively if it can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, it is then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount. In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company considers relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. The Company considers both the income and market approach in determining the fair value of its reporting units when performing a quantitative analysis. An impairment loss generally would be recognized when the carrying amount of the net assets of a reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit. Additionally, the Company reviews property and equipment and intangible assets with finite lives for impairment upon the occurrence of certain events or circumstances that indicate the related amounts may be impaired. The Company recorded a non-cash impairment charge of $ 2.4 million related to assets held-for-sale (described in Note 7 , Assets Held for Sale ), of which $ 1.6 million was attributed to referral relationships, $ 0.5 million was attributed to tradename and $ 0.3 was attributed to other assets, during the year ended December 31, 2024, a non-cash impairment charge of $ 17.5 million, of which $ 15.8 million of goodwill and $ 1.7 million of tradename, during the year ended December 31, 2023 and a non-cash goodwill impairment charge of $ 9.1 million during the year ended December 31, 2022. The impairment charge during the years ended December 31, 2023 and 2022 were related to a reporting unit in the IIP business as a result of a change in the reporting unit’s current and projected operating income as well as various market inputs based on current market conditions. The Company will continue to monitor for any triggering events or other indicators of impairment. Variable interest entities A variable interest entity (“VIE”) is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support, or is structured such that its equity holders do not have power over the activities of the entity; have voting rights, as a group, that are not proportionate to their economic interests; or are not exposed to the residual losses or benefits of the entity. At the inception of a contractual agreement, the Company determines whether it holds a variable interest in a legal entity that is a VIE and whether it is the primary beneficiary of the VIE. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. If the Company concludes it is the primary beneficiary of a VIE, the Company consolidates the accounts of that VIE. The Company regularly reviews and reconsiders previous conclusions regarding whether the Company holds a variable interest in a potential VIE, the status of an entity as a VIE, and whether it is the primary beneficiary of a VIE. Investment in unconsolidated affiliates Investments in unconsolidated affiliates, in which the Company has less than a controlling interest, are accounted for under the equity method of accounting and, accordingly, are adjusted for capital contributions, distributions and the Company’s equity in net earnings or loss of the respective joint venture. 59 Table of Contents Redeemable Non-Controlling Interest The non-controlling interest that is reflected as redeemable non-controlling interest in the consolidated financial statements consists of those in which the owners and the Company have certain redemption rights, whether currently exercisable or not, and which currently, or in the future, require that the Company purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are met. The purchase price is derived at a predetermined formula based on a multiple of trailing twelve months earnings performance as defined in the respective limited partnership agreements. Most of these redemption rights can be triggered by the owner or the Company at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction, typically three to five years , as defined in the limited partnership agreement. Other redemption rights can be triggered by the owner after the passage of a certain period of time. The redemption rights are not automatic or mandatory (even upon death) and require either the owner or the Company to exercise its rights when the conditions triggering the redemption rights have been satisfied. On the date the Company acquires a controlling interest in a partnership, and the limited partnership agreement for such partnership contains redemption rights not under the control of the Company, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the ca ption—Redeemab le non-controlling interest – temporary equity. Then, in each reporting period thereafter until it is purchased by the Company, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial carrying value, based on the predetermined formula defined in the respective limited partnership agreement. As a result, the value of the non-controlling interest is not adjusted below its initial carrying value. The Company records any adjustment in the redemption value, net of tax, directly to retained earnings and are not reflected in the consolidated statements of net income. Although the adjustments are not reflected in the consolidated statements of net income, current accounting rules require that the Company reflects the adjustments, net of tax, in the earnings per share calculation. The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statements of net income. Management believes the redemption value (i.e. the carrying amount) and fair value are the same. Non-Controlling Interest The Company recognizes non-controlling interest, in which the Company has no obligation but the right to purchase the non-controlling interest, as permanent equity in the consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the statements of net income. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the non-controlling equity investment on the deconsolidation date. When the purchase price of a non-controlling interest by the Company exceeds the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Additionally, operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606. For ASC 606, there is an implied contract between us and the patient upon each patient visit. Separate contractual arrangements exist between us and third-party payors (e.g. insurers, managed care programs, government programs, workers’ compensation) which establish the amounts the third parties pay on behalf of the patients for covered services rendered. While these agreements are not considered contracts with the customer, they are used for determining the transaction price for services provided to the patients covered by the third-party payors. The payor contracts do not indicate performance obligations for us but indicate reimbursement rates for patients who are covered by those payors when the services are provided. At that time, the Company is obligated to provide services for the reimbursement rates stipulated in the payor contracts. The execution of the contract alone does not indicate a performance obligation. For self-paying customers, the performance obligation exists when we provide the services at established rates. The difference between the Company’s established rate and the anticipated reimbursement rate is accounted for as an offset to revenue — contractual allowance. Payments for services rendered are typically due 30 to 120 days after receipt of the invoice. 60 Table of Contents Patient revenue Net patient revenue consists of revenues for physical therapy and occupational therapy clinics that provide pre-and post-operative care and treatment for orthopedic related disorders, sports-related injuries, preventative care, rehabilitation of injured workers and neurological-related injuries. Net patient revenues (patient revenues less estimated contractual adjustme nts, see – Contractual Adjustments , f or additional information) ar e recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Generally, this occurs as the Company (or a physical therapist owned practice managed by the Company) provides physical and occupational therapy services, as each service provided is distinct and future services rendered are not dependent on previously rendered services. The Company has agreements with third-party payors that provide payments to the Company at amounts different from its established rates. Other Revenue Revenue from the IIP business, which is included in other revenue in the consolidated statements of net income, is derived from onsite services the Company provides to clients’ employees including injury prevention, rehabilitation, ergonomic assessments , post-offer employment testing and performance optimization. Revenue from the Company’s IIP business is recognized when obligations under the terms of the contract are satisfied. Revenues are recognized at an amount equal to the consideration the company expects to receive in exchange for providing injury prevention services to its clients. The revenue is determined and recognized based on the number of hours and respective rate for services provided in a given period. Revenue from management agreements with third-party physicians and hospitals, which is also included in other revenue, is derived from contractual arrangements whereby the Company manages a clinic for third party physicians and hospitals. The Company does not have any ownership interest in these clinics. Typically, revenue is determined based on the number of visits conducted at the clinic and recognized at a point in time when services are performed. Costs, typically salaries for the Company’s employees, are recorded when incurred. Management contract revenue was $ 9.8 million, $ 8.6 million, and $ 8.1 million for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively. Additionally, other revenue from physical therapy operations includes services the Company provides on-site at locations such as schools and industrial worksites for physical or occupational therapy services, athletic trainers and gym membership fees. Contract terms and rates are agreed to in advance between the Company and the third parties. Services are typically performed over the contract period and revenue is recorded at the point of service. If the services are paid in advance, revenue is recorded as a contract liability over the period of the agreement and recognized at the point in time, when the services are performed. Contractual Allowances The allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience. Contractual allowances result from the differences between the rates charged for services performed and expected reimbursements by both insurance companies and government sponsored healthcare programs for such services. Medicare regulations and the various third-party payors and managed care contracts are often complex and may include multiple reimbursement mechanisms payable for the services provided in Company clinics. The Company estimates contractual allowances based on its interpretation of the applicable regulations, payor contracts and historical calculations. Each month the Company estimates its contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and applies an appropriate contractual allowance reserve percentage to the gross accounts receivable balances for each payor of the clinic. Based on the Company’s historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow the Company to provide the necessary detail and accuracy with its collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from the Company’s estimates. Payor terms are periodically revised necessitating continual review and assessment of the estimates made by management. The Company’s billing system does not capture the exact change in its contractual allowance reserve estimate from period to period in order to assess the accuracy of its revenues and hence its contractual allowance reserves. Management regularly compares its cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis. In the aggregate, historically the difference between net revenues and corresponding cash collections for any fiscal year has generally reflected a difference within approximately 1 % to 1.5 % of net revenues. Additionally, analysis of subsequent periods’ contractual write-offs on a payor basis reflects a difference within approximately 1.0 % to 1.5 % between the actual aggregate contractual reserve percentage as compared to the estimated contractual allowance reserve percentage associated with the same period end balance. As a result, the Company believes that a change in the contractual allowance reserve estimate would not likely be more than 1.0 % to 1.5 % of gross billings included in accounts receivable at both December 31, 2024 and December 31, 2023. 61 Table of Contents Provision for Credit Losses The Company determines allowances for credit losses based on the specific agings and payor classifications at each clinic. The provision for credit losses is included in operating costs in the consolidated statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and provision for credit losses, includes only those amounts the Company estimates to be collectible. The Company’s accounts receivable balance, less provision for credit losses was $ 51.9 million as of December 31, 2022 and $ 46.3 million on January 1, 2022. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company records interest or penalties in interest and other expense, in the consolidated statements of net income. The Company did no t have any interest or penalties in each of the years ended December 31, 2024, 2023 and 2022. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation at the measurement date. 62 Table of Contents • Level 1 – Quoted prices in active markets for identical assets or liabilities. • Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. • Level 3 – Unobservable inputs based on the Company’s own assumptions. The carrying amounts reported in the balance sheets for cash and cash equivalents, contingent earn-out payments, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term maturity of these financial instruments. The carrying amount under the Credit Agreement approximates the fair value due to the proximity of the debt issue date and the balance sheet date and the variable component of interest on debt. The interest rate on the Credit Agreement is tied to the Secured Overnight Financing Rate (“SOFR”). The put right associated with the potential future purchase of the separate company in the November 2021 acquisition are both is also marked to fair value on a recurring basis using Level 3 inputs. The put right associated with the potential future purchase of the separate company in the IIP business is determined using a Monte Carlo simulation model utilizing unobservable inputs such as asset volatility and discount rates. The unobservable inputs in the valuation include asset volatility of 20.0 % and a discount rate of 11.6 %. The value of the put right associated with the potential future purchase of a company in the IIP business increased $ 0.1 million from $ 1.0 million on December 31, 2023 to approximately $ 1.1 million on December 31, 2024. Accordingly, the Company recognized a loss of $ 0.1 million on this change in revaluation for the twelve months ended December 31, 2024 . The Company recognized a gain of $ 2.6 million on this change in revaluation for the twelve months ended December 31, 2023. The valuations of the Company’s interest rate derivative is measured as the present value of all expected future cash flows based on SOFR-based yield curves. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty which is a Level 2 fair value measurement. The fair value of the interest rate swap on December 31, 2024, was $ 3.8 million, of which $ 1.8 million has been included within other current assets and $ 2.0 million has been included in other assets in the accompanying Consolidated Balance Sheet. The impact of the interest rate swap on the accompanying Consolidated Statements of Comprehensive Income was an unrealized gain of $ 0.1 million, net of tax for the year December 31, 2024 and a loss of $ 1.2 million, net of tax, for the year ended December 31, 2023. The consideration for some of the Company’s acquisitions includes future payments that are contingent upon the occurrence of future operational objectives being met. The Company estimates the fair value of contingent consideration obligations through valuation models designed to estimate the probability of such contingent payments based on various assumptions and incorporating estimated success rates. These fair value measurements are based on significant inputs not observable in the market. Substantial judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period. The Company determined the fair value of its contingent consideration obligations to be $ 17.6 million and $ 9.8 million on December 31, 2024, and 2023, respectively. The redemption value of redeemable non-controlling interests approximates the fair value. See Note 6 for the changes in the fair value of Redeemable non-controlling interest. Segment Reporting Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by chief operating decision makers in determining the allocation of resources and in assessing performance. The Company currently operates through two segments: physical therapy operations and industrial injury prevention services. Use of Estimates In preparing the Company’s consolidated financial statements, management makes certain estimates and assumptions, especially in relation to, but not limited to, goodwill impairment, tradenames, allocations of purchase price, allowance for receivables, tax provision and contractual allowances, that affect the amounts reported in the consolidated financial statements and related disclosures. Actual results may differ from these estimates. 63 Table of Contents Self-Insurance Program The Company utilizes a self-insurance plan for its employee group health and dental insurance coverage administered by a third party. Predetermined loss limits have been arranged with the insurance company to minimize the Company’s maximum liability and cash outlay. Accrued expenses include the estimated incurred but unreported costs to settle unpaid claims and estimated future claims. The management believes that the current accrued amounts are sufficient to pay claims arising from self-insurance claims incurred through December 31, 2024. Restricted Stock Restricted stock issued to employees and directors is subject to continued employment or continued service on the board, respectively. Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, the restrictions will lapse in equal quarterly installments during the first year after the date of grant. For those granted to officers and senior management, the restriction will lapse in equal quarterly installments during the four years following the date of grant. Compensation expense for grants of restricted stock is recognized based on the fair value per share on the date of grant amortized over the vesting period. The Company recognizes any forfeitures as they occur. The restricted stock issued is included in basic and diluted shares for the earnings per share computation. Reclassification of Prior Period Presentation Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Immaterial out of period adjustment During the fourth quarter of 2024, the Company identified an error in the calculation of the Company’s contingent consideration liability related to a certain acquisition which impacted the previously issued financial statements. The error was related to an incorrect input used in the initial valuation of the contingent consideration liability and subsequent mark-to-market remeasurements. Specifically, the error resulted in an overstatement of net income by $ 1.2 million for the year ended December 31, 2023, and an understatement of net income for the quarters ended March 31, 2024, June 30, 2024, and September 30, 2024 by $ 0.8 million, $ 4.3 million, and $ 0.6 million, respectively. The Company determined the error to be immaterial to the previously issued financial statements and corrected it as an out-of-period adjustment during the fourth quarter of 2024. Recently Adopted Accounting Guidance In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. As part of this update, convertible instruments are to be included in diluted earnings per share using the if-converted method, rather than the treasury stock method. Further, contracts which can be settled in cash or shares, excluding liability-classified share-based payment awards, are to be included in diluted earnings per share on an if-converted basis if the effect is dilutive, regardless of whether the entity or the counterparty can choose between cash and share settlement. The share-settlement presumption may not be rebutted based on past experience or a stated policy. This pronouncement was effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021. The Board specified that an entity should adopt the guidance at the beginning of its annual fiscal year. The Company adopted this pronouncement as of January 1, 2022. The use of either the modified retrospective or fully retrospective method of transition is permitted. The adoption of ASU 2020-06 did not have a material impact on the Company’s financial statements. 64 Table of Contents In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The new guidance was effective upon issuance, and the Company has elected to apply the amendments prospectively through December 31, 2022. Borrowings under the Company’s Credit Agreement bear interest based on SOFR. In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-01, Leases (Topic 842): Common Control Arrangements, which requires companies to amortize leasehold improvements associated with related party leases under common control over the useful life of the leasehold improvement to the common control group. The Company completed the adoption of ASU 2023-01 on January 1, 2024 and there was no material impact on the Company’s financial statements. In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker and included within the reported measure of segment profit or loss. In addition, the ASU requires disclosure of other segment expenses by reportable segment and a description of their composition to permit the reconciliation between segment revenue, significant segment expenses and the reported segment measure of profit or loss. The ASU also requires disclosure of the name and title of the chief operating decision maker. The Company completed the adoption of ASU 2023-07 on January 1, 2024 and there was no material impact on the Company’s segment disclosures. In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure on an annual basis, a tabular reconciliation, including both amount and percentage of specific categories of the effective tax rate reconciliation, including state and local income taxes (net of Federal taxes), foreign taxes, effects of changes in tax laws and regulations, effects of cross-border tax laws, tax credits, changes in valuation allowances, nontaxable and nondeductible items and changes in unrecognized tax benefits. Additional disclosures are required for certain items exceeding five percent of income from continuing operations multiplied by the statutory income tax rate. The standard also requires disclosure of income taxes paid between Federal, state and foreign jurisdictions, including further disaggregation of those payments exceeding five percent of the total income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company will implement this standard as of January 1, 2025, and anticipates no significant impact on its consolidated financial statements. 3. Earnings Per Share Basic and diluted earnings per share is computed using the two-class method, which is an earnings allocation method that determines earnings per share for common shares and participating securities. The restricted stock the Company grants are participating securities containing non-forfeitable rights to receive dividends. Accordingly, any unvested shares of restricted stock is included in the basic and diluted earnings per share computation. Additionally, in accordance with current accounting guidance, the revaluation of redeemable non-controlling interest (see Note 6 Redeemable Non-Controlling Interest ), net of tax, charged directly to retained earnings is included in the earnings per basic and diluted share calculation. 65 Table of Contents The table below shows the calculation of basic and diluted earnings for the periods presented. For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 (In thousands, except per share data) Computation of earnings per share - USPH shareholders: Net income attributable to USPH shareholders $ 31,424 $ 28,239 $ 32,158 Charges to retained earnings: Revaluation of redeemable non-controlling interest ( 4,964 ) ( 13,565 ) ( 3,890 ) Tax effect at statutory rate (federal and state) 1,268 3,466 994 $ 27,728 $ 18,140 $ 29,262 Earnings per share (basic and diluted) $ 1.84 $ 1.28 $ 2.25 Shares used in computation: Basic and diluted earnings per share - weighted-average shares 15,064 14,188 12,985 4. Acquisitions of Businesses The Company’s strategy is to continue acquiring and managing multi-clinic outpatient physical therapy practices, to develop outpatient physical therapy clinics as satellites in existing partnerships and to continue acquiring companies that provide and serve the IIP sector. The consideration paid for each acquisition is derived through arm’s length negotiations and funded through working capital, borrowings under the Company’s revolving credit facilities or proceeds from the secondary offering discussed in Note 1. The finalized purchase prices plus the fair value of the non-controlling interests for the acquisitions in 2023 and 2022 were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, i.e. trade names, referral relationships and non-compete agreements, and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill. For the acquisitions in 2024, the Company is in the process of completing its formal valuation analysis to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities assumed. Thus, the final allocation of the purchase price may differ from the preliminary estimates used at December 31, 2024 based on additional information obtained and completion of the valuation of the identifiable intangible assets. Changes in the estimated valuation of the tangible assets acquired, the completion of the valuation of identifiable intangible assets and the completion by the Company of the identification of any unrecorded pre-acquisition contingencies, where the liability is probable and the amount can be reasonably estimated, will likely result in adjustments to goodwill. The Company does not expect the adjustments to be material. During 2024, 2023 and 2022, the Company acquired a majority interest in the following businesses: 2024 Acquisitions % Interest Number of Acquisition Date Acquired Clinics November 2024 Acquisition November 30, 2024 75 % 8 October 2024 Acquisition October 31, 2024 50 % 50 August 2024 Acquisition August 31, 2024 70 % 8 April 2024 Acquisition April 30, 2024 ** * March 2024 Acquisition March 29, 2024 50 % 9 * IIP business ** On April 30, 2024, one of the Company’s primary IIP business , Briotix Health Limited Partnership , acquired 100 % of an IIP business. On November 30 , 2024, the Company acquired a 75 % equity interest in an eight -clinic physical therapy practice. The owner of the practice retained 25 % of the equity interests. The purchase price for the 75 % equity interest was approximately $ 15.9 million, of which $ 15.7 million was paid in cash, and $ 0.2 million was in the form of a note payable. The note accrues interest at 5.0 % per annum and the principal and interest is payable on December 1, 2026. 66 Table of Contents On October 31, 2024, the Company acquired 50 % interest in MSO Metro, LLC (“Metro”) pursuant to the Equity Interest Purchase Agreement (the “Purchase Agreement”) dated October 7, 2024 among U.S. Physical Therapy, Ltd. (a subsidiary of the Company), Metro, the members of Metro, and Michael G. Mayrsohn, as Sellers’ Representative. The Company also became the managing member of Metro. At the closing, the Company paid the purchase price of approximately $ 76.5 million, $ 75.0 million of which was funded by its cash on hand and the remaining $ 1.5 million through the issuance of 18,358 shares of the Company’s common stock based on a trailing five-day average as of the day immediately prior to closing. The shares of the Company’s common stock were issued in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act. The Purchase Agreement also includes an earnout where the sellers can earn up to another $ 20.0 million of consideration if certain performance criteria relating to the Metro business are achieved. The contingent consideration is valued at $ 11.3 million at December 31, 2024. In addition, as part of the transaction, Mr. Mayrsohn and the other owners have the right to require the Company to purchase up to 20 % of the Metro equity, commencing on the third anniversary of the Metro transaction closing. In connection with the Metro transaction, on October 2, 2024, the Company’s Board of Directors approved the appointment of Mr. Mayrsohn as a director of the Company, effective as of February 24, 2025, contingent on the completion of the Metro transaction. Subsequently, on February 24, 2025, the Company’s Board of Directors took formal action to allow Mr. Mayrsohn to focus on the integration and operations of the Metro business, and instead approved the nomination of Mr. Mayrsohn to serve on the Company’s Board of Directors and that he be included in the Proxy Statement for the Company’s Annual Meeting of Stockholders to be held on May 20, 2025. On August 31, 2024, the Company acquired a 70 % equity interest in an eight -clinic practice physical therapy and the original practice owners retained a 30 % equity interest. The purchase price for the 70 % equity interest was approximately $ 2.0 million. As part of the transaction, the Company agreed to additional contingent consideration if future operational and financial objectives are met. The maximum amount of additional contingent consideration due under this agreement is $ 3.6 million. The contingent consideration was valued at $ 3.2 million on December 31, 2024. On April 30, 2024 , the Company acquired 100 % of an IIP business through one of its primary IIP businesses, Briotix Health Limited Partnership, for a purchase price of approximately $ 24.0 million, of which $ 0.5 million was in the form of a note payable. The note accrues interest at 5.0 % per annum and the principal and the interest are payable on May 1, 2025. As part of the transaction, the Company agreed to additional contingent consideration if future operational objectives are met by the business. The maximum amount of additional contingent consideration due under this agreement is $ 10.0 million. The contingent consideration was valued at $ 2.5 million as of December 31, 2024. On March 29, 2024, the Company acquired a 50 % equity interest in a nine -clinic physical therapy and hand therapy practice (“March 2024 Acquisition”) . The original owners of the practice retained the remaining 50 %. The purchase price for the 50 % equity interest was approximately $ 16.4 million, of which $ 0.5 million was in the form of a note payable. The note accrues interest at 4.5 % per annum and the principal and the interest are payable on March 29, 2026. As part of the transaction, the Company agreed to additional contingent consideration if future operational and financial objectives are met. There is no maximum payout. The contingent consideration was valued at $ 0.2 million on December 31, 2024. 67 Table of Contents The purchase prices for the 2024 acquisitions have been preliminarily allocated as follows. For the Year Ended December 31 , 2024 Physical Therapy IIP Operations Total (In thousands) Cash paid, net of cash acquired $ 23,106 $ 109,981 $ 133,087 Seller note 455 1,220 1,675 Granted shares - 1,500 1,500 Contingent payments 2,100 15,571 17,671 Total consideration $ 25,661 $ 128,272 $ 153,933 Estimated fair value of net tangible assets acquired: Total current assets $ 1,211 $ 9,691 $ 10,902 Total non-current assets 218 31,109 31,327 Total liabilities ( 541 ) ( 28,502 ) ( 29,043 ) Net tangible assets acquired 888 12,298 13,186 Customer and referral relationships 6,708 54,018 60,726 Non-compete agreement 261 3,293 3,554 Tradenames 1,331 12,310 13,641 Goodwill 16,473 148,056 164,529 Fair value of non-controlling interest (classified as redeemable non-controlling interest) - ( 101,703 ) ( 101,703 ) $ 25,661 $ 128,272 $ 153,933 Total current assets primarily represent accounts receivable while total non-current assets consist of fixed assets and equipment used in the practice. For the acquisitions in 2024, the values assigned to the customer and referral relationships and non-compete agreement are being amortized on a straight-line basis over their respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 12.0 years. For the non-compete agreements, the weighted-average amortization period is 5.0 years. The values assigned to tradenames are tested annually for impairment. Following are the supplemental consolidated financial results of U.S. Physical Therapy Inc. on an unaudited pro forma basis , as if the 2024 acquisitions had been consummated on January 1 , 2023. For the Year Ended December 31 , 2024 December 31 , 2023 (In thousands) Net revenue $ 763,954 $ 678,743 Net income $ 52,927 $ 42,421 These pro forma results were based on estimates and assumptions which the Company believes are reasonable. They are not necessarily indicative of the Company ’ s consolidated results of operations in future periods. The pro forma results include adjustments related to purchase accounting , primarily amortization of intangible assets, and other adjustments which are included in the earliest period presented. Variable Interest Entities During 2024 , the Company acquired interests in the March 2024 Acquisition and Metro and paid the purchase prices of approximately $ 16.4 million and $ 76.5 million, respectively, as of the dates and to the extent below. Acquisition Date % Interest Acquired Number of Clinics Metro October 31, 2024 50 % 50 March 2024 Acquisition March 29, 2024 50 % 9 The Company’s acquisitions include future payments that are contingent upon the occurrence of future operational objectives being met. The Company estimates the fair value of contingent consideration obligations through valuation models designed to estimate the probability of such contingent payments based on various assumptions and incorporating estimated success rates. These fair value measurements are based on significant inputs not observable in the market. Substantial judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. The Company determined the fair value of its contingent consideration obligation to be $ 11.3 million and $ 0.2 million for MSO Metro LLC and the March 2024 Acquisition , at December 31, 2024 respectively. 68 Table of Contents The Company determined that these entities are variable interest entities and that it is the primary beneficiary of these VIEs. The Company consolidates the VIEs since it controls the management and operating activities that are most significant to the VIEs’ economic performance and its ownership interests expose the Company to the risks and benefits that could potentially be significant to each VIE. The assets of the VIEs recognized in consolidation may only be used to settle obligations of each respective VIE and may not be used to satisfy claims of the Company , and the creditors of each VIE do not have recourse to the Company ’s general credit. The following table presents the assets and liabilities of the Company’s VIEs as of December 31 , 2024, excluding intercompany balances that are eliminated in consolidation. Assets and liabilities of the VIEs: December 31 , 2024 (In thousands) Current assets $ 9,660 Non-current assets 36,523 Total assets $ 46,183 Current liabilities $ 5,321 Non-current liabilities 28,817 Total liabilities $ 34,138 69 Table of Contents Operating results of the VIEs For the Year Ended December 31 , 2024 (In thousands) Net revenue $ 19,138 Operating cost: Salaries and related costs 11,903 Rent , supplies, contract labor and other 4,883 Provision for credit losses 188 Total operating cost 16,974 Gross profit 2,164 Other expense 3 Income before taxes $ 2,161 2023 Acquisitions % Interest Number of Acquisition Date Acquired Clinics October 2023 Acquisition October 31, 2023 ** * September 2023 Acquisition 1 September 29, 2023 70 % 4 September 2023 Acquisition 2 September 29, 2023 70 % 1 July 2023 Acquisition July 31, 2023 70 % 7 May 2023 Acquisition May 31, 2023 45 % 4 February 2023 Acquisition February 28, 2023 80 % 1 * IIP business ** On October 31, 2023, the Company concurrently acquired 100 % of an IIP business and a 55 % equity interest in the ergonomics software business (“October 2023 Acquisition”). On October 31, 2023, the Company concurrently acquired 100 % of an IIP business and a 55 % equity interest in the ergonomics software business. The previous owner of the ergonomics software business retained a 45 % equity interest. The total purchase price of the combined businesses was approximately $ 4.0 million and was paid in cash. On September 29, 2023, the Company acquired a 70 % equity interest in a four -clinic physical therapy practice. The owner of the practice retained 30 % of the equity interests. The purchase price for the 70 % equity interest was approximately $ 6.0 million, of which $ 5.4 million was paid in cash, and $ 0.6 million was in the form of a note payable. The note accrues interest at 5.0 % per annum and the principal and interest are payable in two installments. The first payment of principal and interest of $ 0.3 million was paid in January 2024, and the second installment of $ 0.3 million is due on September 30, 2025. In a separate transaction, on September 29, 2023, the Company acquired a 70 % equity interest in a single clinic physical therapy practice. The owner of the practice retained 30 % of the equity interests. The purchase price for the 70 % equity interest was approximately $ 7.8 million, of which $ 7.4 million was paid in cash and $ 0.4 million is a deferred payment due on June 30, 2025. On July 31, 2023, the Company acquired a 70 % equity interest in a five -clinic practice. The practice’s owners retained a 30 % equity interest. The purchase price for the 70 % equity interest was approximately $ 2.1 million, of which $ 1.8 million was paid in cash and $ 0.3 million is a deferred payment due on June 30, 2025. 70 Table of Contents On May 31, 2023, the Company and a local partner together acquired a 75 % interest in a four -clinic physical therapy practice. After the transaction, the Company’s ownership interest is 45 %, the Company’s local partner’s ownership interest is 30 %, and the practice’s pre-acquisition owners have a 25 % ownership interest. The purchase price for the 75 % equity interest was approximately $ 3.1 million, of which $ 1.7 million was paid in cash by the Company, $ 1.1 million was paid in cash by the local partner, and $ 0.3 million was in the form of a note payable. The note was paid in full on July 1, 2024 ($ 0.2 million was paid by the Company and $ 0.1 million was paid by the local partner). On February 28, 2023, the Company acquired an 80 % interest in a one -clinic physical therapy practice. The practice’s owners retained 20 % of the equity interests. The purchase price for the 80 % equity interest was approximately $ 6.2 million, of which $ 5.8 million was paid in cash and $ 0.4 million in the form of a note payable. The note accrues interest at 4.5 % per annum and the principal and interest were paid on February 28, 2025. The purchase prices for the 2023 acquisitions has been allocated as follows. For the Year Ended December 31, 2023 Physical Therapy IIP Operations Total (In thousands) Cash paid, net of cash acquired $ 3,955 $ 22,627 $ 26,582 Seller note - 985 985 Deferred payments - 830 830 Contingent payments - 200 200 Total consideration $ 3,955 $ 24,642 $ 28,597 Estimated fair value of net tangible assets acquired: Total current assets $ 392 $ 1,141 $ 1,533 Total non-current assets 335 3,149 3,484 Total liabilities ( 41 ) ( 3,163 ) ( 3,204 ) Net tangible assets acquired 686 1,127 1,813 Customer and referral relationships 757 6,819 7,576 Non-compete agreement 37 329 366 Tradenames 187 1,680 1,867 Goodwill 2,562 25,521 28,083 Fair value of non-controlling interest (classified as redeemable non-controlling interest) ( 274 ) ( 10,834 ) ( 11,108 ) $ 3,955 $ 24,642 $ 28,597 2022 Acquisitions % Interest Number of Acquisition Date Acquired Clinics November 2022 Acquisition November 30, 2022 80 % 13 October 2022 Acquisition October 31, 2022 60 % 14 September 2022 Acquisition September 30, 2022 80 % 2 August 2022 Acquisition August 31, 2022 70 % 6 March 2022 Acquisition March 31, 2022 70 % 6 On November 30, 2022, the Company acquired an 80 % interest in a thirteen -clinic physical therapy practice. The practice’s owners retained 20 % of the equity interests. The purchase price for the 80 % equity interest was approximately $ 25.0 million, of which $ 24.2 million was paid in cash and $ 0.8 million in the form of a note payable. The note accrues interest at 7.0 % per annum and the principal and interest was paid on November 30, 2024. As part of the acquisition, the Company agreed to additional contingent consideration of up to $ 1.6 million if future operational objectives were met. The future operational objectives were not met, and no additional payment was made. On October 31, 2022, the Company acquired a 60 % interest in a fourteen -clinic physical therapy practice. The practice’s owners retained 40 % of the equity interests. The purchase price for the 60 % equity interest was approximately $ 19.5 million, with additional contingent consideration if certain future operational objectives were met. The Company paid $ 9.7 million of additional contingent consideration related to this transaction on December 10, 2024. 71 Table of Contents On September 30, 2022, the Company acquired an 80 % interest in a two -clinic physical therapy practice. The practice’s owners retained 20 % of the equity interests. The purchase price for the 80 % equity interest was approximately $ 4.2 million, of which $ 3.9 million was paid in cash and $ 0.3 million in the form of a note payable. The note accrues interest at 5.5 % per annum and the principal and interest were paid on September 30, 2024. On August 31, 2022, the Company acquired 70 % interest in a six -clinic physical therapy practice. The practice’s owners retained 30 % of the equity interests. The purchase price for the 70 % equity interest was approximately $ 3.5 million, of which $ 3.3 million was paid in cash and $ 0.2 million in the form of a note payable. The note accrues interest at 5.5 % per annum and the principal and interest were paid on August 31, 2024. On March 31, 2022, the Company acquired a 70 % interest in a six -clinic physical therapy practice. The practice’s owners retained 30 % of the equity interests. 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 were paid on March 31, 2024. The purchase price for the 2022 acquisitions has been allocated as follows. Physical Therapy Operations (In thousands) Cash paid, net of cash acquired $ 59,788 Seller notes 1,574 Contingent payments 10,000 Total consideration $ 71,362 Estimated fair value of net tangible assets acquired: Total current assets $ 1,329 Total non-current assets 7,798 Total liabilities ( 10,930 ) Net tangible assets acquired ( 1,803 ) Customer and referral relationships 18,062 Non-compete agreements 934 Tradenames 5,445 Goodwill 75,525 Fair value of non-controlling interest (classified as redeemable non-controlling interest) ( 26,801 ) $ 71,362 Total current assets primarily represent accounts receivable while total non-current assets consist of fixed assets and equipment used in the practice. The purchase price plus the fair value of the non-controlling interests for the acquisitions in 2022 were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, (i.e. trade names, referral relationships and non-compete agreements) and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill. For the acquisitions in 2022, the values assigned to the customer and referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 12.2 years. For non-compete agreements, the weighted-average amortization period is 5.0 years. The values assigned to tradenames are tested annually for impairment. 5. Acquisitions and Sales of Non-Controlling Interests During 2024, the Company acquired additional interests in partnerships which are included in non-controlling interests - permanent equity. The additional interests purchased in each of the partnerships ranged from 0.1 % to 35.0 %. The aggregated purchase price for acquired non-controlling interests – permanent equity was $ 0.8 million. The Company also sold interests in six partnerships for an aggregate price of $ 0.3 million. The non-controlling interests - permanent equity sold in each of the partnerships ranged from 0.15 % to 10.0 %. 72 Table of Contents During 2023, the Company acquired additional interests in three partnerships which are included in non-controlling interests - permanent equity. The additional interests purchased in each of the partnerships ranged from 0.15 % to 35.0 %. The aggregated purchase price for these acquired interests was $ 0.5 million. The Company also sold interests in four partnerships for an aggregate price of $ 0.6 million. The non-controlling interests - permanent equity sold in each of the partnerships ranged from 0.5 % to 8.0 %. During 2022, the Company acquired additional interests in three partnerships which are included in non-controlling interest. The additional interests purchased in each of the partnerships ranged from 10 % to 35 %. The aggregated purchase price for these acquired interests was $ 0.3 million. 6. Redeemable Non-Controlling Interest In most of the Company’s acquired partnerships, the former practice owner retains an equity interest in our subsidiary which the Company is required to purchase upon the exercise of either the put right or the call right. The applicable purchase price is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets. The terms and conditions regarding repurchase rights and obligations for most of the redeemable con-controlling interests, are summarized below under “Physical Therapy Practice Acquisitions”. However, the Company has an agreement that provides for different rights and obligations regarding the particular redeemable non-controlling interests involved in that agreement – described below under “ProgressiveHealth Acquisition”. Physical Therapy Practice Acquisitions When the Company acquires a majority interest (the “Acquisition”) in a physical therapy clinic (referred to as “Therapy Practice”), these Therapy Practice transactions typically occur in a series of steps which are described below. 1. Prior to the Acquisition, the Therapy Practice exists as a separate legal entity (the “Seller Entity”). The Seller Entity is owned by one or more individuals (the “Selling Shareholders”) most of whom are physical therapists that work in the Acquired Therapy Practice and provide physical therapy services to patients. 2. In conjunction with the Acquisition, the Seller Entity contributes the acquired Therapy Practice into a newly-formed limited partnership (“NewCo”), in exchange for one hundred percent ( 100 %) of the limited and general partnership interests in NewCo. Therefore, in this step, NewCo becomes a wholly-owned subsidiary of the Seller Entity. 3. The Company enters into an agreement (the “Purchase Agreement”) to acquire from the Seller Entity a majority (ranges from 50 % to 90 %) of the limited partnership interest and in all cases 100 % of the general partnership interest in NewCo . The Company does not purchase 100 % of the limited partnership interest because the Selling Shareholders, through the Seller Entity, want to maintain an ownership percentage. The consideration for the Acquisition is primarily payable in the form of cash at closing and a two-year note in lieu of an escrow (the “Purchase Price”). In some of the acquired therapy practice transactions, the Purchase Agreement contains an earn-out or other contingent consideration that is payable to the Seller Entity or the Selling Shareholders. 4. The Company and the Seller Entity also execute a partnership agreement (the “Partnership Agreement”) for NewCo that sets forth the rights and obligations of the limited and general partners of NewCo. After the Acquisition, the Company is the general partner of NewCo. 5. As noted above, the Company does not purchase 100% of the limited partnership interests in NewCo and the Seller Entity retains a portion of the limited partnership interest in NewCo (“Seller Entity Interest”). 6. In most cases, some or all of the Selling Shareholders enter into an employment agreement (the “Employment Agreement”) with NewCo with an initial term that ranges from three to five years (the “Employment Term”), with automatic one-year renewals, unless employment is terminated prior to the end of the Employment Term. As a result, a Selling Shareholder becomes an employee (“Employed Selling Shareholder”) of NewCo. The employment of an Employed Selling Shareholder can be terminated by the Employed Selling Shareholder or NewCo, with or without cause, at any time. In a few situations, a Selling Shareholder does not become employed by NewCo and is not involved with NewCo following the closing; in those situations, such Selling Shareholders sell their entire ownership interest in the Seller Entity as of the closing of the Acquisition. 73 Table of Contents 7. The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities based on other employees in similar capacities within NewCo, the Company and the industry. 8. The Company and the Selling Shareholder (including both Employed Selling Shareholders and Selling Shareholders not employed by NewCo) execute a non-compete agreement (the “Non-Compete Agreement”) which restricts the Selling Shareholder from engaging in competing Therapy Practice activities for a specified period of time (the “Non-Compete Term”). A Non-Compete Agreement is executed with the Selling Shareholders in all cases. That is, even if the Selling Shareholder does not become an Employed Selling Shareholder, the Selling Shareholder is restricted from engaging in a competing Therapy Practice during the Non-Compete Term. 9. The Non-Compete Term commences as of the date of the Acquisition and typically expires on the later of: a. Two years after the date an Employed Selling Shareholders’ employment is terminated (if the Selling Shareholder becomes an Employed Selling Shareholder) or b. Five to six years from the date of the Acquisition, as defined in the Non-Compete Agreement, regardless of whether the Selling Shareholder is employed by NewCo. 10. The Non-Compete Agreement applies to a restricted region which is defined as a mileage radius from the Acquired Therapy Practice. That is, an Employed Selling Shareholder is permitted to engage in competing Therapy Practices or activities outside the designated geography (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholder who is not employed by NewCo immediately is permitted to engage in the competing Therapy Practice or activities outside the designated geography. The Partnership Agreement contains provisions for the redemption of the Seller Entity Interest, either at the option of the Company (the “Call Right”) or at the option of the Seller Entity (the “Put Right”) as follows: 1. Put Right a. In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to a specified number of years following the Closing Date, the Seller Entity thereafter may have an irrevocable right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below. b. In the event that any Selling Shareholder is not employed by NewCo as of the specified date and the Company has not exercised its Call Right with respect to the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, Seller Entity thereafter has the Put Right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below. c. In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the specified date, the Seller Entity has the Put Right, and upon the exercise of the Put Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below. 74 Table of Contents 2. Call Right a. If any Selling Shareholder’s employment by NewCo is terminated prior to the specified date after the Closing Date, the Company thereafter has an irrevocable right to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, in each case at the purchase price described in “3” below. b. In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the specified date, the Company has the Call Right, and upon the exercise of the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below. 3. For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”). NewCo’s earnings are distributed monthly based on available cash within NewCo; therefore, the undistributed earnings amount is small, if any. 4. The Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that is used in the Put Right and the Call Right noted above. 5. The Put Right and the Call Right do not have an expiration date. The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling Shareholders sell their entire ownership interest in the Seller Entity at the closing of the Acquisition. An Employed Selling Shareholder’s ownership of his or her equity interest in the Seller Entity predates the Acquisition and the Company’s purchase of its partnership interest in NewCo. The Employment Agreement and the Non-Compete Agreement do not contain any provision to escrow or “claw back” the equity interest in the Seller Entity held by such Employed Selling Shareholder, nor the Seller Entity Interest in NewCo, in the event of a breach of the employment or non-compete terms. More specifically, even if the Employed Selling Shareholder is terminated for “cause” by NewCo, such Employed Selling Shareholder does not forfeit his or her right to his or her full equity interest in the Seller Entity and the Seller Entity does not forfeit its right to any portion of the Seller Entity Interest. The Company’s only recourse against the Employed Selling Shareholder for breach of either the Employment Agreement or the Non-Compete Agreement is to seek damages and other legal remedies under such agreements. There are no conditions in any of the arrangements with an Employed Selling Shareholder that would result in a forfeiture of the equity interest held in the Seller Entity or of the Seller Entity Interest. 75 Table of Contents Carrying Amounts of Redeemable Non-Controlling Interests For the years ended December 31, 2024, 2023 and 2022, the following table details the changes in the carrying amount (fair value) of the redeemable non-controlling interests. For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 (In thousands) Beginning balance $ 174,828 $ 167,515 $ 155,262 Net income allocated to redeemable non-controlling interest 10,044 4,426 6,902 Distributions to redeemable non-controlling interest partners ( 10,579 ) ( 11,533 ) ( 10,102 ) Changes in the fair value of redeemable non-controlling interest 4,964 13,565 3,862 Purchases of redeemable non-controlling interest ( 8,122 ) ( 12,073 ) ( 16,061 ) Acquired interest 100,336 11,007 26,746 Contributed capital - - 231 Sales of redeemable non-controlling interest 1,969 5,012 1,982 Changes in notes receivable related to redeemable non-controlling interest ( 1,016 ) ( 3,091 ) ( 1,901 ) Reduction due to separation agreement ( 3,033 ) - - Adjustments in notes receivables related to the sales of redeemable non-controlling interest ( 366 ) - 594 Ending balance $ 269,025 $ 174,828 $ 167,515 The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interests. As of the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 (In thousands) Contractual time period has lapsed but holder’s employment has not terminated $ 74,668 $ 96,876 $ 75,688 Contractual time period has not lapsed and holder’s employment has not terminated 194,357 77,952 91,827 Holder’s employment has terminated and contractual time period has expired - - - Holder’s employment has terminated and contractual time period has not expired - - - $ 269,025 $ 174,828 $ 167,515 7. Assets Held for Sale In December 2024, the Company signed a non-binding Letter of Intent to sell an underperforming business unit within the physical therapy operations segment. The decision to divest was based on performance considerations and strategic realignment. As of December 31, 2024, the business unit met the criteria for classification as held for sale under ASC 360. A $ 2.4 million impairment charge was recorded to write down the disposal group’s carrying value to fair value, less estimated costs to sell. The impairment was included in Impairment of assets held for sale on the consolidated statements of net income. The impairment charges primarily related to intangible assets. Assets held for sale were valued at $ 0.6 million on December 31, 2024, and have been presented within other current assets in the accompanying balance sheets. The transaction closed in February 2025 and the financial impact will be recognized accordingly. 8. Goodwill The changes in the carrying amount of goodwill consisted of the following. For the Year Ended December 31, 2024 December 31, 2023 (In thousands) Beginning balance $ 509,571 $ 494,101 Acquisitions 164,529 28,083 Adjustments for purchase price allocation of businesses acquired in prior year ( 6,551 ) 3,187 Impairment charges - ( 15,800 ) Other ( 397 ) - Ending balance $ 667,152 $ 509,571 The Company recorded a charge for goodwill impairment of $ 15.8 million during the year ended December 31, 2023 related to a unit in the IIP business. 76 Table of Contents 9. Intangible Assets, net The Company’s intangible assets, net, consisted of the following. As of the Year Ended December 31, 2024 December 31, 2023 Gross Amount Accumulated Amortization Net Carrying Amount Gross Amount Accumulated Amortization Net Carrying Amount (In thousands) Customer and referral relationships $ 156,747 $ ( 39,218 ) $ 117,529 $ 93,658 $ ( 30,414 ) $ 63,244 Tradenames 57,041 - 57,041 44,573 - 44,573 Non-compete agreements 13,077 ( 8,336 ) 4,741 9,459 ( 7,594 ) 1,865 $ 226,865 $ ( 47,554 ) $ 179,311 $ 147,690 $ ( 38,008 ) $ 109,682 Tradenames, customer and referral relationships and non-compete agreements are related to the businesses acquired. The value assigned to tradenames has an indefinite life and is tested at least annually for impairment using the relief from royalty method in conjunction with the Company’s annual goodwill impairment test. The value assigned to customer and referral relationships is being amortized over their respective estimated useful lives which range from 6 to 15 years . Non-compete agreements are amortized over the respective terms of the agreements which range from 5 to 6 years . The weighted average amortization period for customer and referral relationships was 12.9 years for the year ended December 31, 2024 and 12.7 years for the year ended December 31, 2023. The weighted average amortization period for non-compete agreements was 5.3 years for the years ended December 31, 2024, and 5.6 years for December 31, 2023. During the year ended December 31, 2024, the Company recognized charges of $ 2.0 million related to the impairment of assets held for sale. During the year ended December 31, 2023, the Company recognized a charge of $ 1.7 million related to the impairment of a tradename related to an IIP acquisition. These impairment losses are presented in the impairment of goodwill and other intangible assets and impairment of assets held for sale in the Consolidated Statements of Income. The following table details the amount of amortization expense recorded for intangible assets for the periods presented. For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 (In thousands) Customer and referral relationships $ 8,804 $ 6,678 $ 5,974 Non-compete agreements 742 595 549 $ 9,546 $ 7,273 $ 6,523 The remaining balances of the customer and referral relationships and non-compete agreements are expected to be amortized as follows. For the Year Ending December 31, Customer and Referral Relationships Non-Compete Agreements (In thousands) 2025 $ 11,878 $ 1,133 2026 11,409 995 2027 11,246 869 2028 10,978 790 2029 10,599 584 Thereafter $ 61,419 $ 370 77 Table of Contents 10. Accrued Expenses Accrued expenses consisted of the following for the periods presented. As of the Year Ended December 31, 2024 December 31, 2023 (In thousands) Salaries and related costs $ 34,886 $ 25,641 Credit balances due to patients and payors 6,359 8,847 Group health insurance claims 2,462 2,301 Federal income taxes payable 4,544 1,006 Contingency payable 3,043 12,285 Other property taxes payable 371 355 Interest payable 402 235 Closure costs 2,828 231 Other 4,618 4,443 $ 59,513 $ 55,344 11. Borrowings Amounts outstanding under the Credit Agreement (as defined above) and notes payable consisted of the following. As of the Year Ended December 31, 2024 December 31, 2023 Principal Amount Unamortized Debt Issuance Cost Net Debt Principal Amount Unamortized Debt Issuance Cost Net Debt (In thousands) Term Facility $ 140,625 $ ( 1,049 ) $ 139,576 $ 144,375 $ ( 1,468 ) $ 142,907 Revolving Facility 11,000 - 11,000 - - - Other (1) 2,953 - 2,953 3,775 - 3,775 Total debt 154,578 ( 1,049 ) 153,529 148,150 ( 1,468 ) 146,682 Less: Current portion of long-term debt 11,422 ( 423 ) 10,999 8,111 ( 420 ) 7,691 Long-term debt, net of current portion $ 143,156 $ ( 626 ) $ 142,530 $ 140,039 $ ( 1,048 ) $ 138,991 (1) The long-term portion is included as part of Other Long-Term Liabilities in the Consolidated Balance Sheet. Effective December 5, 2013, the Company 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. On June 17, 2022, the Company entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”) among Bank of America, N.A., as administrative agent (“Administrative Agent”) and the lenders from time-to-time party thereto. The Credit Agreement, which matures on June 17, 2027 , provides for loans in an aggregate principal amount of $ 325 million. Such loans were made available through the following facilities (collectively, the “Senior Credit Facilities”): 1) Revolving Facility: $ 175 million , five-year , revolving credit facility (“Revolving Facility”), which includes a $ 12 million sublimit for the issuance of standby letters of credit and a $ 15 million sublimit for swingline loans (each, a “Swingline Loan”). 2) Term Facility: $ 150 million term loan facility (the “Term Facility”). The Term Facility amortizes in quarterly installments of: (a) 0.625 % in each of the first two years, (b) 1.250 % in the third and fourth year, and (c) 1.875 % in the fifth year of the Credit Agreement. The remaining outstanding principal balance of all term loans is due on the maturity date. The proceeds of the Revolving Facility shall be used by the Company for working capital and other general corporate purposes of the Company and its subsidiaries, including to fund future acquisitions and invest in growth opportunities. The proceeds of the Term Facility were used by the Company to refinance the indebtedness outstanding under the Amended Credit Agreement, to pay fees and expenses incurred in connection with the transactions involving the loan facilities, for working capital and other general corporate purposes of the Company and its subsidiaries. 78 Table of Contents The Company is permitted to increase the Revolving Facility and/or add one or more tranches of term loans in an aggregate amount not to exceed the sum of (i) $ 100 million plus (ii) an unlimited additional amount, provided that (in the case of clause (ii)), after giving effect to such increases, the pro forma Consolidated Leverage Ratio (as defined in the Credit Agreement) would not exceed 2.0 :1.0, and the aggregate amount of all incremental increases under the Revolving Facility does not exceed $ 50,000,000 . The interest rates per annum applicable to the Senior Credit Facilities (other than in respect of Swingline Loans) will be Term SOFR (as defined in the Credit Agreement) plus an applicable margin or, at the option of the Company, an alternate base rate plus an applicable margin. Each Swingline Loan shall bear interest at the base rate plus the applicable margin. The applicable margin for Term SOFR borrowings ranges from 1.50 % to 2.25 %, and the applicable margin for alternate base rate borrowings ranges from 0.50 % to 1.25 %, in each case, based on the Consolidated Leverage Ratio of the Company and its subsidiaries. Interest is payable at the end of the selected interest period but no less frequently than quarterly and on the date of maturity. The Company is also required to pay to the Administrative Agent, for the account of each lender under the Revolving Facility, a commitment fee equal to the actual daily excess of each lender’s commitment over its outstanding credit exposure under the Revolving Facility (“unused fee”). Such unused fee will range between 0.25 % and 0.35 % per annum and is also based on the Consolidated Leverage Ratio of the Company and its subsidiaries. The Company may prepay and/or repay the revolving loans and the term loans, and/or terminate the revolving loan commitments, in whole or in part, at any time without premium or penalty, subject to certain conditions. The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets. The Credit Agreement includes certain financial covenants which include the Consolidated Fixed Charge Coverage Ratio, and the Consolidated Leverage Ratio, as defined in the Credit Agreement. The Credit Agreement also contains customary events of default. The Company’s obligations under the Credit Agreement are guaranteed by its wholly-owned material domestic subsidiaries (each, a “Guarantor”), and the obligations of the Company and any Guarantors are secured by a perfected first priority security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions. As of December 31, 2024, $ 140.6 million was outstanding on the Term Facility while $ 11.0 million was outstanding under the Revolving Facility resulting in $ 164.0 million of credit availability. As of December 31, 2024, the Company was in compliance with all of the covenants contained in the Credit Agreement. The Company generally enters into various notes payable as a means of financing a portion of its acquisitions and purchasing of non- controlling interests. In conjunction with these transactions in 2024 and 2023, the Company entered into notes payable in the aggregate amount of $ 2.9 million of which an aggregate principal payment of $ 2.0 million will be paid in 2025, $ 0.9 million is due in 2026. Interest accrues in the range of 3.25 % to 8.5 % per annum and is payable with each principal installment. 12. Derivative Instruments The Company is exposed to certain market risks during the ordinary course of business due to adverse changes in interest rates. The exposure to interest rate risk primarily results from the Company’s variable-rate borrowing. The Company may elect to use derivative financial instruments to manage risks from fluctuations in interest rates. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in interest rates can be volatile and the Company’s risk management activities do not eliminate these risks. Interest Rate Swap In May 2022, the Company entered into an interest rate swap agreement, effective on June 30, 2022, with Bank of America, N.A. The swap has a $ 150 million notional value adjusted concurrently with scheduled principal payments made on the term loan. The swap has a maturity date of June 30, 2027 . Beginning in July 2022, the Company receives a 1-month SOFR, and pays a fixed rate of interest of 2.815 % on 1-month SOFR on a quarterly basis. The total interest rate in any period will also include an applicable margin based on the Company’s consolidated leverage ratio. 79 Table of Contents In connection with the swap, no cash was exchanged between the Company and the counterparty. The Company designated its interest rate swap as a cash flow hedge and structured it to be highly effective. Consequently, unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income (loss), net of tax. Savings from the interest rate swap arrangement totaled $ 3.4 million for the year ended December 31, 2024, and less than $ 3.3 million for the year ended December 31, 2023. These savings reduce the amount of interest expense, debt and other in the accompanying consolidated statements of income. The impacts of the Company’s derivative instruments on the accompanying Consolidated Statements of Comprehensive Income are presented in the table below. Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Net income $ 45,600 $ 37,220 $ 43,407 Other comprehensive income Unrealized (loss) gain on cash flow hedge 23 ( 1,642 ) 5,378 Tax effect at statutory rate (federal and state) ( 6 ) 420 ( 1,374 ) Comprehensive income $ 45,617 $ 35,998 $ 47,411 Comprehensive income attributable to non-controlling interest ( 14,176 ) ( 8,981 ) ( 11,249 ) Comprehensive income attributable to USPH shareholders $ 31,441 $ 27,017 $ 36,162 The valuations of the Company’s interest rate derivatives are measured as the present value of all expected future cash flows based on SOFR-based yield curves. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty, which is a Level 2 fair value measurement. The carrying and fair value of the Company’s interest rate derivatives (included in other current assets and other assets) were as follows: As of the Year Ended December 31, 2024 December 31, 2023 (In thousands) Other current assets $ 1,752 $ 2,663 Other assets 2,006 1,073 $ 3,758 $ 3,736 13. Leases The Company has operating leases for its corporate offices and operating facilities. The Company determines if an arrangement is a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent net present value of the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and operating lease liabilities are recognized at commencement date based on the net present value of the fixed lease payments over the lease term. The Company’s operating lease terms are generally five years or less. The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating fixed lease expense is recognized on a straight-line basis over the lease term. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage are not included in the right-of-use assets or operating lease liabilities. These are expensed as incurred and recorded as variable lease expense. 80 Table of Contents The components of lease expense were as follows. For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 (In thousands) Operating lease cost $ 41,751 $ 38,559 $ 35,154 Short-term lease cost 1,163 1,353 1,049 Variable lease cost 9,739 9,438 6,779 Sublease income ( 481 ) ( 526 ) ( 492 ) Total lease cost $ 52,172 $ 48,824 $ 42,490 Lease costs are reflected in the consolidated statements of net income in the line item — rent, supplies, contract labor and other. The supplemental cash flow information related to leases was as follows. For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 (In thousands) Cash paid for amounts included in the measurement of operating lease liabilities $ 42,934 $ 39,813 $ 36,136 Right-of-use assets obtained in exchange for new operating lease liabilities $ 70,729 $ 36,264 $ 40,502 The aggregate future lease payments for operating leases as of December 31, 2024, were as follows. Fiscal Year Amount (In thousands) 2025 $ 45,290 2026 37,572 2027 28,363 2028 18,999 2029 and thereafter 27,424 Total lease payments $ 157,648 Less: imputed interest 15,945 Total operating lease liabilities $ 141,703 Average lease terms and discount rates were as follows: As of the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Weighted-average remaining lease term 4.5 years 3.9 years 4.1 Years Weighted-average discount rate 4.7 % 4.0 % 2.9 % 81 Table of Contents 14. Income Taxes Significant components of deferred tax assets and liabilities included in the consolidated balance sheets as of the periods below were as follows. As of the Year Ended December 31, 2024 December 31, 2023 (In thousands) Deferred tax assets: Compensation $ 2,370 $ 1,680 Provision for credit losses 747 574 Lease obligations - including closed clinics 36,205 28,592 Deferred tax assets $ 39,322 $ 30,846 Deferred tax liabilities: Depreciation and amortization $ ( 32,392 ) $ ( 27,290 ) Operating lease right-of-use assets ( 34,221 ) ( 26,427 ) Gain on cash flow hedge ( 960 ) ( 955 ) Change in revaluation of put-right liability ( 638 ) ( 586 ) Other ( 576 ) ( 403 ) Deferred tax liabilities ( 68,787 ) ( 55,661 ) Net deferred tax liabilities $ ( 29,465 ) $ ( 24,815 ) The deferred tax assets and liabilities related to purchased interests not yet finalized may result in an adjustment. As of December 31, 2024, the Company has a federal tax payable of $ 4.5 million, which is included in accrued expenses in the accompanying balance sheet, and state tax receivables of $ 0.9 million, which is included in other current assets in the accompanying balance sheet. The differences between the federal tax rate and the Company’s effective tax rate for the years ended December 31, were as follows for the periods presented: For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 (In thousands) U.S. tax at statutory rate $ 9,667 21.0 % $ 8,483 21.0 % $ 9,307 21.0 % State income taxes, net of federal benefit 2,945 6.4 % 2,135 5.3 % 2,079 4.7 % Shortfall (excess) equity compensation deduction 75 0.2 % 123 0.3 % 149 0.3 % Non-deductible expenses 907 2.0 % 710 1.8 % 629 1.4 % Return to provision adjustments 1,015 2.1 % 705 1.7 % - 0.0 % $ 14,609 31.7 % $ 12,156 30.1 % $ 12,164 27.4 % Significant components of the provision for income taxes were as follows for the periods presented. For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 (In thousands) Current: Federal $ 5,805 $ 6,996 $ ( 770 ) State 3,930 512 518 Total current 9,735 7,508 ( 252 ) Deferred: Federal 4,006 3,819 9,933 State 868 829 2,483 Total deferred 4,874 4,648 12,416 Total income tax provision $ 14,609 $ 12,156 $ 12,164 82 Table of Contents For 2024, 2023 and 2022, the Company performed a detailed reconciliation of its federal and state taxes payable and receivable accounts along with its federal and state deferred tax asset and liability accounts. The Company considers this reconciliation process to be an annual control. The Company is required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income in the periods which the deferred tax assets are deductible, management believes that a valuation allowance is not required, as it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. The Company’s U.S. federal returns remain open to examination for 2021 through 2023 and U.S. state jurisdictions are open for periods ranging from 2020 through 2023 . The Company does not believe that it has any significant uncertain tax positions at December 31, 2024 and December 31, 2023, nor is this expected to change within the next twelve months due to the settlement and expiration of statutes of limitation. The Company did no t have any accrued interest or penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the years ended December 31, 2024, 2023 and 2022. 15. Segment Information The Company’s reportable segments include the physical therapy operations segment and the IIP segment. Also included in the physical therapy operations segment are revenues from management contract services and other services which include services the Company provides on-site, such as athletic trainers for schools . Physical Therapy Operations The physical therapy operations segment primarily operates through subsidiary clinic partnerships (“Clinic Partnerships”), in which the Company generally owns a 1 % general partnership interest in all the Clinic Partnerships. The Company’s limited partnership interests generally range from 65 % to 75 % (the range is 10 % - 99 %) in the Clinic Partnerships. The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnership interest in most of the clinics (hereinafter referred to as “Clinic Partnerships”). Some of the Clinic Partnerships serve as management services organizations which manage and provide staffing and a variety of administrative services to physical therapy provider entities in which the Company does not have an ownership interest. These Clinic Partnerships similarly are owned collectively by the Company and one or more physical therapists who are involved in the management of the operations. To a lesser extent, the Company operates some clinics, through wholly-owned subsidiaries (hereinafter referred to as “Wholly-Owned Facilities”). The Company continues to seek to attract for employment physical therapists who have established relationships with physicians and other referral sources, by offering these therapists a competitive salary and incentives based on the profitability of the clinic that they manage. For multi-site clinic practices in which a controlling interest is acquired by the Company, the prior owners typically continue on as employees to manage the clinic operations, retain a non-controlling ownership interest in the clinics and receive a competitive salary for managing the clinic operations. In addition, the Company has developed satellite clinic facilities as part of existing Clinic Partnerships and Wholly-Owned Facilities, with the result that a substantial number of Clinic Partnerships and Wholly-Owned Facilities operate more than one clinic location. 83 Table of Contents Clinic Partnerships For non-acquired Clinic Partnerships, the earnings and liabilities attributable to the non-controlling interests, typically owned by the managing therapist, directly or indirectly, are recorded within the balance sheets and income statements as non-controlling interest—permanent equity . For acquired Clinic Partnerships with redeemable non-controlling interests, the earnings attributable to the redeemable non-controlling interests are recorded within the consolidated balance sheets and income statements as redeemable non-controlling interest—temporary equity . Wholly-Owned Facilities For Wholly-Owned Facilities with profit sharing arrangements, an appropriate accrual is recorded for the amount of profit sharing due the clinic partners/directors. The amount is expensed as compensation and included in clinic operating costs—salaries and related costs. The respective liability is included in current liabilities— accrued expenses on the consolidated balance sheets. Industrial Injury Prevention Services Services provided in the IIP segment include onsite injury prevention and rehabilitation, performance optimization, post offer employment testing, functional capacity evaluations, 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. The Company performs these services through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers. 84 Table of Contents Segment Financials The Company, including its chief operating decision maker, the Chief Executive Officer, uses gross profit in its budget-to-actual, forecasting, and other analytical processes to assess segment performance and allocate resources. The Company has provided additional information regarding its reportable segments which contributes to the understanding of the Company and provides useful information. For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 ( In thousands) Net revenue: Physical therapy operations $ 574,433 $ 526,548 $ 476,092 Industrial injury prevention services 96,912 78,254 77,052 Total Company $ 671,345 $ 604,802 $ 553,144 Operating Costs: Salaries and related costs: Physical therapy operations $ 337,466 $ 302,765 $ 272,360 Industrial injury prevention services 61,928 50,625 46,831 Total salaries and related costs $ 399,394 $ 353,390 $ 319,191 Rent supplies, contract labor and other: Physical therapy operations $ 105,019 $ 97,873 $ 88,523 Industrial injury prevention services 13,891 10,723 13,847 Total rent, supplies, contract labor and other $ 118,910 $ 108,596 $ 102,370 Depreciation and amortization: Physical therapy operations $ 16,741 $ 14,542 $ 13,563 Industrial injury prevention services 1,112 418 376 Total depreciation and amortization $ 17,853 $ 14,960 $ 13,939 Provision for credit losses: Physical therapy operations $ 6,904 $ 6,129 $ 5,517 Industrial injury prevention services 8 43 31 Total provision for credit losses $ 6,912 $ 6,172 $ 5,548 Clinic closure costs: Physical therapy operations $ 4,355 $ 175 $ 72 Industrial injury prevention services - - - Total clinic closure costs $ 4,355 $ 175 $ 72 Total Company $ 547,424 $ 483,293 $ 441,120 Gross profit: Physical therapy operations $ 103,948 $ 105,064 $ 96,057 Industrial injury prevention services 19,973 16,445 15,967 Total Company $ 123,921 $ 121,509 $ 112,024 Impairment of goodwill and other intangible assets Industrial injury prevention services $ - $ 17,495 $ 9,112 Total impairment of goodwill and other intangible assets $ - $ 17,495 $ 9,112 Impairment of assets held for sale Physical therapy operations $ 2,418 $ - $ - Total impairment of assets held for sale $ 2,418 $ - $ - Unallocated amounts Corporate office costs $ 58,290 $ 51,953 $ 46,111 Interest expense, debt and other 8,015 9,303 5,779 Interest income from investments ( 3,941 ) ( 3,774 ) - Change in fair value of contingent earn-out consideration 219 1,550 ( 2,520 ) Change in revaluation of put-right liability 82 ( 2,582 ) 5 Equity in earnings of unconsolidated affiliate ( 1,014 ) ( 955 ) ( 1,175 ) Relief Funds - ( 467 ) - Other ( 357 ) ( 390 ) ( 859 ) Total unallocated amounts $ 61,294 $ 54,638 $ 47,341 Income before taxes $ 60,209 $ 49,376 $ 55,571 Assets: Goodwill: Physical therapy operations $ 595,519 $ 437,413 $ 408,705 Industrial injury prevention services 71,633 72,158 85,396 Total goodwill $ 667,152 $ 509,571 $ 494,101 All other assets: Physical therapy operations 452,905 $ 398,272 $ 263,131 Industrial injury prevention services 47,410 89,395 100,922 Total all other assets 500,315 487,667 364,053 Total Assets $ 1,167,467 $ 997,238 $ 858,154 85 Table of Contents 16. Investment in Unconsolidated Affiliate Through one of its subsidiaries, the Company has a 49 % joint venture interest in a company which provides physical therapy services for patients at hospitals. The Company is deemed to not have a controlling interest in the company, and therefore the Company’s investment is accounted for using the equity method of accounting. The investment balance of this joint venture as of December 31, 2024, is $ 12.2 million and the earnings amounted to approximately $ 1.0 million for the year ended December 31, 2024. The investment balance of this joint venture as of December 31, 2023, was $ 12.3 million and the earnings amounted to approximately $ 1.0 million for the year ended December 31, 2023 . 17. Equity Based Plans U.S. Physical Therapy Stock Incentive Plans Amended and Restated 1999 Employee Stock Option Plan The Amended and Restated 1999 Employee Stock Option Plan (the “Amended 1999 Plan”) permits the Company to grant to non-employee directors and employees of the Company up to 600,000 non-qualified options to purchase shares of common stock and restricted stock (subject to proportionate adjustments in the event of stock dividends, splits, and similar corporate transactions). The exercise prices of options granted under the Amended 1999 Plan are determined by the Compensation Committee. The period within which each option will be exercisable is determined by the Compensation Committee. Amended and Restated 2003 Stock Option Plan The Amended and Restated 2003 Stock Option Plan (the “Amended 2003 Plan”) permits the Company to grant to key employees and outside directors of the Company incentive and non-qualified options and shares of restricted stock covering up to 2,600,000 shares of common stock (subject to proportionate adjustments in the event of stock dividends, splits, and similar corporate transactions). As of December 31, 2024, there were 0.4 million shares remaining that can be subject to new awards under the Amended 2003 Plan. Stock-based compensation expense related to the U.S. Physical Therapy Stock Incentive Plans was approximately $ 7.8 million, $ 7.2 million, and $ 7.3 million for the years ended December 31, 2024, 2023 and 2022 respectively. As of December 31, 2024, the remaining $ 10.4 million compensation expense will be recognized over a weighted average period of 2.38 years. Restricted Stock Awards During 2024, 2023 and 2022, the Company granted the following shares of restricted stock to directors, officers, and employees pursuant to its equity plans as follows: Weighted Average Fair Year Granted Number of Shares Value Per Share 2024 90,810 $ 101.30 2023 73,384 $ 102.79 2022 95,316 $ 100.08 During 2024, 2023 and 2022, the following shares were cancelled due to employee terminations prior to restrictions lapsing: Weighted Average Fair Year Cancelled Number of Shares Value Per Share 2024 2,339 $ 103.81 2023 4,086 $ 103.99 2022 5,180 $ 109.42 Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, the restrictions will lapse in equal quarterly installments during the first year after the date of grant. For those granted to officers, the restriction will lapse in equal quarterly installments during the four years following the date of grant. 86 Table of Contents There were 140,276 and 124,638 shares outstanding as of December 31, 2024, and December 31, 2023, respectively, for which restrictions had not lapsed. The restrictions will lapse from 2025 through 2028 . Metro Equity Incentive Plan The MSO Metro LLC 2024 Incentive Plan (“Metro Plan”) was approved on October 31, 2024. The Metro Plan permits MSO Metro to grant to employee participants up to 5,000 Units of MSO Metro upon the attainment of certain EBITDA thresholds, subject to continuous employment. Upon vesting, the Units will contain both a call right and a put right at a fixed price based on the level of EBITDA that is reached. As the Units are subject to repurchase upon issuance at a fixed purchase price, the share-based compensation is classified as a liability. The following table summarizes the Metro Plan activity during the year ended December 31, 2024: Number of Units Grant-Date Fair Value per Unit Unvested as of December 31, 2023 - - Granted 4,650 $ 1,530 Vested - - Unvested as of December 31, 2024 4,650 $ 1,530 The Company recognized $ 0.2 million of compensation expense related to the Metro Plan in 2024. Unrecognized compensation expense related to the Metro Plan was $ 5.7 million as of December 31, 2024, to be amortized over a remaining period of approximately 5.0 years. 18. Preferred and Common Stock Preferred Stock The Board is empowered, without approval of the shareholders, to cause shares of preferred stock to be issued in one or more series and to establish the number of shares to be included in each such series and the rights, powers, preferences, and limitations of each series. There are no provisions in the Company’s Articles of Incorporation specifying the vote required by the holders of preferred stock to take action. All such provisions would be set out in the designation of any series of preferred stock established by the Board. The bylaws of the Company specify that, when a quorum is present at any meeting, the vote of the holders of at least a majority of the outstanding shares entitled to vote who are present, in person or by proxy, shall decide any question brought before the meeting, unless a different vote is required by law or the Company’s Articles of Incorporation. Because the Board has the power to establish the preferences and rights of each series, it may afford the holders of any series of preferred stock, preferences, powers, and rights, voting or otherwise, senior to the right of holders of common stock. The issuance of the preferred stock could have the effect of delaying or preventing a change in control of the Company. Common Stock From September 2001 through December 31, 2008, the Board authorized the Company to purchase, in the open market or in privately negotiated transactions, up to 2,250,000 shares of the Company’s common stock. In March 2009, the Board authorized the repurchase of up to 10 % or approximately 1,200,000 shares of its common stock (“March 2009 Authorization”). Under the March 2009 Authorization, the Company has purchased a total of 859,499 shares. The Company is required to retire shares purchased under the March 2009 Authorization. In November 2023, the Board terminated the March 2009 Authorization such that any such proposed repurchase of our common stock would be considered and determined by the Board at such time. The Company did no t purchase any shares of its common stock during 2024, 2023 or 2022. 87 Table of Contents In May 2023, the Company completed a secondary offering of 1,916,667 shares of its common stock at an offering price of $ 90.00 per share. Upon completion of the offering, the Company received net proceeds of approximately $ 163.6 million, after deducting an underwriting discount of $ 8.6 million and recognizing related fees and expenses of $ 0.2 million. A portion of the net proceeds was used to repay the $ 35.0 million then outstanding under the Company’s credit facility while the remainder was used primarily for additional acquisitions. 19. Defined Contribution Plan The Company has several 401(k) profit sharing plans covering all employees with three months of service. For certain plans, the Company makes matching contributions. The Company may also make discretionary contributions of up to 50 % of employee contributions. The Company did no t make any discretionary contributions for the years ended December 31, 2024, 2023 and 2022. The Company matching contributions totaled $ 2.6 million, $ 2.2 million and $ 2.0 million, respectively, for the years ended December 31, 2024, 2023 and 2022. 20. Contingencies The Company is a party to various legal actions, proceedings, and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of our business. 21. Subsequent Events On February 28, 2025, the Company acquired a 65 % interest in a physical therapy practice with three clinic locations. The prior owners retained a 35 % ownership interest. On February 25, 2025 , the Company’s Board of Directors raised the Company’s quarterly dividend rate from $ 0.44 per share to $ 0.45 per share. The dividend will be payable on April 11, 2025 , to shareholders of record on March 14, 2025 . On February 3, 2025, the Company completed the sales process that began in 2024 for a business unit within the physical therapy operations segment. In connection with the sales process, the assets and liabilities of the clinics sold were revalued as of December 31, 2024, and an impairment of approximately $ 2.4 million was included in the accompanying Consolidated Statements of Net Income in Item 8. The sale closed at a price of $ 0.7 million. 88 Table of Contents FINANCIAL STATEMENT SCHEDULE* SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES (In Thousands) Balance at Beginning of Period Additions Charged to Costs and Expenses Additions Charged to Other Accounts Deductions Balance at End of Period YEAR ENDED DECEMBER 31, 2024 : Reserves and allowances deducted from asset accounts: Allowance for credit losses (1) $ 2,736 $ 6,912 - $ 6,142 (2) $ 3,506 YEAR ENDED DECEMBER 31, 2023 : Reserves and allowances deducted from asset accounts: Allowance for credit losses (1) $ 2,829 $ 6,172 - $ 6,265 (2) $ 2,736 YEAR ENDED DECEMBER 31, 2022 : Reserves and allowances deducted from asset accounts: Allowance for credit losses $ 2,768 $ 5,548 - $ 5,487 (2) $ 2,829 (1) Related to patient accounts receivable and accounts receivable-other. (2) Uncollectible accounts written off, net of recoveries. * All other schedules are omitted because of the absence of conditions under which they are required or because the required information is shown in the financial statements or notes thereto. 89 Table of Contents ITEM 9. CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of the end of the fiscal period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective in ensuring that the information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. U.S. Physical Therapy, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that: • Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; • Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of the Company’s management and directors; and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, the risk. Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria described in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2024. The Company’s internal control over financial reporting has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in their report included on page 51. Changes in Internal Control over Financial Reporting In October 2024, we entered into an Equity Interest Purchase Agreement with MSO Metro, LLC and become the managing member. As part of our ongoing integration activities, we are currently in the process of implementing internal controls and procedures at the new entity. Except for the integration of the new entity noted above, there were no changes in our internal control over financial reporting during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION Not applicable. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICATIONS THAT PREVENT INSPECTION Not applicable. 90 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required in response to this Item 10 is incorporated herein by reference to our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report. ITEM 11. EXECUTIVE COMPENSATION The information required in response to this Item 11 is incorporated herein by reference to our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMEMNT AND RELATED STOCKHOLDER MATTERS The information required in response to this Item 12 is incorporated herein by reference to our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required in response to this Item 13 is incorporated herein by reference to our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required in response to this Item 14 is incorporated herein by reference to our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year covered by this report. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES Documents filed as a part of this report: 1. Financial Statements Reference is made to the Index to Financial Statements and Related Information under Item 8 in Part II hereof, where these documents are listed. 2. Financial Statement Schedules See page 85 for Schedule II — Valuation and Qualifying Accounts. All other schedules are omitted because of the absence of conditions under which they are required or because the required information is shown in the financial statements or notes thereto. 3. Exhibits The exhibits listed in List of Exhibits on the next page are filed or incorporated by reference as part of this report. 91 Table of Contents EXHIBIT INDEX LIST OF EXHIBITS Number ​ Description 1.1 Underwriting Agreement, dated May 24, 2023, by and between U.S. Physical Therapy, and BofA Securities, Inc. and J.P. Morgan Securities LLC., as representatives of the several underwriters named therein. [incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 25, 2023.] 3.1 ​ Articles of Incorporation of the Company [filed as an exhibit to the Company’s Form 10-Q for the quarterly period ended June 30, 2001 and incorporated herein by reference]. ​ 3.2 ​ Amendment to the Articles of Incorporation of the Company [filed as an exhibit to the Company’s Form 10-Q for the quarterly period ended June 30, 2001 and incorporated herein by reference]. ​ 3.3 ​ Bylaws of the Company, as amended [filed as an exhibit to the Company’s Form 10-KSB for the year ended December 31, 1993 and incorporated herein by reference—Commission File Number—1-11151]. ​ 4.1 ​ Description of Company Securities [incorporated by reference to Exhibit 4.1 of the Company's Annual Report on Form 10-K filed with the SEC on February 28, 2020.] ​ 10.1+ ​ 1999 Employee Stock Option Plan (as amended and restated May 20, 2008) [incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 17, 2008]. ​ 10.2+ ​ U.S. Physical Therapy, Inc. 2003 Stock Incentive Plan, (as amended and restated effective March 26, 2016) [incorporated herein by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 7, 2016.] 10.3+ ​ First Amendment to U.S. Physical Therapy, Inc. 2003 Stock Incentive Plan, (as amended and restated effective March 26, 2016) effective on March 1, 2022 [incorporated herein by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 4, 2022.] 10.4+ ​ Form of Restricted Stock Agreement [incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on March 16, 2016]. 10.7+ ​ Third Amended and Restated Employment Agreement by and between the Company and Christopher J. Reading dated effective May 21, 2019 [incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 22, 2019] 92 Table of Contents Number ​ Description ​ 10.8+ ​ Amended & Restated Employment Agreement commencing by and between the Company and Graham Reeve dated effective May 21, 2019 [incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on May 22, 2019] ​ 10.9+ ​ Form of Restricted Stock Agreement [incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on May 22, 2019] ​ 10.11+ ​ Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Christopher Reading [incorporated by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed with the SEC on March 26, 2020]. ​ 10.12+ ​ Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Graham Reeve [incorporated by reference to Exhibit 10.4 to the Company Current Report on Form 8-K filed with the SEC on March 26, 2020]. ​ 10.13+ ​ Employment Agreement by and between the Company and Eric Williams entered into on December 3, 2020 and commencing as of July 1, 2021 [filed by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed with the SEC on December 7, 2020.] ​ 10.16 Third Amended and Restated Credit Agreement dated as of June 17, 2022 among the Company, as the borrower, and Bank of America, N.A., as Administrative Agent, Regions Capital Markets as Syndication Agent, BofA Securities Inc. and Regions Capital Markets as Joint Load Arrangers, BofA Securities Inc., as Sole Bookrunner and the lenders named therein. [incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 10-Q filed with the SEC on June 21, 2022] 10.17+ Employment Agreement by and between the Company and Rick Binstein entered into on March 23, 2022 [incorporated by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed with the SEC on March 23, 2022] 10.18+ U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 18, 2022] 10.19+ U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 18, 2022] 10.20+ U. S. Physical Therapy, Inc. Objective Cash/RSA Bonus Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.3 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 18, 2022] 93 Table of Contents 10.21+ U. S. Physical Therapy, Inc. Discretionary Cash/RSA Bonus Plan for Senior Management for 2022, effective March 14, 2022 [incorporated by reference to Exhibit 99.4 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 18, 2022] 10.22+ U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2023, effective March 2, 2023 [incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 8, 2023] 10.23+ U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2023, effective March 2, 2023 [incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 8, 2023] 10.24+ U. S. Physical Therapy, Inc. Objective Cash/RSA Bonus Plan for Senior Management for 2023, effective March 2, 2023 [incorporated by reference to Exhibit 99.3 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 8, 2023] 10.25+ U. S. Physical Therapy, Inc. Discretionary Cash/RSA Bonus Plan for Senior Management for 2023, effective March 2, 2023 [incorporated by reference to Exhibit 99.4 of the Current Report on Form 8-K filed by U.S. Physical Therapy, Inc. on March 8, 2023] 10.26+ ​ Employment Agreement entered into as of November 9, 2020 by and between U.S. Physical Therapy and Carey Hendrickson [incorporated by reference to Exhibit 10.1 to the Company Current Report on Form 8-K filed with the SEC on September 23, 2020.] 10.27+ U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2024, effective March 6, 2024 [incorporated by reference to Exhibit 99.1 to the Company Current Report on Form 8-K filed with the SEC on March 7, 2024]. 10.28+ U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2024, effective March 6, 2024 [incorporated by reference to Exhibit 99.2 to the Company Current Report on Form 8-K filed with the SEC on March 7, 2024]. 10.29+ U. S. Physical Therapy, Inc. Objective Cash/RSA Bonus Plan for Senior Management for 2024, effective March 6, 2024 [incorporated by reference to Exhibit 99.3 to the Company Current Report on Form 8-K filed with the SEC on March 7, 2024]. 10.30+ U. S. Physical Therapy, Inc. Discretionary Cash/RSA Bonus Plan for Senior Management for 2024, effective March 6, 2024 [incorporated by reference to Exhibit 99.4 to the Company Current Report on Form 8-K filed with the SEC on March 7, 2024]. 10.31+ U. S. Physical Therapy, Inc. First Amendment to Third Amended and Restated Employment Agreement, entered into as of May 27, 2024, by and between the Company and Christopher Reading [incorporated by reference to Exhibit 99.1 to the Company Current Report on Form 8-K filed with the SEC on May 31, 2024]. 94 Table of Contents 10.32+ U. S. Physical Therapy, Inc. First Amendment to Employment Agreement, entered into as of May 27, 2024, by and between the Company and Eric Williams [incorporated by reference to Exhibit 99.2 to the Company Current Report on Form 8-K filed with the SEC on May 31, 2024]. 10.33+ U. S. Physical Therapy, Inc. First Amendment to Amended and Restated Employment Agreement, entered into as of May 27, 2024, by and between the Company and Graham Reeve [incorporated by reference to Exhibit 99.3 to the Company Current Report on Form 8-K filed with the SEC on May 31, 2024]. 10.34+ U. S. Physical Therapy, Inc. First Amendment to Employment Agreement, entered as of May 27, 2024, by and between the Company and Carey Hendrickson [incorporated by reference to Exhibit 99.4 to the Company Current Report on Form 8-K filed with the SEC on May 31, 2024]. 10.35+ U. S. Physical Therapy, Inc. First Amendment to Amended and Restated Employment Agreement, entered as of May 27, 2024, by and between the Company and Richard Binstein [incorporated by reference to Exhibit 99.5 to the Company Current Report on Form 8-K filed with the SEC on May 31, 2024]. 10.36* Equity Interest Purchase Agreement dated as of October 7, 2024 among U.S. Physical Therapy, Ltd., MSO Metro, LLC, the member of MSO Metro, LLC and Michael G. Mayrsohn as Sellers’ Representative. 10.37 Second Amendment to the Credit Agreement dated as of September 27, 2024 among the Company, as the borrower, and Bank of America, N.A., as Administrative Agent, Regions Capital Markets as Syndication Agent, BofA Securities Inc. and Regions Capital Markets as Joint Load Arrangers, BofA Securities Inc., as Sole Bookrunner and the lenders named therein [incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed by U.S. Physical Therapy, Inc. on November 8, 2024]. 10.38+* Form of Amendment to the Restricted Stock Agreements. 10.39+* Form of Restricted Stock Agreement. 95 Table of Contents Number ​ Description 21.1* ​ Subsidiaries of the Registrant ​ 23.1* ​ Consent of Independent Registered Public Accounting Firm—Grant Thornton LLP ​ 31.1* ​ Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended ​ 31.2* ​ Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended ​ 32.1* ​ Certification of Periodic Report of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ​ 97.1 ​ U.S. Physical Therapy Compensation Clawback Policy (incorporated by reference to Exhibit 97.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2023 filed with SEC on February 29, 2024) 101.INS* ​ XBRL Instance Document ​ 101.SCH* ​ XBRL Taxonomy Extension Schema Document ​ 101.CAL* ​ XBRL Taxonomy Extension Calculation Linkbase Document ​ 101.DEF* ​ XBRL Taxonomy Extension Definition Linkbase Document ​ 101.LAB* ​ XBRL Taxonomy Extension Label Linkbase Document ​ 101.PRE* ​ XBRL Taxonomy Extension Presentation Linkbase Document * Filed herewith + Management contract or compensatory plan or arrangement. 96 Table of Contents FINANCIAL STATEMENT SCHEDULE* SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES (In Thousands) Balance at Additions Charged Additions Charged Balance at Beginning of Period to Costs and Expenses to Other Accounts Deductions End of Period YEAR ENDED DECEMBER 31, 2024: Reserves and allowances deducted from asset accounts: Allowance for credit losses (1) $ 2,736 $ 6,912 - $ 6,142 (2 ) $ 3,506 YEAR ENDED DECEMBER 31, 2023: Reserves and allowances deducted from asset accounts: Allowance for credit losses (1) $ 2,829 $ 6,172 - $ 6,265 (2 ) $ 2,736 YEAR ENDED DECEMBER 31, 2022: Reserves and allowances deducted from asset accounts: Allowance for credit losses $ 2,768 $ 5,548 - $ 5,487 (2 ) $ 2,829 (1) Related to patient accounts receivable and accounts receivable-other. (2) Uncollectible accounts written off, net of recoveries. * All other schedules are omitted because of the absence of conditions under which they are required or because the required information is shown in the financial statements or notes thereto. 97 Table of Contents ITEM 16. FORM 10-K SUMMARY None. 98 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. U.S. PHYSICAL THERAPY, INC. (Registrant) By: /s/ Carey Hendrickson Carey Hendrickson Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Date: March 3, 2025 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of the date indicated above. /s/ Carey Hendrickson Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) March 3, 2025 Carey Hendrickson /s/ Chris J. Reading Chief Executive Officer, and Chairman of the Board of Directors (Principal Executive Officer) March 3, 2025 Chris J. Reading /s/ Bernard A. Harris Lead Independent Director March 3, 2025 Dr. Bernard A. Harris, Jr. /s/ Kathleen A. Gilmartin Director March 3, 2025 Kathleen A. Gilmartin /s/ Anne B. Motsenbocker Director March 3, 2025 Anne Motsenbocker /s/ Regg E. Swanson Director March 3, 2025 Reginald E. Swanson /s/ Clayton K. Trier Director March 3, 2025 Clayton K. Trier /s/ Nancy J. Ham Director March 3, 2025 Nancy J. Ham