What changed in this filing

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Item 1. Financial Statements

2025-05-09 compared with 2024-11-08 · 686 added, 710 removed, 522 unchanged (73% of the section changed)

3 unchanged sentences

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS )

September 30 , 2024

March 31 , 2025

December 31, 2024

23 unchanged sentences

Notes payable, net of current portion

Revolving facility

Term loan, net of current portion and deferred financing costs

24 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

For the Three Months Ended

September 30, 2024

September 30, 2023

September 30,2024

September 30, 2023

Three Months Ended

March 31, 2025

March 31, 2024

Net patient revenue

3 unchanged sentences

Rent, supplies, contract labor and other

Depreciation and amortization

Provision for credit losses

2 unchanged sentences

Corporate office costs

Gain on change in fair value of contingent earn-out consideration

Operating income

Other income (expense):

Other (expense) income

Interest expense, debt and other

Interest income from investments

Change in fair value of contingent earn-out consideration

Change in revaluation of put-right liability

Equity in earnings of unconsolidated affiliate

Total other income (expense)

Loss on sale of a partnership

Total other expense

Income before taxes

7 unchanged sentences

Dividends declared per common share

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

The accompanying

notes are an integral part of these unaudited Consolidated Financial Statements.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS

COMPREHENSIVE INCOME

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

(IN THOUSANDS)

For the Three Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Other comprehensive ( loss ) gain:

Three Months Ended

March 31, 2025

March 31, 2024

Other comprehensive gain:

Unrealized (loss) gain on cash flow hedge

3 unchanged sentences

Comprehensive income attributable to USPH shareholders

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

PHYSICAL THERAPY, INC.

2 unchanged sentences

(IN THOUSANDS)

For the Nine Months Ended

September 30 , 2024

September 30 , 2023

Three Months Ended

March 31 , 2025

March 31 , 2024

OPERATING ACTIVITIES

7 unchanged sentences

Change in revaluation of put-right liability

Change in fair value of contingent earn-out consideration

Gain on change in fair value of contingent earn-out consideration

Equity of earnings in unconsolidated affiliate

Loss (gain) on sale of fixed assets

Loss on sale of fixed assets

Loss on sale of a partnership

Changes in operating assets and liabilities:

Increase in patient accounts receivable

Increase in accounts receivable - other

(Increase) decrease in other current and long term assets

Increase (decrease) in accounts payable and accrued expenses

(Decrease) increase in other long-term liabilities

Net cash provided by operating activities

Decrease (increase) in accounts receivable - other

Increase in other current and long term assets

Decrease in accounts payable and accrued expenses

(Decrease) increase in long term liabilities

Net cash (used in) provided by operating activities

INVESTING ACTIVITIES

3 unchanged sentences

Purchase of non controlling interest, permanent equity

Proceeds on sale of redeemable non-controlling interest, temporary equity

Proceeds on sale of non-controlling interest, permanent equity

Proceeds from the sale of partnership interest - redeemable non-controlling interest, temporary equity

Proceeds from the sale of non-controlling interest, permanent equity

Proceeds from sale of partnership

Distributions from unconsolidated affiliate

1 unchanged sentence

FINANCING ACTIVITIES

Cash dividends paid to shareholders

Proceeds from revolving facility

Distributions to non-controlling interest, permanent and temporary equity

Principal payments on notes payable

Payments on term loan

P ayments on revolving facility

Proceeds from issuance of common stock pursuant to the secondary public offering, net of issuance costs

P roceeds from revolving facility

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents

Principal payments on notes payable

Net cash provided by (used in) financing activities

Net (decrease) in cash and cash equivalents

Cash and cash equivalents - beginning of period

4 unchanged sentences

Non-cash investing and financing transactions during the period:

Purchase of interest in businesses - seller financing portion

Initial contingent consideration related to purchase of interest of businesses

Offset of notes receivable associated with purchase of redeemable non-controlling interest

Purchase of businesses - seller financing portion

Purchase of redeemable non-controlling interest, temporary equity, recorded in accrued liabilities

Fair market value of initial contingent consideration related to purchase of businesses

Notes payable related to purchase of redeemable non-controlling interest, temporary equity

Notes payable related to purchase of non-controlling interest, permanent equity

Notes receivable related to sale of redeemable non-controlling interest, temporary equity

Notes receivable related to sale of redeemable non-controlling interest

Notes receivable related to the sale of non-controlling interest, permanent equity

Offset to notes receivable associated with purchase of redeemable non-controlling interest

Dividends payable to USPH shareholders

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

1 unchanged sentence

AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF

UNAUDITED CONSOLIDATED

STATEMENTS OF CHANGES IN EQUITY

(IN THOUSANDS)

U.S.Physical Therapy, Inc.

Accumulated Other

2 unchanged sentences

Non-Controlling

For the three months ended September 30, 2024

Paid-In Capital

Comprehensive Gain

Balance June 30, 2024

Net income attributable to USPH shareholders

Net income attributable to non-controlling interest - permanent equity

Issuance of restricted stock, net of cancellations

Revaluation of redeemable non-controlling interest

Compensation expense - equity-based awards

Sale of non-controlling interest

Purchase of partnership interests - non-controlling interest

Dividends paid to USPH shareholders

Distributions to non-controlling interest partners - permanent equity

Deferred taxes related to redeemable non-controlling interest - temporary equity

Other comprehensive gain

Balance September 30, 2024

U .S.Physical Therapy, Inc.

Accumulated Other

Treasury Stock

Total Shareholders’

Non-Controlling

For the nine months ended September 30, 2024

Paid-In Capital

Comprehensive Loss

Balance December 31, 2024

2 unchanged sentences

Issuance of restricted stock, net of cancellations

Revaluation of redeemable non-controlling interest, net of tax

Revaluation of redeemable non-controlling interest

Compensation expense - equity-based awards

Sale of non-controlling interest

Purchase of partnership interests - non-controlling interest

Dividends paid to USPH shareholders

Dividends payable to USPH shareholders

Distributions to non-controlling interest partners - permanent equity

2 unchanged sentences

Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans

Transfer of RNCI due to separation agreement

Balance September 30, 2024

U.S.Physical Therapy, Inc.

Balance March 31, 2025

Accumulated Other

2 unchanged sentences

Non-Controlling

For the three months ended September 30, 2023

Paid-In Capital

Comprehensive Gain

Balance June 30, 2023

Net income attributable to USPH shareholders

Net income attributable to non-controlling interest - permanent equity

Issuance of common stock, pursuant to the secondary public offering, net of issuance costs

Revaluation of redeemable non-controlling interest

Compensation expense - equity-based awards

Sale of non-controlling interest

Purchase of partnership interests - non-controlling interest

Dividends paid to USPH shareholders

Distributions to non-controlling interest partners - permanent equity

Deferred taxes related to redeemable non-controlling interest - temporary equity

Other comprehensive gain

Balance September 30, 2023

U.S.Physical Therapy, Inc.

Accumulated Other

Treasury Stock

Total Shareholders’

Non-Controlling

For the nine months ended September 30, 2023

Paid-In Capital

Comprehensive Loss

Balance December 31, 2023

Issuance of restricted stock, pursuant to the secondary offering, net of cancellations

Net income attributable to USPH shareholders

Net income attributable to non-controlling interest - permanent equity

Issuance of common stock, pursuant to the secondary public offering, net of issuance costs

Revaluation of redeemable non-controlling interest, net of tax

Issuance of restricted stock, net of cancellations

Revaluation of redeemable non-controlling interest

Compensation expense - equity-based awards

1 unchanged sentence

Purchase of partnership interests - non-controlling interest

Dividends paid to USPH shareholders

Dividends payable to USPH shareholders

Distributions to non-controlling interest partners - permanent equity

1 unchanged sentence

Other comprehensive gain

Balance September 30, 2023

Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans

Balance March 31, 2024

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

5 unchanged sentences

Physical Therapy, Inc.

and its subsidiaries (the “Company”) operates its business through two reportable business segments which

include the physical therapy operations segment and the industrial injury prevention services (“IIP”) segment.

Our physical therapy operations consist of physical therapy and occupational therapy clinics that provide pre- and post-operative

care and treatment for a variety of orthopedic-related disorders, and sports-related injuries, and rehabilitation of injured workers.

Services provided by the IIP segment include onsite services for clients’ employees including 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.

These services are performed through Industrial Sports Medicine Professionals, consisting of both physical therapists and specialized certified

athletic trainers.

As of September 30,

2024, the Company operated 661 clinics in 42 states.

In addition to the 661 clinics, the Company also managed 39 physical therapy practices for unrelated physician groups and hospitals as of September 30, 2024.

D uring the nine months ended September 30, 2024, and for the year-ended

December 31, 2023, the Company completed the acquisitions of the following clinic practices and IIP businesses:

and its subsidiaries (the “Company”) operates its business through two reportable business segments.

Our physical therapy operations consist of physical therapy and occupational therapy clinics that provide pre- and post-operative care and treatment for a variety of orthopedic-related

disorders, and sports-related injuries, and rehabilitation of injured workers.

Services provided by the industrial injury prevention services (“IIP”) segment include onsite services for clients’ employees including injury prevention and

rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations and ergonomic assessments.

The majority of IIP is contracted with and paid for directly by employers, including a number of Fortune 500

IIP services are performed through Industrial Sports Medicine Professionals with specialized training related to the musculoskeletal system.

As of March 31, 2025,

the Company operated and/or managed 736 clinics in 44 states.

In addition to the foregoing 736 clinics, the Company also managed

37 hospital and/or physician owned physical therapy practices.

D uring the three months ended March 31, 2025, and for the year ended December

31, 2024, the Company completed the acquisitions of the following clinic practices and IIP businesses:

2025 Acquisition

February 28, 2025

November 2024 Acquisition

November 30, 2024

2024 Acquisition

October 31, 2024

August 2024 Acquisition

August 31, 2024

April 2024 Acquisition

2024 Acquisition

April 30, 2024

1 unchanged sentence

March 29, 2024

October 2023 Acquisition

October 31, 2023

September 2023 Acquisition 1

September 29, 2023

September 2023 Acquisition 2

September 29, 2023

July 2023 Acquisition

July 31, 2023

May 2023 Acquisition

February 2023 Acquisition

February 28, 2023

IIP business.

On April 30, 2024, one

of the Company’s primary IIP businesses, Briotix Health Limited Partnership, acquired 100 % of an IIP business.

On October 31, 2023, the Company concurrently acquired 100 % of an IIP business and a 55 %

equity interest in an ergonomics software business.

On April 30, 2024, one of our primary IIP businesses, Briotix Health Limited Partnership, acquired 100 % of an IIP business.

Basis of Presentation

The accompanying unaudited

consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions for Form 10-Q.

statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

Management believes this report contains all necessary

adjustments (consisting only of normal recurring adjustments) to present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the interim periods presented.

These unaudited consolidated

financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and

Exchange Commission on February 29, 2024.

The accompanying unaudited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance

with the instructions for Form 10-Q.

However, the statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

believes this report contains all necessary adjustments (consisting only of normal recurring adjustments) to present fairly, in all material respects, the Company’s financial position, results of operations and cash flows for the interim periods

These unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31,

2024, filed with the Securities and Exchange Commission on March 3, 2025.

Interim results are not necessarily indicative of the results the Company expects for the entire year.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company.

All significant

intercompany transactions have been eliminated.

All significant intercompany transactions have been eliminated

in consolidation.

Segment Reporting

Operating segments are components of an enterprise for which separate financial information is

available and is evaluated regularly by chief operating decision makers in determining the allocation of resources and in assessing performance.

Operating segments are components of an enterprise for which separate financial information is available and 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:

6 unchanged sentences

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, permanent equity 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 triggering 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, combined with a history of such losses or a projection of continuing losses;

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, permanent equity 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 triggering 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, 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 triggering events or conditions could significantly impact an

impairment assessment, necessitating an impairment charge.

evaluates indefinite-lived tradenames in conjunction with its annual goodwill impairment test.

The reporting units within the Company’s physical

therapy business are comprised of six regions primarily based on each clinic’s location.

The occurrence of one of these triggering events or conditions could result in an impairment assessment, necessitating an impairment charge.

The Company evaluates indefinite-lived tradenames in conjunction with its annual goodwill impairment test.

The reporting units within the Company’s physical therapy business are comprised of six regions primarily based on each clinic’s location.

The IIP business consists of two reporting units.

6 unchanged sentences

reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit.

For both the three and nine months ended September 30, 2024, the Company recorded goodwill impairment of $ 0.1 million

related to a closed clinic.

During the three and twelve months ended December 31, 2023, the Company recorded a charge of $ 15.8

million for goodwill impairment and a charge of $ 1.7 million for the impairment of a tradename.

The charges for impairment were

related to one reporting unit in the IIP business.

The impairment was related to 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 did no t recognize any impairment as a result of the Company’s annual assessment of goodwill and tradename for the other seven reporting units.

The Company also noted no

impairment to long-lived assets for all reporting units.

For the three

months ended March 31, 2025, no triggering events or indicators were identified that would require impairments of assets for such period.

During the three and twelve months ended December 31,

2024, the Company recorded a non-cash impairment charge of $ 2.4 million related to assets held for sale (described in Note 5 , Assets Held for Sale ), of which $ 1.6 million was attributed to referral relationships, $ 0.5 million was

attributed to tradename and $ 0.3 million was attributed to other assets, during the year ended December 31, 2024.

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 affiliate

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.

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 unaudited consolidated financial statements separate from the parent entity’s equity.

The amount of net income attributable to non-controlling interest is included in the consolidated net income on the face of the unaudited

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.

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 via a predetermined formula based on a multiple of 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 or limited liability company agreement, as applicable.

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 caption—Redeemable 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.

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 these adjustments 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

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.

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 unaudited consolidated financial statements separate from the parent entity’s equity.

The amount of net income attributable to non-controlling interest is included in the consolidated net income on the face of the unaudited consolidated

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.

Company recognizes a gain or loss in net income when a subsidiary is deconsolidated.

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.

Redeemable Non-Controlling Interest

The non-controlling interest that is reflected as redeemable non-controlling interest in the unaudited consolidated financial statements consist 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.

The 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 six years ,

as defined in the limited partnership agreement.

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

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 caption – Redeemable 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

As a result, the value of the non-controlling interest is not adjusted below its initial carrying value.

The Company records any adjustments in the redemption value, net of tax, directly to retained earnings and the adjustments are not

reflected in the unaudited consolidated statements of net income.

Although the adjustments are not reflected in the unaudited 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 unaudited consolidated statements of net income.

believes the redemption value (i.e., the carrying amount) and fair value are the same.

Additionally, operating losses are

allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner.

During the three months

ended March 31, 2025, the Company sold an interest of 3.0 % in a partnership which is included in non-controlling interest, permanent

equity, for an aggregate price of less than $ 0.1 million.

During the year ended, December 31, 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.

During the year ended December 31, 2024, the Company also sold interests in six partnerships for an aggregate price of $ 0.3

The non-controlling interests - permanent equity sold in each of the partnerships ranged from 0.15 % to 10.0 %.

Revenue Recognition

Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606.

The Company recognizes revenue in accordance with

Accounting Standards Codification (“ASC”) 606.

For ASC 606, there is an implied contract between the Company and the patient upon each patient visit.

Separate contractual arrangements exist between the

Company 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 the Company but

indicate reimbursement rates for patients who are covered by those payors when the services are provided.

Separate contractual arrangements exist between the Company and third-party payors (e.g.

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 the Company 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.

The execution of the contract alone does not indicate a performance

For self-paying customers, the performance obligation exists when the Company provides 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.

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.

Patient Revenue

4 unchanged sentences

There is an implied contract between us and the patient upon each patient visit.

Generally, this occurs as 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.

Generally, this occurs as 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.

7 unchanged sentences

The revenue is determined and recognized based on the number of hours and respective rate for services provided in a given period.

Management contract revenue, which is also included in other revenue, is derived from contractual arrangements whereby the Company manages a clinic for third party owners.

The Company does not have any ownership interest in these

Management contract revenue, which is also

included in other revenue, is derived from contractual arrangements whereby the Company manages a clinic for unrelated physician groups and hospitals .

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 consisting of salaries , are recorded when incurred.

Management contract revenue was $ 2.5 million and $ 2.4 million for the three months ended

September 30, 2024 and September 30, 2023, respectively, and was $ 7.3 million and $ 6.3 million for the nine months ended September 30, 2024 and September 30, 2023, respectively.

Management contract revenue was $ 2.5 million and $ 2.4 million for the three months ended March 31,

2025 and March 31, 2024 , respectively.

Additionally, other revenue from physical therapy

6 unchanged sentences

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.

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

However, the services authorized, 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

In order to assess the accuracy of its revenues, 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 between approximately 1.0 %

to 1.5 % of net revenues.

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 %

on each balance sheet date.

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,

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 between approximately 1.0 % to 1.5 % of net revenues.

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 % on any

balance sheet date.

Allowance for Credit Losses

The Company determines allowances for credit losses

based on the specific agings and payor classifications at each clinic.

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 allowance for credit losses, includes only those amounts the Company estimates to be collectible.

Patient accounts receivable, which are stated at the historical

carrying amount net of contractual allowances, write-offs, and allowance for credit losses, includes only those amounts the Company estimates to be collectible.

Income taxes are accounted for under the asset and liability method.

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settlement with the relevant tax authority.

The Company did no t have any accrued interest or penalties associated with any unrecognized tax benefits no r was any interest expense recognized during the three and nine months ended September 30, 2024, and September 30, 2023.

The Company records any interest or penalties, if required, in interest and other

expense, as appropriate.

The Company did no t have any accrued interest or penalties associated with any unrecognized tax benefits no r was any interest expense recognized during either the three months ended March 31, 2025, or March 31, 2024.

The Company records any interest or penalties, if required, in interest and other expense, as

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.

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.

The three levels of the fair value hierarchy are as follows:

Level 1 – Quoted prices in active markets for identical assets or

Level 2 – Inputs, other than the quoted prices in active markets, that

are observable either directly or indirectly.

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, certain 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 of the debt under the Third Amended and Restated Credit Agreement (defined as “Credit Agreement” in Note 8) 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 expiring in 2027 is associated

with the potential future purchase of a separate company within the Company’s IIP business.

The carrying amounts

reported in the balance sheets for cash and cash equivalents, certain 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 of the debt under the Third Amended and Restated Credit Agreement (defined as “Credit Agreement” in Note 9) 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 ”) or the rate of interest in effect as publicly announced from time to time by Bank of America as its prime rate .

The put right expiring in 2027 is associated with

the potential future purchase of a separate company within the Company’s IIP business.

It is marked to fair value on a recurring basis using Level 3 inputs.

In determining the value of the put right as of September 30 , 2024 , the Company used a Monte Carlo simulation model utilizing unobservable inputs including asset volatility of 20.0 % and a discount rate of 10.96 %.

The value of this put right decreased $ 0.2 million for the three months ended September 30, 2024 , and increased $ 0.1 million for the nine months ended September 30 , 2024 .

The put right was valued at approximately $ 1.1 million on

September 30, 2024, and approximately $ 1.0 million on December 31, 2023.

The valuation 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.

In determining the value of the put right as of March 31 , 2025 , the Company used a

Monte Carlo simulation model utilizing unobservable inputs including asset volatility of 20.0 % and a discount rate of 11.27 %.

The value of this put right increased $ 0.4

million for the three months ended March 31 , 2025 .

The put right was valued at approximately $ 1.4 million on March

31, 2025, and approximately $ 1.0 million on December 31, 2024.

The valuation 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.

See Note 10 for more information on the Company’s interest rate derivative.

The redemption value of redeemable non-controlling interests approximates the fair value.

The redemption value of redeemable

non-controlling interests approximates the fair value.

See Note 4 for the changes in the fair value of Redeemable non-controlling interest.

The consideration for some of the Company’s acquisitions includes future payments that are contingent upon the occurrence of future operational or financial 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.

The unobservable inputs used in the valuation of the contingencies as of September 30 , 2024 , include asset

volatility of 15.0 % and a discount rate of 6.0 %.

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 Company ’s financial position or

results of operations in any given period.

The Company determined the fair value of its contingent consideration obligations to be $ 22.7

million on September 30, 2024, and $ 12.5 million on December 31, 2023.

The consideration for some of the Company’s

acquisitions includes future payments that are contingent upon the occurrence of future operational or financial 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 $ 14.0 million on March 31, 2025, and $ 17.6

million on 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 certain other key employees,

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.

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 certain other key employees, 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.

New Accounting Pronouncements

In March 2023, the FASB issued ASU 2023-01, Leases (Topic

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.

effective for annual reporting periods beginning on or after D ecember 15, 2023;

however, early adoption is permitted.

The ASU can either be applied prospectively or retrospectively.

The adoption of ASU 2023-01 did not have a material effect 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.

ASU also requires disclosure of the name and title of the chief operating decision maker.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and

early adoption is permitted.

The Company is currently evaluating the impact of this accounting standard on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09 Income Taxes

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.

The restricted stock issued is included in basic and diluted shares for the earnings per share computation.

Recently Adopted Accounting Guidance

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 is currently evaluating the impact of this accounting standard on its consolidated financial statements.

The Company has adopted this standard as of January 1, 2025, and there

was no significant impact on the Company’s consolidated financial statements.

Recent Accounting Guidance Not Yet Adopted

In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) , which is intended to improve the disclosures of expenses by providing more detailed information about the types of expenses in commonly presented expense captions.

The ASU requires entities to disclose the amounts of purchases of

inventory, employee compensation, depreciation and intangible asset amortization included in each relevant expense caption;

as well as a qualitative description of the amounts remaining in relevant expense captions that are not separately

disaggregated quantitatively.

The amendment also requires disclosure of the total amount of selling expense and, in annual reporting periods, an entity’s definition of selling expenses.

The ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027;

however early

adoption is permitted.

The ASU can be applied either prospectively or retrospectively.

The Company is currently reviewing the impact that ASU 2024-03 will have on the disclosures in our consolidated financial statements.

Earnings Per Share

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is included in the earnings per basic and diluted share calculation.

The computation of basic

and diluted earnings per share are as follows.

For the Three Months Ended

For the Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

(In thousands, except per share data)

The computation of basic and diluted earnings per share are as follows.

Three Months Ended

March 31, 2025

March 31, 2024

Earnings per Share

(In thousands, except per share data)

Computation of earnings per share - USPH shareholders:

4 unchanged sentences

Earnings per share (basic and diluted)

Shares used in computation - basic and diluted

Shares used in computation:

Basic and diluted earnings per share - weighted-average shares

Acquisitions of Businesses

1 unchanged sentence

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 Revolving Facility (as defined in

Borrowings) or proceeds from the secondary equity offering completed in May 2023.

The purchase price plus the fair value of the non-controlling interest for the acquisitions after September 30, 2023, were allocated to the fair value of the assets acquired,

inclusive of identifiable intangible assets (i.e.

tradenames, referral relationships and non-compete agreements) and liabilities assumed based on the estimated fair values at the acquisition date, with the amount in excess of fair values being

recorded as goodwill.

The Company is in the process of completing its formal valuation analysis of the above-mentioned acquisitions, 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 on September 30, 2024, based on additional information obtained and completion of the valuation of the identifiable intangible

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 consideration paid for each acquisition is derived through arm’s length negotiations and funded through working capital or borrowings under the Company’s revolving facility.

The purchase price plus the fair value of the non-controlling interest for the acquisitions after March 31, 2024 were allocated to the fair value of the assets acquired, inclusive of

identifiable intangible assets (i.e.

tradenames, referral relationships and non-compete agreements) and liabilities assumed based on the estimated fair values at the acquisition date, with the amount in excess of fair values being recorded as

The Company is in the process of completing its formal valuation analysis of the above-mentioned acquisitions in order to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities

Thus, the final allocation of the purchase price may differ from the preliminary estimates used on March 31, 2025, 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.

The Company continues to evaluate the components for the purchase

price allocations for other acquisitions in 2023 and 2024.

The results of operations of the acquisi tions below have been included in the Company’s unaudited consolidated financial statements from their respective date of acquisition.

Unaudited proforma consolidated financial information for the

acquisitions has not been included, as the results, individually and in the aggregate, were not material to current operations.

The Company continues to evaluate the components for the purchase price allocations for subsequent acquisitions in 2024 and

The results of operations of the acquisitions below have been included in the Company’s unaudited consolidated financial statements from their respective date of acquisition.

Unaudited proforma consolidated financial information for the acquisitions has not been included, as the results, individually and in the aggregate, were not material to current operations.

During the three months ended March 31, 2025, the Company acquired a majority interest in the following businesses:

2025 Acquisitions

August 2024 Acquisition

August 31, 2024

April 2024 Acquisition

April 30, 2024

March 2024 Acquisition

March 29, 2024

IIP business.

On April 30 , 2024, one of the Company ’s primary IIP businesses, Briotix Health Limited Partnership, acquired 100 % of an

IIP business.

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.

February 2025 Acquisition

February 28, 2025

On February 28, 2025, the Company acquired 65 % interest in a physical practice with three clinic locations.

The prior owner retained a 35 % ownership interest.

The purchase price for the 65 % interest was approximately $ 3.8 million, which was paid in

As part of this transaction, the Company agreed to additional consideration if future operational objectives are met by the business.

The maximum amount of additional contingent consideration due under this agreement is $ 1.3 million.

contingent consideration was valued at $ 3.6 million on August 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

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.

There is no maximum payout.

The contingent consideration was valued at $ 2.4 million as of September 30, 2024.

On March 29, 2024, the Company 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, 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 $ 1.3

million on September 30, 2024.

Besides the multi-clinic acquisition referenced above, the Company purchased the assets and business of six physical therapy clinics, which were tucked into larger partnerships in separate transactions.

The following table provides details on the preliminary purchase price

allocation for the acquisitions described above.

million as of March 31, 2025.

Besides the multi-clinic acquisition referenced above, the

Company purchased the assets and business of three physical therapy clinics, which were tucked into larger partnerships in separate

transactions.

The following table provides details on the preliminary purchase price allocation

for the acquisitions described above.

Physical Therapy

1 unchanged sentence

Cash paid, net of cash acquired

Deferred payments

Contingent payments

6 unchanged sentences

Customer and referral relationships

Non-compete agreement

Non-compete agreements

Fair value of non-controlling interest (classified as redeemable non-controlling interest)

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 the first nine months of 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.

Total current assets primarily represent accounts receivable while total non-current assets consist of fixed

assets and equipment used in a physical therapy practice.

For the acquisitions completed in the three months ended March 31, 2025, 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.

2024 Acquisitions

November 2024 Acquisition

November 30, 2024

October 2024 Acquisition

October 31, 2024

September 2023 Acquisition 1

September 29, 2023

September 2023 Acquisition 2

September 29, 2023

July 2023 Acquisition

July 31, 2023

May 2023 Acquisition

February 2023 Acquisition

February 28, 2023

August 2024 Acquisition

August 31, 2024

April 2024 Acquisition

April 30, 2024

March 2024 Acquisition

March 29, 2024

IIP business.

On October 31, 2023, the Company concurrently acquired 100 %

of an IIP business and a 55 % equity interest in an ergonomics software business.

October 31, 2023, the Company concurrently acquired 100 % of an IIP business and a 55 % equity interest in an 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.

September 29, 2023, the Company acquired a 70 % equity interest in a four -clinic physical therapy practice.

The original 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

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.

On April 30 , 2024, one of the Company ’s primary IIP businesses, Briotix Health Limited Partnership, acquired 100 % of an IIP

On November 30, 2024, the Company acquired a 75 % equity interest in an eight -clinic physical therapy practice.

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 is a deferred payment due on June 30, 2025.

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 are payable on February 28, 2025.

The aggregate purchase price for the 2023 acquisitions has been

preliminarily allocated as follows:

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.

On October 31, 2024, the Company 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.

The Company 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 $ 20.0 million of

additional consideration if certain performance criteria relating to the Metro business are achieved.

The contingent consideration is valued at $ 7.4

million on March 31, 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

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 $ 2.1

million on March 31, 2025.

The note accrues interest at 5.0 % per annum and the principal and the interest is to be paid in May 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 $ 2.0

million as of March 31, 2025.

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 $ 0.8 million on

March 31, 2025.

For the year ended December 31, 2024, besides the multi-clinic

acquisition referenced above, the Company purchased the assets and business of seven physical therapy clinics, which were tucked into

larger partnerships in separate transactions.

The following table provides details on the purchase price allocations for

the March 2024 acquisition and preliminary purchase price allocations for the other acquisitions described above.

Physical Therapy

1 unchanged sentence

Cash paid, net of cash acquired

Deferred payments

Granted shares

Contingent payments

8 unchanged sentences

Fair value of non-controlling interest (classified as redeemable non-controlling interest)

Besides the multi-clinic acquisitions referenced in the table

above, the Company purchased the assets and business of eight physical therapy clinics in separate transactions.

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 2023, the values assigned to the

customer and referral relationships and non-compete agreements 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.

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 agreements 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.

Variable Interest Entities

Certain states prohibit the “corporate

practice of medicine,” which restricts the Company from owning physical therapy practices which directly employ therapists and from exercising control over medical decisions by therapists.

In these states, the Company enters into long-term

management agreements with medical practices that are owned by licensed therapists, which, in turn, employ or contract with therapists who provide professional services.

Based on the provisions of the management agreements, the Company determined that these entities are variable

interest entities.

The Company’s ownership percentages in these entities is 50% as of March 31, 2025.

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.

As of March 31, 2025, and December 31, 2024, the total assets of the Company’s variable interest

entities were $ 232.1 million and $ 231.3

million, respectively.

As of March 31, 2025, and December 31, 2024, the total liabilities of the Company’s VIEs were $ 31.4 million

and $ 31.9 million respectively.

The table below presents the operating results of the VIEs.

Three Months Ended

March 31, 2025

(In thousands)

Operating cost:

Salaries and related costs

Rent, supplies, contract labor and other

Provision for credit losses

Total operating cost

Other expense

Income before taxes

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

occur in a series of steps which are described below.

typically occur in a series of steps which are described below.

Prior to the Acquisition, the Therapy Practice exists as a separate legal entity (the “Seller Entity”).

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(the “Selling Shareholders”) most of whom are physical therapists that work in the Acquired Therapy Practice and provide physical therapy services to patients.

In conjunction with the Acquisition, the Seller Entity contributes the 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.

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

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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”).

The Purchase Agreement does not contain any future earn-out or other contingent consideration that is payable to the Seller

Entity or the Selling Shareholders.

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.

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

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of the limited partnership interests in NewCo and the Seller Entity retains a portion of the limited partnership interest in NewCo (“Seller Entity Interest”).

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.

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

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.

The employment of an Employed Selling Shareholder can be terminated by the Employed Selling Shareholder or NewCo, with or without cause,

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.

in those situations, such Selling Shareholders sell their entire ownership interest in the Seller

Entity as of the closing of the Acquisition.

The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities

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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 business 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 business during the Non-Compete Term.

The Non-Compete Term commences as of the date of the Acquisition and expires on the later

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.

The Non-Compete Term commences as of the date of the Acquisition and typically expires on the later

Two years after the date an Employed Selling

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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.

The Non-Compete Agreement applies to a restricted region which is a defined mileage radius from the 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 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:

In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to a specified anniversary of 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.

In the event that any Selling Shareholder is not employed by NewCo as of a specified anniversary of the Closing 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 shall have 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.

In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after a specified of the Closing 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.

If any Selling Shareholder’s employment by NewCo is terminated prior to a specified anniversary of 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.

In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after a specified anniversary of the Closing 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.

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

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.

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.

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.

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.

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.

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 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.

The Purchase Price for the initial equity interest purchased by the Company, 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.

The Put Right and the Call Right do not have an expiration date, and the Seller Entity Interest is not required to be purchased by the Company or sold by the Seller Entity unless either

the Put Right or the Call Right is exercised.

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.

ProgressiveHealth

On November 30, 2021,

the Company acquired a majority interest in ProgressiveHealth Companies, LLC (“Progressive”), which owns a majority interest in certain subsidiaries (“Progressive Subsidiaries”) that operate in the IIP business.

The Progressive transaction was

completed in a series of steps which are described below.

Prior to the acquisition, the Progressive Subsidiaries were owned by a legal entity (“Progressive Parent”) controlled by its individual owners (the “Progressive Selling Shareholders”),

who work in and manage the Progressive business.

In conjunction with the acquisition, the Progressive Selling Shareholders caused the Progressive Parent to transfer its ownership of the Progressive Subsidiaries into a newly-formed

limited liability company (“Progressive NewCo”), in exchange for one hundred percent ( 100 %) of the membership interests in

Progressive NewCo.

The Purchase Price for the initial equity interest purchased by the Company typically 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.

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.

ProgressiveHealth Acquisition

On November 30, 2021, the Company acquired a majority interest in ProgressiveHealth Companies, LLC (“Progressive”), which owns a majority interest

in certain subsidiaries (“Progressive Subsidiaries”) that operate in the IIP business.

The Progressive transaction was completed in a series of steps which are described below.

Prior to the acquisition, the Progressive Subsidiaries were owned by a legal entity (“Progressive Parent”) controlled by its individual

owners (the “ Progressive Selling Shareholders”), who work in and manage the Progressive business.

In conjunction with the acquisition, the Progressive Selling Shareholders caused the Progressive Parent to transfer its ownership of the

Progressive Subsidiaries into a newly-formed limited liability company (“Progressive NewCo”), in exchange for one hundred percent ( 100 %)

of the membership interests in Progressive NewCo.

Therefore, in this step, Progressive NewCo became wholly-owned by the Progressive Selling Shareholders.

The Company entered into an agreement (the “Progressive Purchase Agreement”) to acquire from the Progressive Selling Shareholders a majority of the membership interest in Progressive

The consideration for the acquisition is primarily payable in the form of cash at closing, a relatively small portion paid in cash after the closing contingent on certain performance criteria, and a small note in lieu of an escrow

(the “Progressive Purchase Price”).

The Company and the Progressive Selling Shareholders also executed an operating agreement (the “Progressive Operating Agreement”) for Progressive NewCo that sets forth the rights and

obligations of the members of Progressive NewCo.

As noted above, the Company did not purchase 100 % of the membership

interests in Progressive NewCo and the Progressive Selling Shareholders retained a portion of the membership interest in Progressive NewCo (“Progressive Selling Shareholders’ Interest”).

The Company and the Progressive Selling Shareholders executed a non-compete agreement (the “Progressive Non-Compete Agreement”) which restricts the Progressive Selling Shareholders from

competing for a specified period of time (the “Progressive Non-Compete Term”).

The Company entered into an agreement (the “Progressive Purchase Agreement”) to acquire from the Progressive Selling Shareholders a

majority of the membership interest in Progressive NewCo.

The consideration for the acquisition is primarily payable in the form of cash at closing, a relatively small portion paid in cash after the closing contingent on certain

performance criteria, and a small note in lieu of an escrow (the “Progressive Purchase Price”).

The Company and the Progressive Selling Shareholders also executed an operating agreement (the “Progressive Operating Agreement”)

for Progressive NewCo that sets forth the rights and obligations of the members of Progressive NewCo.

As noted above, the Company did not purchase 100 % of the membership interests in Progressive NewCo and the Progressive Selling Shareholders retained a portion of the membership interest in Progressive NewCo (“Progressive

Selling Shareholders’ Interest”).

The Company and the Progressive Selling Shareholders executed a non-compete agreement (the “Progressive Non-Compete Agreement”)

which restricts the Progressive Selling Shareholders from competing for a specified period of time (the “Progressive Non-Compete Term”).

The Progressive Non-Compete Term commences as of the date of the Progressive acquisition and expires on the later of:

Two years after the date a Progressive Selling Shareholder no longer is

involved in the management of Progressive NewCo or

Seven years from the date of the acquisition.

Two years after the date

a Progressive Selling Shareholder no longer is involved in the management of Progressive NewCo or

Seven years from the

date of the acquisition.

The Progressive Non-Compete Agreement applies to the entire United States.

The Progressive Put Right (as defined below) and the Progressive Call Right (as defined below) do not have an expiration date.

The Progressive Operating Agreement contains provisions

for the redemption of the Progressive Selling Shareholder’s Interest, either at the option of the Company (the “Progressive Call Right”) or at the option of the Progressive Selling Shareholder (the “Progressive Put Right”) as follows:

The Progressive Put Right (as defined below) and the Progressive Call Right (as defined below) do not have an expiration

The Progressive Operating Agreement contains provisions for the redemption of the Progressive Selling Shareholder’s Interest, either at the option of the Company (the “Progressive Call Right”) or at the option of the

Progressive Selling Shareholder (the “Progressive Put Right”) as follows:

Progressive Put Right

Each of the Progressive Selling Shareholders has the right to sell 30 %

of their respective residual interests on each of the 4th and 5th anniversaries of the acquisition closing, and then 10 % on

each of the 6th and 7th anniversaries.

In the event that any Progressive Selling Shareholder terminates his management relationship with Progressive NewCo for any reason on or after the seventh anniversary of

the Closing Date, the Progressive Selling Shareholder has the Progressive Put Right, and upon the exercise of the Progressive Put Right, the Progressive Selling Shareholder’s Interest shall be redeemed by the Company at the purchase

price described in “3” below.

Each of the Progressive Selling Shareholders has the right to sell 30 % of their respective residual interests on each of the 4th and 5th anniversaries of the acquisition closing, and then 10 % on each of the 6th and 7th anniversaries.

In the event that any Progressive Selling Shareholder terminates his management relationship with Progressive NewCo for any

reason on or after the seventh anniversary of the Closing Date, the Progressive Selling Shareholder has the Progressive Put Right, and upon the exercise of the Progressive Put Right, the Progressive Selling Shareholder’s Interest

shall be redeemed by the Company at the purchase price described in “3” below.

Progressive Call Rights

If any Progressive Selling Shareholder’s ceases to perform management services on behalf of Progressive NewCo, the Company thereafter shall have an irrevocable right to

purchase from such Progressive Selling Shareholder his Interest, in each case at the purchase price described in “3” below.

For the Progressive Put Right and the Progressive Call Right, the purchase price is derived from a formula based on a specified multiple of Progressive 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 Progressive NewCo.

Progressive NewCo’s

earnings are distributed monthly based on available cash within Progressive NewCo; therefore, the undistributed earnings amount is small, if any.

The Progressive 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 Progressive Put Right and the Progressive Call Right noted above.

The Progressive Put Right and the Progressive Call Right do not have an expiration date.

Neither the Progressive Operating Agreement nor the Progressive Non-Compete Agreement contain any provision to escrow or “claw back” the equity interest in Progressive

NewCo held by the Progressive Selling Shareholders, in the event of a breach of the operating agreement or non-compete terms, or the management services agreement pursuant to which the Progressive Selling Shareholders perform services on behalf of

If any Progressive Selling Shareholder’s ceases to perform management services on behalf of Progressive NewCo, the Company

thereafter shall have an irrevocable right to purchase from such Progressive Selling Shareholder his Interest, in each case at the purchase price described in “3” below.

For the Progressive Put Right and the Progressive Call Right, the purchase price is derived from a formula based on a specified

multiple of Progressive 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

Progressive NewCo.

Progressive NewCo’s earnings are distributed monthly based on available cash within Progressive NewCo; therefore, the undistributed earnings amount is small, if any.

The Progressive 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 Progressive Put Right and the Progressive Call Right noted above.

The Progressive Put Right and the Progressive Call Right do not have an expiration date.

Neither the Progressive Operating Agreement nor the Progressive Non-Compete Agreement contain any provision to escrow or “claw back” the equity

interest in Progressive NewCo held by the Progressive Selling Shareholders, in the event of a breach of the operating agreement or non-compete terms, or the management services agreement pursuant to which the Progressive Selling Shareholders

perform services on behalf of Progressive NewCo.

The Company’s only recourse against the Progressive Selling Shareholder for breach of any of these agreements is to seek damages and other legal remedies under such agreements.

There are no conditions in any of the arrangements

with a Progressive Selling Shareholder that would result in a forfeiture of the equity interest in Progressive NewCo held by a Progressive Selling Shareholder.

conditions in any of the arrangements with a Progressive Selling Shareholder that would result in a forfeiture of the equity interest in Progressive NewCo held by a Progressive Selling Shareholder.

For both scenarios described above, 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.

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.

Carrying Amounts of Redeemable Non-Controlling Interests

The following table

details the changes in the carrying amount (fair value) of the Company’s redeemable non-controlling interests:

For the Three Months Ended

For the Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

The following table details the changes in the carrying amount (fair value) of the Company’s redeemable non-controlling interests:

Three Months Ended

March 31, 2025

December 31, 2024

(In thousands)

Beginning balance

Net income allocated to redeemable non-controlling interest partners

Net income allocated to redeemable non-controlling interest

Distributions to redeemable non-controlling interest partners

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Acquired interest

Contributed capital

Sales of redeemable non-controlling interest

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Reduction due to separation agreement

Adjustments in notes receivables related to the sales of redeemable non-controlling interest

Ending balance

The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interests:

September 30, 2024

September 30, 2023

Three Months Ended

March 31, 2025

December 31, 2024

(In thousands)

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Holder’s employment has terminated and contractual time period has not expired

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

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 business unit’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 was completed in February 2025 and the related loss on sale of $ 0.1 million was recognized in the consolidated statements of net income for the three months ended March 31, 2025.

The changes in the carrying amount of goodwill consisted of the following:

Nine Months Ended

September 30, 2024

Three Months Ended

March 31, 2025

December 31, 2024

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Adjustments for purchase price allocation of businesses acquired in prior year

Impairment of goodwill

Impairment charges

Ending balance

For the three and nine months ended September 30,

2024, the Company recorded goodwill impairment of $ 0.1 million related to a closed clinic.

During the year ended December 31, 2023,

the Company recorded goodwill impairment of $ 15.8 million related to a reporting unit in the Company’s IIP business.

For both of the three months ended March 31,

2025, and 2024, no triggering events or indicators were identified that would require impairment assessments as of such periods.

Intangible Assets, Net

The Company’s intangible assets, net, consisted of the following:

As of September 30, 2024

As of December 31, 2023

Accumulated Amortization

March 31, 2025

December 31, 2024

(In thousands)

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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 7.0 to 15.0 years.

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 8.0 to 15.0

Non-compete agreements are amortized over the respective term of the agreements which range from 5.0 to 6.0 years.

For the nine months ended September 30, 2024, the weighted

average amortization period for customer and referral relationships was 12.7 years and the weighted average amortization period for

non-compete agreements was 5.5 years.

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.

The following table details the amount of amortization expense recorded for

intangible assets for the periods presented:

For the Three Months Ended

For the Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

For the three months ended March 31, 2025, the weighted average amortization period for customer and referral relationships was 12.8 years and the weighted average amortization period for non-compete agreements was 5.7 years.

During the year ended December 31, 2024, the Company recognized charges of $ 2.0

million related to the impairment of assets held for sale .

impairment loss is presented in the 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:

Three Months Ended

March 31, 2025

March 31, 2024

(In thousands)

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Non-compete agreements

Based on the balance of referral relationships and non-compete agreements as of September 30, 2024, the

expected amount to be amortized in 2024 and thereafter by year is as follows:

Based on the balance of referral relationships and non-compete agreements as of March

31, 2025, the expected amount to be amortized in 2025 and thereafter by year is as follows:

For the Year Ending December 31,

Customer and Referral

Relationships

Referral Relationships

(In thousands)

(excluding the nine months ended September 30, 2024)

(excluding the three months ended March 31, 2025)

Accrued Expenses

Accrued expenses consisted of the following:

September 30, 2024

Accrued expenses included the following:

March 31, 2025

December 31, 2024

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Salaries and related costs

Contingency payable

Credit balances due to patients and payors

Federal income taxes payable

Dividends payable

Group health insurance claims

Closure costs

Federal income taxes payable

Contingent consideration payable

Other property taxes payable

Interest payable

Closure costs

Payable related to purchase of redeemable non-controlling interests, temporary equity

Deferred payments related to acquisitions

Amounts outstanding under the Company’s Senior Credit Facilities (as defined below) and notes payable

consisted of the following:

As of September 30, 2024

As of December 31, 2023

March 31, 2025

December 31, 2024

Debt Issuance

6 unchanged sentences

The long-term portion is included as part of Other Long-Term Liabilities in the

unaudited Consolidated Balance Sheet.

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 .

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

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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.

(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.

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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.

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 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

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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 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

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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.

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.

Company may prepay and/or repay the revolving loans and the term loans, 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

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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 September 30, 2024, $ 140.6 million was outstanding on the Term Facility while none was outstanding under the Revolving Facility

As of March 31, 2025, $ 136.9 million was outstanding on the Term Facility while $ 28.0 million was outstanding under the Revolving Facility

resulting in $ 147.0 million of credit availability.

As of September 30, 2024, the Company was in compliance with all of the covenants contained in the Credit Agreement.

The interest rate on the Company’s Senior Credit Facilities was 4.7 % for the three months ended September 30, 2024, and 5.6 % for the three months ended September 30, 2023, with an all-in effective interest rate, including all associated costs, of 5.4 % and 5.2 % over the same periods,

As of March 31, 2025, the Company was in compliance with all of the covenants contained in the Credit Agreement.

The interest rate on the Company’s Senior Credit Facilities was 4.9 % for the three months ended March 31, 2025, and 4.7 % for the three months ended March 31, 2024, with an all-in effective interest rate, including all associated costs, of 5.5 % and 5.3 % over the same periods,

respectively.

The all-in effective interest rate on the Company’s Senior Credit Facilities for the nine months ended September 30, 2024, was 5.4 %

and 5.7 % for the nine months ended September 30, 2023.

The Company generally enters into various notes payable as a means of financing acquisitions.

September 30, 2024, the Company’s remaining outstanding balance on these notes amounte d to $ 3.1 million, of which $ 0.8 million is due by December 31, 2024, $ 1.8

March 31, 2025, the Company’s remaining outstanding balance on these notes amounte d to $ 2.6 million, of which $ 1.6 million is due in 2025, $ 0.9

million is due in 2026, and $ 0.1 million is due in 2027.

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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 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.

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, which had a $ 150 million notional value, and a maturity date of June 30, 2027 .

In May 2022, the Company entered into an interest rate swap

agreement, effective on June 30, 2022, with Bank of America, N.A, which had a $ 150 million notional value, and a maturity date of June 30, 2027 .

Beginning in July 2022, the Company receives 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.

The total interest rate in any period will also include an applicable margin based on the Company’s consolidated

leverage ratio.

In connection with the swap, no cash was exchanged between the Company and the counterparty.

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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.

The impact of the Company’s derivative

instruments on the accompanying Consolidated Statements of Comprehensive Income are presented in the table below.

For the Three Months Ended

For the Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

The impact of the Company’s derivative instruments on the accompanying

Consolidated Statements of Comprehensive Income are presented in the table below.

Three Months Ended

March 31, 2025

March 31, 2024

(In thousands)

Other comprehensive (loss) gain:

Other comprehensive gain (loss):

Unrealized (loss) gain on cash flow hedge

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income attributable to USPH shareholders

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

September 30,

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.

(In thousands)

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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

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.

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.

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.

The components of lease expense were as follows.

For the Three Months Ended

For the Nine Months Ended

September 30 , 2024

September 30 , 2023

September 30 , 2024

September 30 , 2023

Three Months Ended

March 31, 2025

March 31, 2024

(In thousands)

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Variable lease cost

Sublease income

Total lease cost

* Sublease income was immaterial

Lease costs are reflected in the consolidated statement of net income in the line item – rent, supplies, contract labor and other.

The supplemental cash flow informa tion

related to leases was as follows.

For the Three Months Ended

For the Nine Months Ended

September 30, 2024

September 30, 2023

September 30 ,

The supplemental cash flow information related to leases was as follows.

Three Months Ended

March 31, 2025

March 31, 2024

(In thousands)

Cash paid for amounts included in the measurement of operating lease liabilities

Right-of-use assets obtained in exchange for new operating lease liabilities

The aggregate future lease payments for operating leases as of September 30, 2024,

were as follows.

Cash paid for amounts included in the measurement of

operating lease liabilities

Right-of-use assets obtained in exchange for new

operating lease liabilities

The aggregate future lease payments for operating leases as of March 31, 2025, were as follows.

(In thousands)

2024 (excluding the nine months ended September 30, 2024)

2025 (excluding the three months ended March 31, 2025)

2029 and thereafter

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Average lease terms and discount rates were as follows.

September 30, 2024

September 30, 2023

Weighted-average remaining lease term - Operating leases

Weighted-average discount rate - Operating leases

March 31, 2025

March 31, 2024

Weighted-average remaining lease term

Weighted-average discount rate

The Company leases certain properties from Michael G.

Mayrsohn (lessor), who is the President of Metro and has been nominated by the Board of Directors to be elected as

a director at the Annual Meeting of Shareholders to be held on May 20,2025.

The two leases expire on April 30, 2030 , and December 31, 2031 .

the three months ended March 31, 2025, the Company paid a total of $ 0.1 million of lease payments to Mr.

The total of minimum

future rental payments under these related party lease agreements is $ 3.0 million as of March 31, 2025.

Segment Information

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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”).

To a lesser extent, the Company operates some clinics, through wholly-owned subsidiaries, under profit sharing arrangements with therapists (hereinafter referred to as “Wholly-Owned

Facilities”).

The managing therapist of each clinic owns, dire ctly 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, th e Company operates some

clinics, through wholly-owned subsidiaries (hereinafter referred to as “Wholly-Owned Facilities).

The Company continues to seek to attract for employment

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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.

managing the clinic operations.

Facilities operate more than one clinic location.

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 .

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

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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.

The respective liability is included in current liabilities—accrued expenses on the consolidated balance sheets.

Industrial Injury Prevention Services

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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.

performs these services through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers.

Other clients include large insurers and their contractor s.

IIP services are performed through

Industrial Sports Medicine Professionals with specialized training related to the musculoskeletal system.

Segment Financials

The Company evaluates performance of the segments based on gross profit.

The Company has provided additional information regarding its reportable segments which

contributes to the understanding of the Company and provides useful information.

The following table summarizes selected financial data for the Company’s reportable segments:

For the Three Months Ended

For the Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

(In thousands)

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.

Company has provided additional information regarding its reportable segments which contributes to the understanding of the Company and provides useful inf ormation.

Three Months Ended

March 31, 2025

March 31, 2024

(In thousands)

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Total rent, supplies, contract labor and other

Depreciation and amortization:

Physical therapy operations

Industrial injury prevention services

Total depreciation and amortization

Provision for credit losses:

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Industrial injury prevention services

Total closure costs

Total clinic closure costs

Total Company

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Total Company

September 30, 2024

September 30, 2023

Total Assets:

Unallocated amounts

Corporate office costs

Interest expense, debt and other

Interest income from investments

Gain on change in fair value of contingent earn-out consideration

Change in revaluation of put-right liability

Equity in earnings of unconsolidated affiliate

Loss on sale of a partnership

Total unallocated amounts

Income before taxes

March 31, 2025

December 31, 2024

Physical therapy operations

Industrial injury prevention services

Total Company

Total goodwil

All other assets:

Physical therapy operations

Industrial injury prevention services

Total all other assets

Investment in Unconsolidated

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The investment

balance of this joint venture as of September 30, 2024, is $ 12.2 million and the earnings amounted to approximately $ 0.2 million and $ 0.8 million for the

three and nine months ended September 30, 2024, respectively.

Earnings in the comparable prior periods were $ 0.2 million and $ 0.8 million for the three and nine months ended September 30, 2023, respectively.

balance of this joint venture as of March 31, 2025, is $ 12.3 million and the earnings amounted to approximately $ 0.4 million for the three months ended March 31, 2025.

Earnings in the comparable prior period amounted to approximately $ 0.3 million and the investment balance of the joint venture was $ 12.2 million as of March 31, 2024.

Reclassification of Prior Period

Certain prior year amounts have been reclassified for consistency with the current year presentation.

These reclassifications had no effect on the reported results of

Subsequent Events

The Company’s Board of Directors declared a quarterly dividend of $ 0.44 per share payable on December 6, 2024 ,

to shareholders of record on November 15, 2024 .

On October 31, 2024, the Company completed the acquisition of a 50 % interest in MSO Metro, LLC (“Metro”) pursuant to the Equity Interest Purchase Agreement (the “Purchase Agreement”) dated October 7, 2024 among

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 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 Company acquired an outpatient home care physical, occupational and speech therapy practice through Metro.

Metro acquired an 80 % ownership interest in the acquired company with the current owner retaining a 20 %

ownership interest.

The Company’s Board of Directors declared a quarterly dividend of $ 0.45 per share payable on June 13, 2025 ,

to shareholders of record on May 23, 2025 .

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

What changed 10-Q

Item 1. Financial Statements