What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2024-11-08 · 335 added, 528 removed, 214 unchanged (80% of the section changed)

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with (i) our historical consolidated financial statements and accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q;

and (ii) our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the

Securities and Exchange Commission (the “SEC”) on February 29, 2024 (“2023 Annual Report”).

and (ii) our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities

and Exchange Commission (the “SEC”) on March 3, 2025 (“2024 Annual Report”).

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

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FORWARD-LOOKING STATEMENTS

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

“Exchange Act”).

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

amended (the “Exchange Act”).

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

These statements (often using words such as

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

Included among such statements are those relating to

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

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

forward-looking statements as a result of certain risks, uncertainties, and factors, which include, but are not limited to:

These statements (often using words such

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

Included among such statements, but not limited to, are

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

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

in such forward-looking statements as a result of certain risks, uncertainties, and factors, which include, but are not limited to:

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

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

private third-party payors for our services may adopt payment policies that could limit our future revenue and profitability;

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

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

write-off of goodwill and other intangible assets;

compliance with state laws and regulations relating to the corporate practice of medicine and fee splitting, and associated fines and penalties for failure to comply ;

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

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

the impact of future public health crises and epidemics/pandemics, such as was the case with the novel strain of COVID-19 and its variants;

one of our acquisition agreements contains a put right related to a future purchase of a majority interest in a separate company;

certain of our acquisition agreements contain put-rights related to a future purchase of significant equity interests in our subsidiaries or in a separate company;

the impact of future vaccinations and/or testing mandates at the federal, state and/or local level, which could have an adverse impact on staffing, revenue, costs and the results of operations;

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changes as the result of government enacted national healthcare reform;

the ability to control variable interest entities for which we do not have a direct ownership;

business and regulatory conditions, including federal and state regulations;

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general economic conditions, including but not limited to inflationary and recessionary periods;

actual or perceived events involving banking volatility or limited liability, defaults or other adverse developments that affect the U.S.

or international financial systems, may result in market wide liquidity

problems which could have a material and adverse impact on our available cash and results of operations;

actual or perceived events involving banking volatility or limited liability, defaults or other adverse developments that affect the U.S or the international financial systems, may result in

market wide liquidity problems which could have a material and adverse impact on our available cash and results of operations;

our business depends on hiring, training, and retaining qualified employees;

availability and cost of qualified physical therapists;

competitive environment in the IIP business, which could result in the termination or non-renewal of contractual service arrangements and other adverse financial consequences for that service line;

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

consequences for that service line;

our ability to identify and complete acquisitions, and the successful integration of the operations of the acquired businesses;

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

maintaining our information technology systems with adequate safeguards to protect against cyber-attacks and preserve data privacy;

a security breach of our or our third party vendors’ information technology systems may subject us to potential legal action and reputational harm and may result in a violation of the Health Insurance Portability

and Accountability Act of 1996 of the Health Information Technology for Economic and Clinical Health Act, or may interfere with our ability to file and process claims for payment which could interfere with our collection of revenues from

third party payors;

maintaining clients for which we perform management, IIP services, and other services, as a breach or termination of those contractual arrangements by such clients could cause operating results to be less than

enforcing our noncompetition covenants with employed therapists;

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

a security breach of our or our third party vendors’ information technology systems may subject us to potential legal action and reputational harm and may result in a violation of the Health

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

maintaining clients for which we perform management, industrial injury prevention related services, and other services, as a breach or termination of those contractual arrangements by such

clients could cause operating results to be less than expected;

maintaining adequate internal controls;

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

Please see the other sections of this report and our other

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

Please see the other sections of this report

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

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

Except as required by

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

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

EXECUTIVE SUMMARY

We operate our business through our reportable segments which include (1) the physical therapy operations segment and (2) the industrial injury prevention services (“IIP”) segment.

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

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

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.

During the nine months ended September 30, 2024, and for the year ended December 31, 2023, we completed the acquisitions of clinic practices and IIP businesses detailed below:

We operate our 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 the IIP services are contracted with and paid for directly

by employers, including a number of Fortune 500 companies.

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

During the three months ended March 31, 2025, and for the year ended December 31, 2024, we completed the acquisitions of clinic practices and IIP businesses detailed below:

February 2025 Acquisition

February 28, 2025

November 2024 Acquisition

November 30, 2024

October 2024 Acquisition

October 31, 2024

August 2024 Acquisition

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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 our IIP businesses, Briotix Health Limited Partnership, acquired 100% of an IIP

*** On October 31, 2023, we concurrently acquired 100% of an IIP business and a 55% equity interest in an ergonomics

software business.

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

The following table provides a roll forward of our clinic count 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

Number of clinics, beginning of period

Clinic Count Roll Forward (1)

Three Months Ended

March 31, 2025

March 31, 2024

Number of clinics owned or managed, beginning of period

Additions (2)

Closed or sold

Number of clinics, end of period

Number of clinics owned or managed, end of period

(1) The Company also manages clinics owned by third parties through management contracts.

In addition to the clinic count shown above, as of March 31, 2025, the Company managed 37 clinics bringing

the total owned/managed clinics to 773.

As of March 31, 2024, the Company managed 41 clinics bringing the total owned/managed clinics to 720.

(2) Includes clinics added through acquisitions.

We also manage clinics owned by third parties through management contracts.

In addition to the clinic count shown above, as of September 30, 2024, we managed 39

clinics bringing the total owned/managed clinics to 700.

Our strategy is to continue acquiring outpatient physical therapy practices, develop outpatient physical therapy clinics as satellites in existing

partnerships, and continue acquiring companies that provide or serve our IIP sector.

Our 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, we 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 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

At the closing, we 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 our common stock based on a trailing five-day average as of the day immediately prior to closing.

The shares of our 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.

Our strategy is to continue acquiring outpatient physical therapy practices, develop outpatient physical therapy clinics as satellites in existing partnerships, and continue acquiring companies that

provide or serve our IIP sector.

Our 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.

On April 30, 2025, we acquired an outpatient home care physical, occupational and speech therapy practice through our 50% owned subsidiary, MSO Metro, LLC (“Metro”).

The practice currently generates approximately $2.1

million in annual revenue.

Metro acquired an 80% interest in the acquired company with the existing owners retaining a 20% ownership interest.

Regulatory Changes

The following is a discussion of some of the significant healthcare regulatory changes that have affected our financial performance in the periods covered by this report or are likely to affect our

financial performance and financial condition in the future.

The following is a discussion of some of the significant healthcare regulatory changes that have affected our financial performance in the periods covered by this report or are likely to affect our financial performance and

financial condition in the future.

The information below should be read in conjunction with the more detailed discussion of regulations contained in our 2024 Annual Report.

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outpatient rehabilitation facilities (i.e., rehab agencies) or individual physical or occupational therapists in private practice.

The majority of our clinicians are enrolled as individual physical or occupational therapists in private practice

while the remaining balance of providers are reimbursed through enrolled rehab agencies.

The majority of our clinicians are enrolled as individual physical or occupational therapists in private practice while

the remaining balance of providers are reimbursed through enrolled rehab agencies.

For calendar years 2021, 2022 and 2023, Centers for Medicare and Medicaid Services (“CMS”) expected decreases in Medicare reimbursement were partially offset by one-time increases in payments as a

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Medicare payments for the therapy specialty.

However, effective as of March 9, 2024, pursuant to the Consolidated Appropriations Act, 2024, Congress minimized the reduction in Medicare payments for therapy services for the balance of 2024,

resulting in an approximate 1.8% reduction in Medicare payments for therapy services (rather than the 3.5% decrease).

The MPFS proposed by CMS for 2025, if enacted, is expected to decrease Medicare reimbursement for therapy services by

approximately 2.8% as compared to the reimbursement rates in effect for most of 2024.

However, effective as of March 9, 2024, pursuant to the Consolidated Appropriations Act, 2024, Congress minimized the reduction in Medicare payments for therapy services for the balance of 2024, resulting

in an approximate 1.8% reduction in Medicare payments for therapy services (rather than the 3.5% decrease).

The MPFS for 2025 decreased Medicare reimbursement for therapy services by approximately 2.9% as compared to the reimbursement rates in effect

for most of 2024.

In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy

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occupational therapist assistants (“OTAs”) at 85% of the otherwise applicable Part B payment amount.

CMS allows a timed service to be billed without a CQ (for PTA’s) or CO (for OTA’s) modifier when a PTA or OTA participates in providing care, but

the physical therapist or occupational therapist meets the Medicare billing requirements without including the PTA’s or OTA’s minutes.

This occurs when the physical therapist or occupational therapist provides more minutes than the 15-minute

CMS allows a timed service to be billed without a CQ (for PTA’s) or CO (for OTA’s) modifier when a PTA or OTA participates in providing care, but the

physical therapist or occupational therapist meets the Medicare billing requirements without including the PTA’s or OTA’s minutes.

This occurs when the physical therapist or occupational therapist provides more minutes than the 15-minute midpoint.

The proposed 2025 MPFS final rule does not contain any policy changes concerning the modifiers for services provided by physical therapy and occupational therapist assistants.

RESULTS OF OPERATIONS

Glossary of terms

The defined terms, with their respective descriptions, used in the following discussions are listed below.

Mature clinics are clinics opened or acquired prior to January 1, 2023, and are still operating as of September 30, 2024.

Mature clinics are clinics opened or acquired prior to January 1, 2024, and are still operating as of the balance sheet date.

Net rate per patient visit is net patient revenue related to our physical therapy operations divided by total number of patient visits (defined below) during the

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further divided by the average number of clinics in operation during the periods presented.

2024 Third Quarter refers to the three months ended September 30, 2024.

2023 Third Quarter refers to the three months ended September 30, 2023.

2024 Nine Months refers to the nine months ended September 30, 2024.

2023 Nine Months refers to the nine months ended September 30, 2023.

USPH Net Income was $6.6 million for the 2024 Third Quarter.

In accordance with Generally Accepted Accounting Principles (“GAAP”), the revaluation of redeemable non-controlling interest, net of taxes, is not included

in net income but is charged directly to retained earnings;

2025 First Quarter refers to the three months ended March 31, 2025.

2024 First Quarter refers to the three months ended March 31, 2024.

2025 First Quarter versus 2024 First Quarter

Three Months Ended

March 31, 2025

March 31, 2024

(In thousands, except percentages)

Net patient revenue

Other revenue

Operating Cost:

Salaries and related costs

Rent, supplies, contract labor and other

Depreciation and amortization

Provision for credit losses

Clinic closure costs - lease and other

Total operating cost

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

Corporate office costs

Operating Income

Other (expense) income:

Interest expense, debt and other

Interest income from investments

Change in revaluation of put-right liability

Equity in earnings of unconsolidated affiliate

Loss on sale of a partnership

Total other expense

Income before taxes

Provision for income taxes

Net income attributable to non-controlling interest:

Redeemable non-controlling interest - temporary equity

Non-controlling interest - permanent equity

Net income attributable to USPH shareholders

* Not meaningful

Represents the percentage of net revenue for the periods presented

Total net revenue for the 2025 First Quarter increased $28.1 million, or 18.1%, to $183.8 million from $155.7 million for the 2024 First Quarter while operating costs increased $25.4

million, or 20.0%, to $152.7 million from $127.3 million over the same periods, respectively.

This increase was due to the increase in visits from the 53 net clinics added since the comparable prior year period and an increase in net rate

per patient visit.

Net rate per patient visit for the 2025 First Quarter was $105.66, increasing $2.29 per visit from $103.37 for the 2024 First Quarter, despite the approximate 2.9% Medicare rate reduction which went into effect on

January 1, 2025.

Net rate per patient visit also increased sequentially by $0.93 from $104.73 for the three months ended December 31, 2024.

The increase in net rate per patient visit reflects our strategic priority of increasing reimbursement rates

through contract negotiations with commercial and other payors as well as growing workers compensation as a percent of our overall mix of business.

Gross profit which included $0.2 million of costs associated with seven clinic closures, in the 2025 First Quarter, was $31.1 million, or 16.9% of net revenue, during the 2025 First Quarter compared to

$28.4 million, or 18.2% of net revenue, for the 2024 First Quarter.

Our Net Income was $9.9 million for the 2025 First Quarter compared to $8.0 million in the 2024 First Quarter.

In accordance with GAAP, the revaluation of noncontrolling interest, net of taxes, is not included in net

income but is charged directly to retained earnings;

however, this change is included in the computation of earnings per share.

Earnings per share for the 2024 Third Quarter was $0.39.

USPH Net Income and earnings per share included a charge of $2.5 million, net of $1.0 million tax, or $0.16 per share, associated with the closure of 32

clinics during the 2024 Third Quarter.

Excluding the clinic closure costs, USPH Net Income was $9.1 million (1) compared to $9.3 million (1) in the comparable prior year period while earnings per share was $0.55 (1) and $0.51 (1) over the same periods, respectively.

USPH Net Income was $22.2 million for the 2024 Nine Months as compared to $27.6 million for the 2023 Nine Months while earnings per share was $1.32 for the 2024 Nine Months compared to $1.72 for the 2023 Nine Months.

USPH Net Income and earnings per share included a charge of $2.9 million, net of $1.2 million tax, or $0.20 per share, associated with the closure of 43 clinics during the 2024 Nine Months.

Excluding the clinic closure costs, USPH Net Income was

$25.1 million (1) compared to $27.7 million (1) in the comparable period while

earnings per share was $1.52 (1) and $1.73 (1) over the same periods, respectively.

Earnings per share was $0.80 for the 2025 First Quarter compared to $0.46 for the 2024 First Quarter

The following table provides a calculation of earnings per share.

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)

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:

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Earnings per share (basic and diluted)

Shares used in computation - basic and diluted

These are non-GAAP Measures.

See below for the reconciliation of non-GAAP measures to the most directly comparable GAAP measure.

Shares used in computation:

Basic and diluted earnings per share - weighted-average shares

Non-GAAP Measures

Adjusted EBITDA a non-GAAP measure, is defined as net income attributable to our shareholders before interest income, interest expense, taxes, depreciation, amortization, change in fair value of contingent earn-out

consideration, payments received from the federal government under the Corona virus Aid, Relief and Economic Security Act (“Relief Funds”), changes in revaluation of put-right liability, equity-based awards compensation expense, clinic closure

costs, business acquisition related costs and other income and related portions for non-controlling interests.

Operating Results, a non-GAAP measure, equals net income attributable to our shareholders less, changes in revaluation of a put-right liability, Relief Funds, clinic closure costs, changes in fair value of contingent

earn-out consideration, business acquisition related costs and any allocations to non-controlling interests, all net of taxes.

Operating Results per share also excludes the impact of the revaluation of redeemable non-controlling interest and the

associated tax impact.

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

EBITDA, Operating Results and other non-GAAP measures.

Management believes providing Adjusted EBITDA and Operating Results to investors is useful information for comparing our period-to-period results as well as for comparing with other similar

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

Management uses Adjusted EBITDA, Operating Results, and other non-GAAP measures, which eliminate certain items described above that can be

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

The tables also provide a reconciliation of additional non-GAAP measures to the most comparable GAAP measure.

We believe providing Adjusted EBITDA and Operating Results to investors is useful for comparing our period-to-period results as

well as for comparing with other similar businesses since most do not have redeemable instruments and therefore have different equity structures.

We use Adjusted EBITDA and Operating Results, which eliminate certain items described above that can be

subject to volatility and unusual costs, as the principal measures to evaluate and monitor financial performance period over period.

Adjusted EBITDA, Operating Results and the other non-GAAP measures presented are not measures of financial performance under GAAP.

Adjusted EBITDA and Operating Results should not be considered in isolation or as an

alternative to, or substitute for, net income attributable to our shareholders presented in the consolidated financial statements.

For the Three Months Ended

For the Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Adjusted EBITDA, a non-GAAP measure, is defined as net income attributable to our shareholders before interest income, interest expense, taxes, depreciation, amortization, change in fair value of contingent earn-out

consideration, changes in revaluation of put-right liability, equity-based awards compensation expense, clinic closure costs, business acquisition related costs, costs related to a one-time financial systems upgrade, loss on sale of a partnership and

other income and related portions for non-controlling interests.

Operating Results, a non-GAAP measure, equals net income attributable to our shareholders less, changes in revaluation of a put-right liability, clinic closure costs, loss on sale of a partnership, changes in fair

value of contingent earn-out consideration, business acquisition related costs, costs related to a one-time financial systems upgrade and any allocations to non-controlling interests, all net of taxes.

Operating Results per share also excludes the

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

Adjusted EBITDA and Operating Results are not measures of financial performance under GAAP.

Adjusted EBITDA, Operating Results and other non-GAAP measures should not be considered in isolation or as an alternative to,

or substitute for, net income attributable to our shareholders presented in the consolidated financial statements.

ADJUSTED EBITDA AND OPERATING RESULTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended

March 31, 2025

March 31, 2024

(In thousands, except per share data)

Adjusted EBITDA (a non-GAAP measure)

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Interest expense, debt and other, net

Equity-based awards compensation expense

Interest income from investments

Equity-based awards compensation expense

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

Clinic closure costs (1)

Business acquisition related costs (2)

ERP implementation costs (3)

Loss on sale of a partnership

Other loss (income)

Allocation to non-controlling interests

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Net income attributable to USPH shareholders

Change in fair value of contingent earn-out consideration

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

Change in revaluation of put-right liability

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Business acquisition related costs (2)

Allocation to non-controlling interests

ERP implementation costs (3)

Loss on sale of a partnership

Allocation to non-controlling interest

Tax effect at statutory rate (federal and state)

Operating Results per share (a non-GAAP measure)

(1) Costs associated with the closure of 32 clinics during the 2024 Third Quarter and 43 clinics during the 2024 Nine Months.

Closure costs in the 2023 Third Quarter

and 2023 Nine Months were not material.

(2) Primarily consists of legal and consulting expenses related to the acquisition of 50% equity interest in a management services organization that provides

management and administrative services to 50 physical therapy clinics.

Costs associated with the closure of seven and six clinics during the 2025 First Quarter and the 2024 First Quarter, respectively.

Primarily consists of legal and consulting expenses related to the acquisition of equity interest in certain partnerships.

Consists of costs related to a one-time financial systems upgrade.

A reconciliation of additional non-GAAP measures to the most comparable GAAP measures are presented in the tables below.

For the Three Months Ended

September 30, 2024

September 30, 2023

(in thousands, except per share data, and percentages)

Operating costs

Operating income

Provision for taxes

USPH Net Income

Earnings per share

Segment information - Physical Therapy Operations

Operating costs

For the Nine Months Ended

September 30, 2024

September 30, 2023

(in thousands, except per share data, and percentages)

Operating costs

Operating income

Provision for taxes

USPH Net Income

Earnings per share

Segment information - Physical Therapy Operations

Operating costs

(1) Costs associated with the closure of 32 and 43 clinics during the 2024 Third Quarter and 2024 Nine Months, respectively.

Closure costs for the comparable prior year periods were not material.

believe that presenting this information will allow investors to evaluate the performance of the Company's business more objectively.

* Not meaningful

2024 Third Quarter versus 2023 Third Quarter

For the Three Months Ended

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Net patient revenue

Other revenue

Operating Cost:

Salaries and related costs

Rent, supplies, contract labor and other

Provision for credit losses

Clinic closure costs - lease and other

Total operating cost

Corporate office costs

Operating Income

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 (expense) income

Income before taxes

Provision for income taxes

Net income attributable to non-controlling interest:

Redeemable non-controlling interest - temporary equity

Non-controlling interest - permanent equity

Net income attributable to USPH shareholders

* Not meaningful

Total net revenue for the 2024 Third Quarter increased $18.0 million, or 12.0%, to $168.0 million from $150.0 million for the 2023 Third Quarter while operating costs increased $16.8 million, or

13.8%, to $138.9 million from $122.1 million over the same periods, respectively.

As a percentage of total net revenue, total operating cost was 82.7% for the 2024 Third Quarter, as compared to 81.4% for the 2023 Third Quarter.

Gross profit for the 2024 Third Quarter was $29.1 million, or 17.3% of net revenue, compared to $27.9 million, or 18.6% of net revenue, for the 2023 Third Quarter.

closure costs (1) of $3.4 million , gross profit from physical therapy operations was

$26.9 million, an increase of $3.4 million, or 14.5%, over the 2023 Third Quarter, and the gross profit margin from physical therapy operations was 18.9% in the 2024 Third Quarter, an increase of 90 basis points from 18.0% in the 2023 Third

Adjusted EBITDA, a non-GAAP measure, was $21.1 million for the 2024 Third Quarter, an increase of $2.5 million from $18.6 million in the 2023 Third Quarter.

Operating Results, a non-GAAP measure, was $10.4 million in the 2024 Third Quarter, an increase of $1.1 million from $9.2 million in the 2023 Third Quarter.

On a per share basis, Operating Results was $0.69 in the

2024 Third Quarter compared to $0.62 in the 2023 Third Quarter.

(1) These are Non-GAAP Measures.

Refer to reconciliation of non-GAAP measures to most comparable GAAP measures for more information.

Physical Therapy Operations

For the Three Months Ended

September 30, 2024

September 30, 2023

Three Months Ended

March 31, 2025

Adjustments (1)

(in thousands, except percentages)

Revenue related to:

Mature Clinics (1)

Clinic additions (2)

Clinics sold or closed (3)

Net Patient Revenue

Operating costs (4)(7)

Gross profit (7)

Financial and operating metrics (not in thousands):

Net rate per patient visit (1)

Patient visits (1)

Average daily visits per clinic (1)

Gross margin, excluding closure costs, non-GAAP (6)(8)

Segment information - Physical Therapy Operations

Salaries and related costs, clinics (2)

Operating costs, clinics (2)

Number of visits

Salaries and related costs per visit, clinics

Operating costs per visit, clinics

Operating costs per visit, clinics, excluding closure costs (5)(6)

(1) See Glossary of Terms - Revenue Metrics for definitions.

(2) Includes 33 clinics added during the nine months ended September 30, 2024 and 46 clinic added during the year ended December 31, 2023.

(3) Includes 43 clinics closed during the nine months ended September 30, 2024 and 15 clinics closed during the year ended December 31, 2023.

(4) Includes revenues and costs from management contracts.

(5) Per visit costs excludes management contract costs.

(6) Excludes $3.4 million of costs associated with the closure of 32 clinics during the 2024 Third Quarter.

(7) Includes $3.4 million of costs associated with the closure of 32 clinics during the 2024 Third Quarter.

(8) Refer to reconcilliation of non-GAAP measures to most comparable GAAP measures for more information.

(9) Not meaningful

Net revenue from physical therapy operations increased $12.2 million, or 9.3%, to $142.7 million for the 2024 Third Quarter from $130.5 million for the 2023 Third Quarter.

This increase was due primarily to the

increase in visits from the 21 net clinics added since the comparable prior year period, a 2.4% increase in visits at mature clinics and an increase in net rate per patient visit.

Total patient visits increased

74,097, or 6.0%, to 1,317,051 in the 2024 Third Quarter from 1,242,954 in the 2023 Third Quarter.

Average daily visits per clinic was 30.1 for the 2024 Third Quarter compared to 29.7 in the comparable prior year quarter.

Net rate per patient

visit for the 2024 Third Quarter increased to $105.65 from $102.37 for the 2023 Third Quarter, an increase of 3.2%, despite the 1.8% Medicare rate reduction which went into effect at the beginning of 2024.

The increase in net rate per

patient visit was mainly driven by higher reimbursement rates from commercial and other payors as a result of contract negotiations and an increase in workers compensation as a percent of our total net patient revenues.

Other revenues increased approximately $0.3 million, or 8.8%, to $3.6 million for the 2024 Third Quarter from $3.3 million for the 2023 Third Quarter primarily due to the increase in management

contract revenue since the comparable prior year period.

Operating costs

Operating costs from physical therapy operations increased $12.2 million, or 11.4%, to $119.2 million in the 2024 Third Quarter from $107.0 million in the 2023 Third Quarter primarily driven by the 21 net new clinics

added since the comparable prior year period and $3.4 million of costs associated with the closure of 32 clinics during the 2024 Third Quarter.

Excluding the clinic closure costs, operating costs increased 8.2% (1) , while total operating costs per visit was $88.98 compared to $84.49 over the same periods, respectively.

Excluding the clinic closure costs, operating costs per visit was $86.37 in the 2024 Third

Salaries and related costs (including management contracts) increased to $84.2 million in the 2024 Third Quarter compared to $77.0 million, in the 2023 Third Quarter, an increase of $7.2 million, or

Salaries and related costs per visit (excluding management contracts), increased to $62.47 for the 2024 Third Quarter from $60.35 for the 2023 Third Quarter.

Total rent, supplies, contract labor and other costs related to clinics (excluding management contracts) increased to $29.8 million in the 2024 Third Quarter from $28.5 million in the 2023 Third

Quarter, an increase of $1.6 million, or 5.7%.

On a per visit basis, rent, supplies, contract labor and other costs (excluding management contracts costs), decreased slightly to $22.59 for the 2024 Third Quarter compared to $22.90 for the 2023

Third Quarter.

The provision for credit losses was $1.7 million for the 2024 Third Quarter and $1.5 million for the 2023 Third Quarter.

As a percentage of net revenues, the provision for credit losses was 1.2% for

both the 2024 Third Quarter and the 2023 Third Quarter.

Gross profit from physical therapy operations in the 2024 Third Quarter was $23.5 million with a gross profit margin of 16.5%.

Excluding closure costs, gross profit from physical therapy operations was $26.9 million

(1) , an increase of $3.4 million, or 14.5%, over the 2023 Third Quarter, and the gross profit margin from physical therapy operations was 18.9% (1) in the 2024 Third Quarter, an increase of 90 basis points from 18.0% in the 2023 Third Quarter.

(1) These are Non-GAAP Measures.

Refer to reconciliation of non-GAAP measures to most comparable GAAP measures for more information.

Industrial Injury Prevention Services

For the Three Months Ended

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Operating costs

IIP revenues increased $5.8 million, or 29.9%, to $25.3 million for the 2024 Third Quarter as compared to $19.5 million for the 2023 Third Quarter.

Excluding our IIP acquisitions during the years 2023 and 2024, IIP

revenues increased 12.9%.

Gross profit from IIP operations in the 2024 Third Quarter increased $1.2 million, or 27.1%, to $5.6 million from $4.4 million in the 2023 Third Quarter.

Excluding our IIP acquisitions during the years 2023 and 2024, IIP

gross profit increased 13.2%.

The gross profit margin from IIP operations was 22.2% in the 2024 Third Quarter compared to 22.7% in the 2023 Third Quarter.

Corporate Office Costs

Corporate office costs were $14.4 million, or 8.6% of net revenue, in the 2024 Third Quarter compared to $12.0 million, or 8.0% of revenue in the 2023 Third Quarter.

Operating Income

Operating income was $14.7 million for the 2024 Third Quarter compared to $15.9 million for the 2023 Third Quarter.

Excluding the clinic closure costs, operating income was $18.2 million (1) in the 2024 Third Quarter.

Other (Expenses) Income

Interest Expense, Debt and Other

Interest expense decreased $0.1 million to $2.0 million for the 2024 Third Quarter compared to $2.1 million in the 2023 Third Quarter due to a lower outstanding balance on our term loan.

rate on our credit facility was 4.7% for the 2024 Third Quarter and 4.9% for the 2023 Third Quarter, with an all-in effective interest rate, including all associated costs of 5.4% and 5.6% over the same periods, respectively.

Interest income from investment

Interest income from investing excess cash (primarily proceeds from the secondary offering sale of our stock completed in May 2023) in a high-yield savings account decreased to $1.0 million during the

2024 Third Quarter from $1.7 million in the 2023 Third Quarter as a result of our lower cash balance, due to cash used for acquisitions, since the comparable prior year period.

Change in fair value of contingent earn-out consideration and put-right liability

We revalued contingent and put-right liabilities related to certain acquisitions and recognized a net non-cash expense (an increase in the related liabilities) of $1.7 million in the 2024 Third

Quarter and less than $0.1 million in the comparable 2023 Third Quarter.

The put-right (expiring in 2027) relates to the potential future purchase of a company within our IIP business.

The company provides physical therapy and rehabilitation

services to hospitals and other ancillary providers in a distinct market area.

Equity in earnings of unconsolidated affiliate

For both the 2024 Third Quarter and the 2023 Third Quarter, we recognized income of $0.2 million from a joint venture which provides physical therapy services for patients at hospitals.

deemed to not have a controlling interest in the joint venture, our investment is accounted for using the equity method of accounting.

Provision for Income Taxes

The provision for income taxes was $2.6 million in the 2024 Third Quarter compared to $3.6 million during the 2023 Third Quarter while the effective tax rates were 27.9% and 27.8% for the 2024 Third Quarter and the 2023

Third Quarter respectively.

For the Three Months Ended

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Income before taxes

Net income attributable to non-controlling interest:

Redeemable non-controlling interest - temporary equity

Non-controlling interest - permanent equity

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

Provision for income taxes

Effective income tax rate

Net Income Attributable to Non-controlling Interest

Net income attributable to redeemable non-controlling interest (temporary equity) was $2.0 million for both the 2024 Third Quarter and the 2023 Third Quarter.

Net income attributable to

non-controlling interest (permanent equity) was $1.2 million for the 2024 Third Quarter and $1.0 million for the 2023 Third Quarter.

(1) These are Non-GAAP Measures.

Refer to reconciliation of non-GAAP measures to most comparable GAAP measures for more information.

2024 Nine Months versus 2023 Nine Months

For the Nine Months Ended

September 30, 2024

September 30, 2023

(In thousands, except percentages)

Net patient revenue

Other revenue

Operating Cost:

Salaries and related costs

Rent, supplies, contract labor and other

Provision for credit losses

Clinic closure costs - lease and other

Total operating cost

Corporate office costs

Operating Income

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 (expense) income

Income before taxes

Provision for income taxes

Net income attributable to non-controlling interest:

Redeemable non-controlling interest - temporary equity

Non-controlling interest - permanent equity

Net income attributable to USPH shareholders

(1) Certain incentive costs related to the Metro acquisition.

We believe that presenting this information will allow investors to evaluate the performance of the Company’s business more

(2) Excludes costs related to management contracts.

* Not meaningful

Total net revenue for the 2024 Nine increased $40.9 million, or 9.1%, to $490.9 million from $450.0 million for the 2023 Nine Months while operating costs increased $40.5 million, or 11.3%, to $399.5 million from

$359.0 million over the same periods, respectively.

Gross profit, which included $4.1 million of costs associated with the closure of 43 clinics, was $91.4 million, or 18.6% of net revenue, during the 2024 Nine Months compared to $91.0 million, or 20.2% of net

revenue, for the 2023 Nine Months.

Excluding the clinic closure costs, gross profit for the 2024 Nine Months was $95.5 million (1) or 19.5% (1) of net revenue, compared to $91.1 (1) million, or 20.3% (1) of net revenue, for the 2023 Nine Months.

Non-GAAP Adjusted EBITDA (1) increased $1.1 million to $60.0 million for the 2024 Nine Months from $58.9 million in the 2023 Nine

Months while non-GAAP Operating Results (1) increased $1.7 million to $29.2 million, or $1.94 per share, in the 2024 Nine Months from $27.5 million, or $1.97 per

share, in the 2023 Nine Months.

(1) These are Non-GAAP Measures.

Refer to reconciliation of non-GAAP measures to most comparable GAAP measures for more information.

Adjusted EBITDA, a non- GAAP measure, was $19.5 million for the 2025 First Quarter, an increase of $2.8 million, or 16.5%, from $16.8 million in the 2024 First Quarter primarily driven by acquisitions since the prior

year period and an increase in net patient revenue per visit.

Operating Results, a non-GAAP measure, was $7.3 million in the 2025 First Quarter compared to $7.7 million in the 2024 First Quarter.

On a per share basis, Operating Results was $0.48 in the 2025 First Quarter compared

to $0.51 in the 2024 First Quarter.

Physical Therapy Operations

For the Nine Months Ended

September 30, 2024

September 30, 2023

Three Months Ended

March 31, 2025

March 31, 2024

(In thousands, except percentages)

5 unchanged sentences

Operating costs (5)

Gross profit (7)

Financial and operating metrics (not in thousands):

2 unchanged sentences

Average daily visits per clinic (1)

Gross margin excluding closure costs, non-GAAP (6)(8)

Salaries and related costs per visit, clinics (6)

Operating costs per visit, clinics (6)

Operating costs per visit, clinics, excluding closure costs (5)(6)

(1) See Glossary of Terms - Revenue Metrics for definitions.

(2) Includes 33 clinics added during the nine months ended September 30, 2024 and 46 clinic added during the year ended December 31, 2023.

(3) Includes 43 clinics closed during the nine months ended September 30, 2024 and 15 clinics closed during the year ended December 31, 2023.

(4) Includes revenues and costs from management contracts.

(5) Per visit costs excludes management contract costs.

(6) Excludes $4.1 million of costs associated with the closure of 43 clinics closed during the nine months ended September 30, 2024 and $0.2 million of costs associated with the 15 clinics closed during the year ended December 31, 2023.

(7) Includes $4.1 million of costs associated with the closure of 43 clinics closed during the nine months ended September 30, 2024 and $0.2 million of costs associated with the 15 clinics closed during the year ended December 31, 2023.

(8) Refer to reconcilliation of non-GAAP measures to most comparable GAAP measures for more information.

(1) See Glossary of Terms - Revenue Metrics for definition.

(2) Includes 14 clinics added during the 2025 First Quarter and 103 added during the year ended December 31, 2024.

(3) Includes 7 clinics closed during the 2025 First Quarter and 45 clinics closed during the year ended December 31, 2024.

(4) Includes revenues from management contracts.

(5) Includes costs from management contracts.

(6) Excludes costs from management contracts and $0.1 million of certain incentive costs related to the Metro acquisition.

Please refer to the reconcilliation of non-GAAP measures to the most comparable GAAP measure on page 40.

(7) Not meaningful.

Revenues from physical therapy operations increased $28.7 million, or 7.3%, to $420.6 million in the 2024 Nine Months compared to $391.9 million in the 2023 Nine Months.

This increase was primarily due to the

increase in volume from the 21 net clinics added since the comparable prior year period as well as an increase in net rate per patient visit to $104.71 for 2024 Nine Months from $102.50 for 2023 Nine Months.

patient visits increased 182,804, or 4.9%, to 3,920,388 in the 2024 Nine Months from 3,737,584 in the 2023 Nine Months.

Average daily visits per clinic was 30.0 for both 2024 Nine Months and the comparable prior year period.

Other revenues increased $1.3 million, or 15.0%, to $10.1 million for the 2024 Nine Months from $8.8 million for the 2023 Nine Months due to an increase in management contract revenue since the

comparable prior year period.

Net revenue from physical therapy operations increased $22.0 million, or 16.4%, to $156.4 million for the 2025 First Quarter from $134.4 million for the 2024 First Quarter.

This increase was due to the increase in

visits from the 53 net clinics added since the comparable prior year period and an increase in net rate per patient visit, which reflects our strategic priority of increasing reimbursement rates through contract negotiations with commercial and other

payors as well as growing workers compensation as a percent of our overall mix of business.

January 1, 2025.

Net rate per patient visit also increased sequentially by $0.93 from $104.73 for the three months ended December 31, 2024.

Other revenues increased by $0.5 million, or 15.3%, to $3.9 million for the 2025 First Quarter from $3.4 million for the 2024 First Quarter.

Operating costs

Operating costs from physical therapy operations increased by $31.2 million, or 10.0% to $344.3 million in the 2024 Nine Months from $313.1 million in the 2023 Nine Months primarily driven by costs

associated with the 21 net new clinics added since the comparable prior year period.

On a per visit basis, operating costs (excluding management contracts) increased to $86.32 for the 2024 Nine Months from $82.35 for the 2023 Nine Months.

Total salaries and related costs for physical therapy operations increased to $245.4 million in the 2024 Nine Months from $225.3 million, in the 2023 Nine Months, an increase of $20.1 million, or

Salaries and related costs per visit (excluding management contracts) increased to $61.17 for the 2024 Nine Months from $59.01 for the 2023 Nine Months.

Total rent, supplies, contract labor and other costs related to clinics (excluding management contracts) increased to $89.4 million in the 2024 Nine Months from $82.4 million in the 2023 Nine Months,

an increase of $7.0 million, or 8.5%.

On a per visit, rent, supplies, contract labor and other costs (excluding management contract costs) increased to $22.80 for the 2024 Nine Months compared to $22.04 for the 2023 Nine Months.

The provision for credit losses was $5.1 million for the 2024 Nine Months and $4.6 million for the 2023 Nine Months.

As a percentage of net revenues, the provision for credit losses was 1.2% for both

the 2024 Nine Months and 2023 Nine Months.

Gross profit from physical therapy operations, which included $4.1 million of costs associated with the 43 clinic closures, was $76.4 million, or 18.2% of net revenue, for the 2024 Nine Months compared to $78.8

million, or 20.2% of net revenue, for the 2023 Nine Months.

Excluding the clinic closure costs, physical therapy gross profit was $80.5 million (1) , or 19.1% of net

revenue (1) , in the 2024 Nine Months compared to $79.0 million (1) , or 20.2% of net

revenue (1) , in the 2023 Nine Months.

(1) These are Non-GAAP Measures.

Refer to reconciliation of non-GAAP measures to most comparable GAAP measures for more information.

Operating costs from physical therapy operations increased $20.6 million, or 18.6%, to $130.9 million in the 2025 First Quarter from $110.4 million in the 2024 First Quarter primarily driven

by the 53 net new clinics added since the comparable prior year period.

The total operating costs per visit (excluding management contracts and certain incentive costs related to Metro) was $89.28 compared to $85.50 over the same periods, respectively.

Salaries and related costs, clinics (excluding management contracts) increased to $91.8 million in the 2025 First Quarter from $77.9 million in the 2024 First Quarter, an increase of $13.9 million, or

17.9% mostly due to the net clinics added since the comparable prior year period.

Salaries and related costs per visit (excluding management contracts and certain incentive costs related to Metro) increased to $63.53 for the 2025 First Quarter from

$61.42 for the 2024 First Quarter.

Rent, supplies, contract labor and other costs, related to clinics (excluding management contracts) increased to $30.1 million in the 2025 First Quarter from $25.1 million in the 2024 First Quarter, an

increase of $5.0 million, or 19.9% mostly due to clinic additions.

Rent, supplies, contract labor and other per visit (excluding management contracts), related to clinics increased to $24.47 for the 2025 First Quarter from $22.87 for the 2024 First

Depreciation and amortization related to physical therapy operations increased to $5.2 million in 2025 First Quarter from $3.8 million in the 2024 First Quarter, an increase of $1.4 million, or 33.5%,

primarily due to the larger number of clinics in the 2025 First Quarter compared to the 2024 First Quarter.

The provision for credit losses was $1.8 million for the 2025 First Quarter and $1.6 million for the 2024 First Quarter.

As a percentage of net revenues, the provision for credit losses were 1.0% for

the same periods.

Gross profit from physical therapy operations in the 2025 First Quarter was $25.5 million with a gross profit margin of 16.3% compared to $24.1 million with a gross profit margin of 17.9% in the 2024 First Quarter.

Industrial Injury Prevention Services

For the Nine Months Ended

September 30, 2024

September 30, 2023

Three Months Ended

March 31, 2025

March 31, 2024

(In thousands, except percentages)

Operating costs

Revenues from IIP operations increased $12.2 million, or 21.0%, to $70.3 million for the 2024 Nine Months from $58.1 million for the 2023 Nine Months.

Gross profit from IIP operations increased $2.9 million, or

23.5%, to $15.0 million for the 2024 Nine Months from $12.2 million for the 2023 Nine Months while the gross profit margin from IIP operations increased to 21.4% for the 2024 Nine Months from 21.0% for the 2023 Nine Months.

IIP revenue increased $6.1 million, or 28.8%, to $27.4 million for the 2025 First Quarter as compared to $21.3 million for the 2024 First Quarter.

Gross profit from IIP operations in the 2025 First Quarter increased

$1.3 million, or 29.1%, to $5.6 million from $4.3 million in the 2024 First Quarter.

The gross profit margin from IIP operations was 20.4% in each of the 2025 First Quarter and 2024 First Quarter.

Excluding the IIP acquisition made in April 2024, IIP

revenue increased by $3.2 million or 15.1% in the 2025 First Quarter and gross profit increased $0.6 million or 13.1% in the 2025 First Quarter over the comparable prior year period.

Corporate Office Costs

Corporate office costs were $42.7 million, or 8.7% of net revenue, in the 2024 Nine Months, compared to $38.1 million, or 8.5% of net revenue, in the 2023 Nine Months.

Corporate office costs increased to $16.2 million in the 2025 First Quarter from $14.1 million in the 2024 First Quarter.

This increase was primarily to support the larger number of clinics as well as expenses related

to the integration of our recent acquisitions.

As a ratio to net revenue, corporate office costs improved to 8.8% in the 2025 First Quarter compared to 9.0% in the 2024 Fourth Quarter.

Change in fair value of contingent earn-out consideration

We revalued contingent earn-out consideration related to certain acquisitions resulting in a gain of $4.8 million for the 2025 First Quarter compared to a gain of $0.6 million for the 2024 First

Operating Income

Operating income was $48.7 million for the 2024 Nine Months compared to $52.9 million for the 2023 Nine Months.

Excluding the clinic closure costs, operating income was $52.8 million (1) in the 2024 Nine Months.

Operating income was $19.6 million for the 2025 First Quarter compared to $14.9 million for the 2024 First Quarter.

Other (Expenses) Income

Interest Expense, Debt and Other

Interest expense was $6.0 million in the 2024 Nine Months compared to $7.3 million in the 2023 Nine Months, with the decrease primarily related to lower outstanding borrowings over the comparative periods.

Interest expense increased by $0.3 million to $2.3 million for the 2025 First Quarter compared to $2.0 million in the 2024 First Quarter due to a higher average outstanding balance on our revolving credit facility in

the 2025 First Quarter.

The interest rate on our credit facility was 4.9% for the 2025 First Quarter and 4.7% for the 2024 First Quarter, with an all-in effective interest rate, including all associated costs of 5.5% and 5.3% over the same periods,

respectively.

Interest income from investment

Interest income from investing excess cash (primarily proceeds from the secondary offering sale of our stock completed in May 2023) in a high-yield savings account was $3.7 million during the 2024

Nine Months compared to $2.2 million during the 2023 Nine Months.

Change in fair value of contingent earn-out consideration

We revalued contingent earn-out consideration related to certain acquisitions resulting in a loss of $5.3 million for the 2024 Nine Months compared to a loss of $0.3 million in the comparative prior

Interest income was less than $0.1 million during the 2025 First Quarter compared to $1.5 million in the 2024 First Quarter as the cash on the balance sheet at the end of the 2024 First Quarter has been deployed into

acquisitions since that time.

Change in revaluation of put-right liability

We recorded an expense of $0.1 million on the revaluation of a put right liability for 2024 Nine Months and a gain of $0.2 million for the 2023 Nine Months.

The put-right relates to the potential

future purchase of a company that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area.

We recorded an expense of $0.4 million on the revaluation of a put right liability for the 2025 First Quarter compared to an expense of $0.1 million for the 2024 First Quarter.

The put right relates to

the potential future purchase of a company that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area.

Equity in earnings of unconsolidated affiliate

We recognized income of $0.8 million from a joint venture which provides physical therapy services for patients at hospitals for both the 2024 Nine Months and the 2023 Nine Months.

Since we are deemed

to not have a controlling interest in the joint venture, our investment is accounted for using the equity method of accounting.

We recognized an income of $0.4 million for the 2025 First Quarter compared to $0.3 million for the 2024 First Quarter from a joint venture which provides physical therapy services for patients at

Since we are deemed to not have a controlling interest in the joint venture, our investment is accounted for using the equity method of accounting.

Provision for Income Taxes

The provision for income taxes was $8.8 million in the 2024 Nine Months compared to $10.8 million during the 2023 Nine Months while the effective tax rates were 28.4% and 28.1% over the same periods,

respectively.

For the Nine Months Ended

September 30, 2024

September 30, 2023

The provision for income taxes was $3.9 million in the 2025 First Quarter compared to $3.1 million during the 2024 First Quarter while the effective tax rate was 28.1% in each of the same periods.

Three Months Ended

March 31, 2025

March 31, 2024

(In thousands, except percentages)

7 unchanged sentences

Net Income Attributable to Non-controlling Interest

Net income attributable to redeemable non-controlling interest (temporary equity) was $7.5 million in the 2024 Nine Months compared to $7.6 million in the 2023 Nine Months.

Net income attributable to

non-controlling interest (permanent equity) was $3.4 million for the 2024 Nine Months and $3.3 million for the 2023 Nine Months.

(1) These are Non-GAAP Measures.

Refer to reconciliation of non-GAAP measures to most comparable GAAP measures for more information.

Net income attributable to non-controlling interest (temporary and permanent) was $3.6 million in each of the 2025 First Quarter and 2024 First Quarter, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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

Total cash and cash equivalents were $117.0 million as of September 30, 2024, and $152.8 million

as of December 31, 2023.

We had $140.6 million of outstanding borrowings and $175.0 million in available credit under our Revolving Facility as of September 30, 2024, compared to $144.4 million of outstanding borrowings and $175.0 million in

available credit under our Revolving Facility as of December 31, 2023.

We believe that our cash and cash equivalents and availability under our Senior Credit Facilities are sufficient to fund the working capital needs of our operating subsidiaries through at least

September 30, 2025.

Total cash and cash equivalents were $39.2 million as of March 31, 2025, compared to $41.4 million

as of December 31, 2024, and $132.3 million at March 31, 2024.

Additionally, we had $164.9 million of outstanding borrowings and $147.0 million in available credit under our credit facilities as of March 31, 2025, compared to $151.6 million of

outstanding borrowings and $164.0 million in available credit under our credit facilities as of December 31, 2024.

We believe that our cash and cash equivalents and availability under our Senior Credit Facilities are sufficient to fund the working capital needs of our operating subsidiaries through at least March

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

We plan to continue developing new clinics and making acquisitions.

We have, from time to time, purchased the non-controlling interests of limited partners in our existing partnerships.

have, from time to time, purchased the non-controlling interests of limited partners in our existing partnerships.

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

5 unchanged sentences

When possible, we submit our claims electronically.

The collection process is time-consuming and typically involves the submission of claims to multiple payors whose payment of claims may be dependent upon

the payment of another payor.

The collection process is time-consuming and typically involves the submission of claims to multiple payors whose payment of claims may be dependent upon the

payment of another payor.

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

Medicare and other payor claims relating to new clinics awaiting CMS approval initially may not be submitted for six months or more.

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

With managed care, commercial health plans and self-pay payor type receivables, the write-off generally

occurs after the account receivable has been outstanding for 120 days or longer.

As of September 30, 2024, we have accrued $6.8 million related to credit balances, a portion of which is due to patients and payors.

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

With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs

after the account receivable has been outstanding for 120 days or longer.

As of March 31, 2025, we have accrued $6.8 million related to credit balances, a portion of which is due to patients and payors.

A summary of our operating, investing and financing activities is discussed below.

For the Nine Months Ended

September 30, 2024

September 30, 2023

(in thousands)

Net cash provided by operating activities

Three Months Ended

March 31, 2025

March 31, 2024

Net cash (used in) provided by operating activities

Net cash (used in) investing activities

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Operating Activities

Cash provided by operating activities was $55.5 million for the 2024 Nine Months as compared to $55.1 million for the 2023 Nine Months.

This decrease in cash provided was mostly due to the timing of

payments related to payables and accrued expenses.

Cash used by operating activities was $4.7 million for the 2025 First Quarter as compared to $4.4 million provided by operating activities for the 2024 First Quarter.

This decrease in cash provided was

mostly due to the timing of payments related to payables and accrued expenses.

Investing Activities

Cash used in investing activities for the 2024 Nine Months totaled $54.6 million and primarily consisted of $48.9 million used in the purchase of interests in businesses and non-controlling interests

Cash used in investing activities for the 2025 First Quarter totaled $6.6 million and primarily consisted of $5.1 million used in the purchase of interests in businesses and non-controlling interests

(temporary and permanent), and $2.6 million of fixed assets purchases.

These uses were partially offset by $0.3 million in proceeds from the sale of non-controlling interests (temporary and permanent), and $0.8 million distributions received from

These uses were partially offset by $0.7 million in proceeds from the sale of non-controlling interests (temporary and permanent), and $0.3 million of distributions received from

an unconsolidated affiliate.

Financing Activities

Cash used in financing activities for the 2024 Nine Months, totaled $36.8 million and primarily comprised of $19.9 million of cash dividends paid to shareholders, $11.4 million in distributions to

non-controlling interests (temporary and permanent) and payments of $5.5 million related to notes payable and the term note.

Cash provided by financing activities for the 2025 First Quarter totaled $9.1 million and primarily comprised of $17.0 million in proceeds from our Revolving Facility (as defined below) offset by $3.7

million in distributions to non-controlling interests (temporary and permanent) and payments of $4.2 million related to notes payable and the Term Facility.

Senior Credit Facilities

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January 2016, March 2017, November 2017, and January 2021.

On June 17, 2022, we entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”) among Bank of America, N.A., as administrative agent (“Administrative

Agent”) and the lenders from time-to-time party thereto.

On June 17, 2022, we entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”) among Bank of America, N.A., as administrative agent (“Administrative Agent”) and

the lenders from time-to-time party thereto.

The Credit Agreement, which matures on June 17, 2027, provides for loans in an aggregate principal amount of $325 million.

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The Term Facility amortizes in quarterly installments of:

(a) 0.625% in each of the first two years, (b) 1.250% in the third and fourth year,

and (c) 1.875% in the fifth year of the Credit Agreement.

(a) 0.625% in each of the first two years, (b) 1.250% in the third and fourth year, and

The remaining outstanding principal balance of all term loans is due on the maturity date.

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We are permitted to increase the Revolving Facility and/or add one or more tranches of term loans in an aggregate amount not to exceed the sum of (i) $100 million plus (ii) an unlimited additional

amount, provided that (in the case of clause (ii)), after giving effect to such increases, the pro forma Consolidated Leverage Ratio (as defined in the Credit Agreement) would not exceed 2.0:1.0, and the aggregate amount of all incremental

increases under the Revolving Facility does not exceed $50,000,000.

under the Revolving Facility does not exceed $50,000,000.

The interest rates per annum applicable to the Senior Credit Facilities (other than in respect of Swingline Loans) will be Term SOFR as defined in the agreement plus an applicable margin or, at our

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outstanding credit exposure under the Revolving Facility (“unused fee”).

We may prepay and/or repay the revolving loans and the term loans, and/or terminate the revolving loan commitments, in whole or in part, at any time without premium or

penalty, subject to certain conditions.

The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and

dissolutions, sales of assets, dividends, and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets.

The Credit Agreement includes

certain financial covenants which include the Consolidated Fixed Charge Coverage Ratio and the Consolidated Leverage Ratio, as defined in the Credit Agreement.

We 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 liens, mergers, consolidations, liquidations and dissolutions,

sales of assets, dividends, and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets.

The Credit Agreement includes certain financial

covenants which include the Consolidated Fixed Charge Coverage Ratio and the Consolidated Leverage Ratio, as defined in the Credit Agreement.

The Credit Agreement also contains customary events of default.

As of September 30,

2024, we were in compliance with all of the covenants contained in the Credit Agreement.

As of March 31, 2025, we were in compliance

with all of the covenants contained in the Credit Agreement.

Our obligations under the Credit Agreement are guaranteed by our wholly owned material domestic subsidiaries (each, a “Guarantor”), and our obligations and any Guarantors are secured by a perfected

first priority security interest in substantially all of our existing and future personal property and each Guarantor, subject to certain exceptions.

As of September 30, 2024, $139.5 million (net of unamortized debt issuance costs of $1.2 million) was outstanding on the Term Facility while none was outstanding under the Revolving Facility resulting

in $175.0 million of credit availability.

The interest rate on the Senior Credit Facilities was 4.7% for the 2024 Third Quarter and 4.9% for the 2023 Third Quarter, with an all-in effective interest rate, including all associated costs, of 5.4% and

5.6% over the same periods, respectively.

The interest rate on our Senior Credit Facilities was 4.7% for the 2024 Nine Months and 5.7% for the 2023 Nine Months, with an all-in effective interest rate, including all associated costs, of 5.4% and

6.9% over the same periods, respectively.

As of March 31, 2025, $135.9 million (net of unamortized debt issuance costs of $1.0 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.

The interest rate on the Senior Credit Facilities was 4.9% for the 2025 First Quarter and 4.7% for the 2024 First Quarter, with an all-in effective interest rate, including all associated costs, of

5.5% and 5.3% over the same periods, respectively.

Interest Rate Swap

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payments made on the term loan and has a maturity date of June 30, 2027.

Beginning in July 2022, we receive 1-month SOFR, and pay a fixed rate of interest of 2.815% on 1-month SOFR on a quarterly basis.

The total interest rate in any period also

includes an applicable margin based on our consolidated leverage ratio.

Beginning in July 2022, we receive 1-month SOFR, and pay a fixed rate of interest of 2.815% on 1-month SOFR or Bank of America’s prime rate on a quarterly basis.

interest rate in any period also includes an applicable margin based on our consolidated leverage ratio.

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

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recorded to accumulated other comprehensive income (loss), net of tax.

As of September 30, 2024, the fair value of the interest rate swap was $1.8 million, a decrease of $1.4 million, net of a $0.5 million, income tax effect, as compared to December 31, 2023.

value of the interest rate swap is included in Other assets (current and long term) in our consolidated balance sheet while the increase in fair value is presented as unrealized gain in our unaudited consolidated statements of comprehensive income.

The interest rate swap arrangement has generated $2.8 million in interest savings for the nine months ended September 30, 2024.

The average interest rate for the term facility, net of the savings from the swap, in both the 2024 Third Quarter and

2024 Nine Months was 4.7%.

As of March 31, 2025, the fair value of the interest rate swap was $2.4 million, a decrease of $1.0 million, net of a $0.3 million income tax effect, as compared to December 31, 2024.

The fair value of

the interest rate swap is included in Other assets (current and long term) in our consolidated balance sheet while the decrease in fair value is presented as an unrealized loss in our unaudited consolidated statements of comprehensive income.

interest rate swap arrangement has generated $0.5 million in interest savings for the 2025 First Quarter.

Notes Payable and Deferred Payments Related to Acquisitions

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majority interests in such businesses.

At September 30, 2024, our remaining outstanding balance on these notes amounted to $3.1 million, of which $0.8 million is due by December 31, 2024, $1.8 million is due in 2025 and $0.5 million is due in 2026.

Notes are generally payable in equal annual installments of principal over two years plus any accrued and unpaid interest.

At March 31, 2025, our remaining outstanding balance on these notes aggregated $2.6 million, of which $1.6 million is payable in 2025, $0.9 million is payable in 2026 and $0.1 is payable in 2027.

generally payable in equal annual installments of principal over two years plus any accrued and unpaid interest.

Interest accrues at various interest rates ranging from 4.0% to 8.5% per annum.

On August 31, 2024, we acquired a 70% equity interest in an eight-clinic practice physical therapy with the original practice owners retaining 30% equity interest.

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

The prior owners retained a 35% ownership interest.

The purchase price for the 65% interest was

approximately $3.8 million which was paid in cash.

As part of this transaction, we agreed to additional consideration if future operational objectives are met.

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

The contingent consideration is valued at $1.3 million as of March 31, 2025.

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

The owner of the practice retained 25% of the equity interests.

The purchase price for the 75%

equity interest was approximately $2.0 million.

equity interest was approximately $15.9 million, of which $15.7 million was paid in cash, and $0.2 million was in the form of a note payable.

The note accrues interest at 5.0% per annum and the principal and interest is payable in one installment

which is due on December 1, 2026.

On October 31, 2024, we acquired a 50% interest in MSO Metro, LLC (“Metro”) pursuant to a Equity Interest Purchase Agreement (the “Purchase Agreement”) dated October 7, 2024 among U.S.

Therapy, Ltd.

(a subsidiary of the Company), Metro, the members of Metro, and Michael G.

Mayrsohn, as Sellers’ Representative.

We also became the managing member of Metro.

We paid a purchase price of approximately $76.5 million, $75.0 million of

which was funded by our cash on hand and the remaining $1.5 million through the issuance of 18,358 shares of the Company’s common stock based on a trailing five-day average as of the day immediately prior to closing.

The shares of the Company’s

common stock were issued in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act.

The Purchase Agreement also included an earnout where the sellers can earn up to $20.0 million of additional consideration if

certain performance criteria relating to the Metro business are achieved.

The value of the contingent consideration at March 31, 2025 was $7.4 million.

On August 31, 2024, we acquired a 70% equity interest in an eight-clinic practice physical therapy and the original practice owners retained a 30% equity interest.

The purchase price for the 70% equity

interest was approximately $2.0 million.

As part of the transaction, we agreed to additional contingent consideration if future operational and financial objectives are met.

The maximum payout is $3.6 million.

The contingent consideration

was valued at $3.6 million on August 31, 2024.

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.

On April 30, 2024, we acquired 100% of an IIP business through one of its primary IIP businesses, Briotix Health Limited Partnership, for a purchase price of approximately $24.0 million, of which $0.5

million was in the form of a note payable.

The note accrues interest at 5.0% per annum and the principal and the interest are payable on May 1, 2025.

As part of the transaction, we agreed to pay additional contingent consideration if future

operational objectives are met.

There is no maximum payout.

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

We contributed the capital for this purchase and as a result, our interest in the IIP business of Briotix

Health Limited Partnership increased to 92.1% subsequent to this transaction.

The note accrues interest at 5.0% per annum and the principal and the interest are payable in May 2025.

As part of the transaction, we agreed to additional contingent consideration if future operational

objectives are met by the business.

The maximum amount of additional contingent consideration due under this agreement is $10.0 million.

The contingent consideration was valued at $2.0 million as of March 31, 2025.

On March 29, 2024, we acquired a 50% equity interest in a nine-clinic physical therapy and hand therapy practice.

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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 of 4.5% per annum and the principal and the interest are payable on March 29, 2026.

Additionally, we have an

obligation to pay an additional amount based on certain future operational objectives being met.

The note accrues interest at 4.5% per annum and the principal and the interest are payable on March 29, 2026.

As part of the

transaction, we agreed to additional contingent consideration if future operational and financial objectives are met.

There is no maximum payout.

The contingent consideration was valued at $0.5 million as of September 30, 2024.

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

The owner of the practice retained 30% of the equity interests.

The purchase price for the 70%

equity interest was approximately $6.0 million, of which $5.4 million was paid in cash, and $0.6 million was in the form of a note payable.

The note accrues interest at 5.0% per annum and the principal and interest are payable in two installments.

The first payment of principal and interest of $0.3 million was paid January 2024, and the second installment of $0.3 million is due on September 30, 2025.

In a separate transaction, on September 29, 2023, we acquired a 70% equity interest in a single clinic physical therapy practice.

The owner of the practice retained 30% of the equity interests.

purchase price for the 70% equity interest was approximately $7.8 million, of which $7.4 million was paid in cash and $0.4 million is a deferred payment due on June 30, 2025.

On July 31, 2023, we acquired a 70% equity interest in a five-clinic practice.

The practice’s owners retained a 30% equity interest.

The purchase price for the 70% equity interest was approximately

$2.1 million, of which $1.8 million was paid in cash and $0.3 million is a deferred payment due on June 30, 2025.

On May 31, 2023, we and a local partner together acquired a 75% interest in a four-clinic physical therapy practice.

After the transaction, our ownership interest is 45%, our local partner’s ownership

interest is 30%, and the practice’s pre-acquisition owners have a 25% ownership interest.

The purchase price for the 75% equity interest was approximately $3.1 million, of which $1.7 million was paid in cash by us, $1.1 million was paid in cash by

the local partner, and $0.3 million was in the form of a note payable.

On July 1, 2024, the note payable of $0.3 million was paid in full ($0.2 million was paid by us and $0.1 million was paid by the local partner).

On February 28, 2023, we 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 contingent consideration was valued at $0.8 million on March 31, 2025.

Redeemable Non-Controlling Interest

Certain limited partnership agreements, as amended, provide that, upon the triggering events, we have a call right and the selling entity or individual has a put right for the purchase and sale of the

limited partnership interest held by the partner.

Certain limited partnership agreements and limited liability company agreements, as amended, provide that, upon the triggering events, we have a call right and the selling entity or individual has a put

right for the purchase and sale of the limited partnership interest held by the partner.

Once triggered, the put right and the call right do not expire, even upon an individual partner’s death, and contain no mandatory redemption feature.

The purchase price of the partner’s limited

partnership interest upon the exercise of either the put right or the call right is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets.

The fair value of the redeemable non-controlling interests on September 30, 2024 was $186.6 million.

purchase price of the partner’s limited partnership interest upon the exercise of either the put right or the call right is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity)

in our consolidated balance sheets.

The fair value of the redeemable non-controlling interests on March 31, 2025, was $260.0 million.

In the event that a limited non-controlling partner’s employment ceases at any time after a specified date that is typically between three and five years from the acquisition date, we have agreed to

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis