What changed in this filing

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Item 1. Financial Statements

2025-08-08 compared with 2025-05-09 · 652 added, 455 removed, 753 unchanged (60% of the section changed)

3 unchanged sentences

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS )

March 31 , 2025

June 30 , 2025

December 31, 2024

51 unchanged sentences

Three Months Ended

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

Net patient revenue

8 unchanged sentences

Corporate office costs

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

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

Operating income

Other (expense) income

Other income (expense):

Interest expense, debt and other

13 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 OF COMPREHENSIVE

UNAUDITED CONSOLIDATED STATEMENTS

COMPREHENSIVE INCOME

(IN THOUSANDS)

Three Months Ended

March 31, 2025

March 31, 2024

Other comprehensive gain:

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

Other comprehensive ( loss ) gain:

Unrealized (loss) gain on cash flow hedge

3 unchanged sentences

Comprehensive income attributable to USPH shareholders

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.

2 unchanged sentences

(IN THOUSANDS)

Three Months Ended

March 31 , 2025

March 31 , 2024

Six Months Ended

June 30 , 2025

June 30 , 2024

OPERATING ACTIVITIES

7 unchanged sentences

Change in revaluation of put-right liability

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

Change in fair value of contingent earn-out consideration

Equity of earnings in unconsolidated affiliate

2 unchanged sentences

Changes in operating assets and liabilities:

Increase in patient accounts receivable

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

Patient accounts receivable,net

Accounts receivable - other

Other current and long term assets

Accounts payable and accrued expenses

Other long-term liabilities

Net cash provided by operating activities

INVESTING ACTIVITIES

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Purchase 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

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

Repayment of notes receivable related to redeemable non-controlling interest

Proceeds from the sale of partnership

Distributions from unconsolidated affiliate

2 unchanged sentences

Proceeds from revolving facility

Payments on revolving facility

Distributions to non-controlling interest, permanent and temporary equity

Cash dividends paid to shareholders

Payments on term loan

Principal payments on notes payable

Net cash provided by (used in) financing activities

Net cash (used in) financing activities

Net (decrease) in cash and cash equivalents

6 unchanged sentences

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

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

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

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

Notes receivable related to sale of redeemable non-controlling interest

Notes receivable related to sale of redeemable non-controlling

interest, temporary equity

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 CHANGES IN EQUITY

UNAUDITED CONSOLIDATED STATEMENTS OF

(IN THOUSANDS)

3 unchanged sentences

Non-Controlling

For the three months ended June 30, 2025

Paid-In Capital

Comprehensive Gain

Balance December 31, 2024

Balance March 31, 2025

Net income attributable to USPH shareholders

3 unchanged sentences

Compensation expense - equity-based awards

Dividends payable to USPH shareholders

Sale of non-controlling interest

partnership interests - non-controlling interest

Dividends paid to USPH shareholders

Distributions to non-controlling interest partners - permanent equity

1 unchanged sentence

Other comprehensive gain

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

Balance March 31, 2025

Transfer of RNCI due

to separation agreement

Balance June 30, 2025

Accumulated Other

2 unchanged sentences

Non-Controlling

For the six months ended June 30, 2025

Paid-In Capital

Comprehensive Gain

Comprehensive Loss

Balance December 31, 2024

2 unchanged sentences

Issuance of restricted stock, net of cancellations

Revaluation of redeemable non-controlling interest

Revaluation of redeemable non-controlling interest, net of tax

Compensation expense - equity-based awards

1 unchanged sentence

Purchase of partnership interests - non-controlling interest

Dividends payable to USPH shareholders

Dividends paid 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 June 30, 2025

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(IN THOUSANDS)

Accumulated Other

Treasury Stock

Total Shareholders’

Non-Controlling

For the three months ended June 30, 2024

Paid-In Capital

Comprehensive Gain

Balance March 31, 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

Transfer of RNCI due to separation agreement

Balance June 30, 2024

Accumulated Other

Treasury Stock

Total Shareholders’

Non-Controlling

For the six months ended June 30, 2024

Paid-In Capital

Comprehensive Loss

Balance December 31, 2023

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, net of tax

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

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

Transfer of RNCI due to separation agreement

Balance June 30, 2024

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

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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

Our physical therapy operations consist of physical therapy, speech therapy and occupational therapy clinics and home-care physical and speech therapy practices that provide pre- and

post-operative care and treatment for a variety of orthopedic-related disorders, 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 companies.

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

The Company added six clinics and closed four clinics in

the 2025 Second Quarter bringing its total owned and/or managed clinics to 768 as of June 30, 2025, compared to 722 as of June 30, 2024.

D uring the six months ended June 30, 2025, and for the year ended December 31,

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

Schedule of Percentage Interest Acquired in Business

2025 Acquisition

April 30, 2025

February 2025 Acquisition

February 28, 2025

November 2024 Acquisition

November 30, 2024

2024 Acquisition

November 30, 2024

October 2024 Acquisition

October 31, 2024

1 unchanged sentence

August 31, 2024

2024 Acquisition

April 2024 Acquisition

April 30, 2024

1 unchanged sentence

March 29, 2024

IIP business.

On April 30,2025, the

Company acquired an outpatient home care practice that provides speech and occupational therapy through its 50 % owned

subsidiary MSO Metro LLC.

After the transaction, the Company’s ownership interest is 40 %, the local partners have an ownership

interest of 40 % and the practice’s preacquisition owners have a 20 % ownership interest.

Home-care business

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

IIP business.

Basis of Presentation

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

All significant intercompany transactions have been eliminated

in consolidation.

All significant intercompany transactions have been

eliminated in consolidation.

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

These reclassifications had no effect on the reported results of

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Segment Reporting

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makers in determining the allocation of resources and in assessing performance.

The Company currently operates through two segments:

The Company currently operates through two

physical therapy operations and IIP.

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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.

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

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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.

and six months ended June 30, 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.

Company will continue to monitor for any triggering events or other indicators of impairment.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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;

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.

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.

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.

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

4 unchanged sentences

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

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:

limited partnership agreement or limited liability company agreement, as applicable.

6 unchanged sentences

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.

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

The Company records any adjustment in the redemption value, net of tax, directly to retained earnings and 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

2 unchanged sentences

carrying amount) and fair value are the same.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

The Company recognizes

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

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.

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 %.

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 six months ending June 30, 2025, the Company sold interests in two partnerships, for an aggregate

price of $ 0.1 million.

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

During the six months

ended, June 30, 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 15 % to 35.0 % and the aggregated

purchase price for acquired non-controlling interests – permanent equity was $ 0.2 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 1.5 % to 35.0 % and the aggregated purchase price for acquired

non-controlling interests – permanent equity was $ 0.8 million.

Revenue Recognition

4 unchanged sentences

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.

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

The execution of the contract alone does not indicate a

performance obligation.

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.

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.

1 unchanged sentence

Net patient revenue consists of revenues for physical therapy

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

revenue (patient revenue less estimated contractual adjustments – as described below) is recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the

terms of the contract are satisfied.

and occupational therapy clinics, and home-care physical and speech therapy practices, that provide pre- and post-operative care and treatment for orthopedic related disorders, sports-related injuries, preventative care, rehabilitation of injured

workers and neurological-related injuries.

Net patient revenue (patient revenue less estimated contractual adjustments – as described below) is recognized at the estimated net realizable amounts from third-party payors, patients and others in

exchange for services rendered when obligations under the terms of the contract are satisfied.

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

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.

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.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Other Revenue

10 unchanged sentences

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 March 31,

2025 and March 31, 2024 , respectively.

Management contract revenue was $ 2.3 million and $ 2.4 million for the three months ended June 30,

2025 and June 30, 2024 , respectively, and was $ 4.8 million for both the six months ended June 30, 2025 and June 30,

2024, respectively.

Additionally, other revenue from physical therapy

10 unchanged sentences

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.

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

payor of the clinic.

collectability estimates.

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.

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.

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 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.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

9 unchanged sentences

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 either the three months ended March 31, 2025, or March 31, 2024.

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 and six months ended June 30, 2025, or June 30, 2024.

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

On July 4, 2025, the President signed H.R.

1, the “One Big Beautiful Bill Act,” into law.

The legislation includes several changes

to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the reinstatement of 100% bonus depreciation.

These changes were not reflected in the income tax provision for the

period ended June 30, 2025, as enactment occurred after the balance sheet date.

The Company is currently evaluating the impact on future periods.

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 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.

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 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 %.

In determining the value of the put right as of June 30 , 2025 , the Company used

a Monte Carlo simulation model utilizing unobservable inputs including asset volatility of 20.0 % and a discount rate of 11.06 %.

The value of this put right increased $ 0.7

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.

million for the six months ended June 30 , 2025 .

The put right was valued at approximately $ 1.8 million on June 30 , 2025, and approximately $ 1.0 million on December 31, 2024.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

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 $ 14.8 million on June 30 , 2025, and $ 17.6 million on December 31, 2024.

The valuation of the Company’s interest rate

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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.

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

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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.

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.

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

computation during the three and six months ended June 30, 2025.

Recently Adopted Accounting Guidance

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

was no significant impact on the Company’s 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

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

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

early adoption is permitted.

The ASU can be applied either prospectively or retrospectively.

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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.

The computation of basic

and diluted earnings per share are as follows.

Three Months Ended

March 31, 2025

March 31, 2024

Six Months Ended

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

Earnings per Share

(In thousands, except per share data)

Computation of earnings per share - USPH shareholders:

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Acquisitions of Businesses

The Company’s strategy is to continue acquiring outpatient physical therapy practices, to develop outpatient physical therapy clinics as satellites in existing partnerships and to

continue acquiring companies that provide and serve the IIP sector.

The consideration paid for each acquisition is derived through arm’s length negotiations and funded through working capital 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 subsequent acquisitions in 2024 and

The Company’s strategy is to continue acquiring multi-clinic outpatient physical therapy practices and home-care physical and speech therapy practices, to develop outpatient physical

therapy clinics as satellites in existing partnerships, and to continue acquiring companies that provide industrial injury prevention services.

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 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:

During the six months ended June 30, 2025, the Company acquired a majority interest in the following businesses:

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2025 Acquisitions

April 2025 Acquisition

April 30, 2025

February 2025 Acquisition

February 28, 2025

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

Home-care business

purchase price plus the fair value of the non-controlling interest for the acquisitions after June 30, 2024 was 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 in order 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 June 30, 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 subsequent acquisitions in 2024 and 2025.

30, 2025, the Company acquired an outpatient home-care physical and speech therapy practice through its 50 %-owned subsidiary, MSO

After the transaction, the Company’s ownership interest is 40 %, the local partners have an ownership interest

of 40 % and the practice’s preacquisition owners have a 20 % ownership interest.

The purchase price for the 80 % equity interest was approximately $ 2.3 million which was paid in cash.

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

The maximum amount of additional contingent consideration due under this agreement is $ 1.8 million.

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

The prior owner retained a 35 % ownership interest.

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The contingent consideration was valued at $ 0.6

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.

million as of June 30, 2025.

Besides the multi-clinic acquisitions referenced above, the

Company purchased the assets and business of four physical therapy clinics during 2025, which were tucked into larger partnerships in

separate transactions.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table provides details on the preliminary purchase price allocation

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Cash paid, net of cash acquired

Deferred payments

Contingent payments

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Customer and referral relationships

Non-compete agreements

Non-compete agreement

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

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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 the acquisitions completed in the three and six months ended June 30, 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.

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IIP business.

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

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

IIP business.

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

5 unchanged sentences

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.

interest in Metro pursuant to an Equity Interest Purchase Agreement (the “Purchase Agreement”) dated October 7, 2024 among U.S.

Physical Therapy, Ltd.

1 unchanged sentence

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.

The Company 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 $ 8.7 million on June 30, 2025.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

On August 31, 2024, the

5 unchanged sentences

The contingent consideration was valued at $ 0.7

million on March 31, 2025.

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

million on June 30, 2025.

On April 30, 2024 the Company acquired 100 % of an IIP business (“April 2024 Acquisition”), 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 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.

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 $ 1.8

million as of March 31, 2025.

million as of June 30, 2025.

On March 29, 2024, the Company acquired a 50 % equity interest in a nine -clinic

1 unchanged sentence

The original owners of the practice retained the remaining 50 %.

The purchase price for the 50 % equity interest was approximately $ 16.4

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.

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.

The contingent consideration was valued at $ 1.2

million on June 30, 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, the April 2024 Acquisition and preliminary purchase price allocations for the other acquisitions described above.

Physical Therapy

1 unchanged sentence

Cash paid, net of cash acquired

Granted shares

Deferred payments

Contingent payments

9 unchanged sentences

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.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 12.6

For the non-compete agreements, the weighted-average amortization period is 5.8 years.

The values assigned to tradenames are tested annually for impairment.

The values assigned to tradenames are

tested annually for impairment.

Variable Interest Entities

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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.

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 June 30, 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 June 30, 2025, and December 31, 2024, the total assets of the Company’s variable

interest entities were $ 242.1 million and $ 231.3 million, respectively.

As of June 30, 2025, and December 31, 2024, the total liabilities of the Company’s VIEs were $ 38.1 million and $ 31.9 million respectively.

The table below presents the operating results of the VIEs.

Three Months Ended

March 31, 2025

Six Months Ended

June 30, 2025

(In thousands)

2 unchanged sentences

Rent, supplies, contract labor and other

Depreciation and amortization

Provision for credit losses

1 unchanged sentence

Other expense

Income before taxes

Provision for income 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”.

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.

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

1 unchanged sentence

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

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

6 unchanged sentences

The Company enters into an agreement (the “Purchase Agreement”) to acquire from the Seller Entity a majority (ranges from 50 % to 90 %) of the limited

partnership interest and in all cases 100 % of the

general partnership interest in NewCo.

The Company does not purchase 100 % of the limited partnership interest because the Selling

Shareholders, through the Seller Entity, want to maintain an ownership percentage.

The consideration for the Acquisition is primarily payable in the form of cash at closing and a two-year note in lieu of an escrow (the “Purchase Price”).

In some of the acquired therapy practice transactions, the Purchase Agreement contains an earn-out or other

contingent consideration that is payable to the Seller Entity or the Selling Shareholders.

partnership interest and in all cases 100 % of the general partnership interest in NewCo.

The Company does not purchase 100 % of the limited partnership interest because the Selling Shareholders, through the Seller Entity, want to maintain an ownership percentage.

The consideration for the Acquisition is primarily payable in

the form of cash at closing and a two-year note in lieu of an escrow (the “Purchase Price”).

In some of the acquired therapy

practice transactions, the Purchase Agreement contains an earn-out or other contingent consideration that is payable to the Seller Entity or the Selling Shareholders.

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

4 unchanged sentences

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

ranges from three to six years

(the “Employment Term”), with automatic one-year renewals, unless employment is terminated prior to the end of the Employment

15 unchanged sentences

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.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

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 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;

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 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 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.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

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 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 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 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

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 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:

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

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.

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.

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.

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.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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:

Three Months Ended

March 31, 2025

The following table

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

Six Months Ended

June 30, 2025

December 31, 2024

1 unchanged sentence

Beginning balance

Net income allocated to redeemable non-controlling interest

Net income allocated to redeemable non-controlling interest partners

Distributions to redeemable non-controlling interest partners

2 unchanged sentences

Acquired interest

Contributed capital

Sales of redeemable non-controlling interest

4 unchanged sentences

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

Three Months Ended

March 31, 2025

Six Months Ended

June 30, 2025

December 31, 2024

13 unchanged sentences

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 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 six months ended June 30, 2025.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended

March 31, 2025

Six Months Ended

June 30, 2025

December 31, 2024

2 unchanged sentences

Adjustments for purchase price allocation of businesses acquired in prior year

Impairment charges

Ending balance

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

For the three and six months ended June 30, 2025, and 2024, no triggering events or indicators were identified that would require impairment assessments as

of such periods.

Intangible Assets

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

March 31, 2025

June 30, 2025

December 31, 2024

Accumulated Amortization

(In thousands)

2 unchanged sentences

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 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 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:

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 years.

Non-compete agreements are amortized over the respective term of the agreements which range from 5.0

to 6.0 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.

This impairment loss is presented in the impairment of assets held for sale in the Consolidated Statements of

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

Six Months Ended

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

(In thousands)

1 unchanged sentence

Non-compete agreements

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:

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Based on the balance of referral relationships and non-compete agreements as of June 30, 2025, the

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

For the Year Ending December 31,

Referral Relationships

Customer and Referral

Relationships

(In thousands)

(excluding the three months ended March 31, 2025)

(excluding the six months ended June 30, 2025)

Accrued Expenses

Accrued expenses included the following:

March 31, 2025

Accrued expenses consists of the following for the period presented.

June 30, 2025

December 31, 2024

2 unchanged sentences

Credit balances due to patients and payors

Dividends payable

Group health insurance claims

4 unchanged sentences

Closure costs

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

Deferred payments related to acquisitions

Professional fees

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

consisted of the following:

March 31, 2025

June 30, 2025

December 31, 2024

13 unchanged sentences

America, N.A., as administrative agent (“Administrative Agent”) and the lenders from time-to-time party thereto.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Credit Agreement, which matures on June 17, 2027 , provides for loans in an aggregate principal amount

38 unchanged sentences

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 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 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.

As of June 30, 2025, $ 135.0 million was outstanding on the Term Facility while $ 24.5 million was outstanding under the Revolving Facility resulting in $ 150.5 million of credit availability.

As of June 30, 2025, the Company was in compliance with all of the covenants contained in the Credit

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The interest rate on the Company’s Senior Credit Facilities was 5.1 % for the three months ended June 30, 2025, and 4.7 % for the three months ended June 30, 2024,

with an all-in effective interest rate, including all associated costs, of 5.6 % and 5.4 % over the same periods, respectively.

The all-in effective interest rate on the Company’s Senior Credit Facilities for the six months ended June 30, 2025 was 5.5 % and 5.4 % for the six months ended June 30, 2024.

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

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.

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

As of June 30 , 2025, the Company’s remaining outstanding balance on these notes amounte d to $ 1.4 million, of which $ 0.3 million is due in 2025, $ 0.9 million is due in 2026, and $ 0.2

million is due in 2027.

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

unpaid interest.

Interest accrues at various interest rates ranging from 4.5 % to 8.5 % per annum.

3 unchanged sentences

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.

5 unchanged sentences

Three Months Ended

March 31, 2025

March 31, 2024

Six Months Ended

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

(In thousands)

Other comprehensive gain (loss):

Other comprehensive (loss) gain:

Unrealized (loss) gain on cash flow hedge

4 unchanged sentences

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 follows.

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.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The carrying and fair value of the Company’s interest rate derivatives (included in other current assets and other assets) were as

December 31, 2024

(In thousands)

2 unchanged sentences

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.

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.

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

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.

1 unchanged sentence

Three Months Ended

March 31, 2025

March 31, 2024

Six Months Ended

June 30 , 2025

June 30 , 2024

June 30 , 2025

June 30 , 2024

(In thousands)

5 unchanged sentences

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 information related to leases was as follows.

The supplemental cash flow informa tion

related to leases was as follows.

Three Months Ended

March 31, 2025

March 31, 2024

Six Months Ended

June 30, 2025

June 30, 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 March 31, 2025, 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

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The aggregate future lease payments for operating leases as of June 30, 2025, were

(In thousands)

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

2025 (excluding the six months ended June 30, 2025)

2029 and thereafter

3 unchanged sentences

Average lease terms and discount rates were as follows.

March 31, 2025

March 31, 2024

Weighted-average remaining lease term

Weighted-average discount rate

June 30, 2025

June 30, 2024

Weighted-average remaining lease term - Operating leases

Weighted-average discount rate - Operating leases

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.

Mayrsohn (lessor), who is the President of Metro and elected to the Board of Directors by the Company’s

shareholders as of May 20, 2025.

The two leases are classified as operating leases that expire on April 30, 2030 and December 31, 2031 .

For the six months ended June 30, 2025, the Company paid a total of $ 0.2 million of lease payments to Mr.

Metro has made

leasehold improvements valued at $ 0.3 million as of June 30, 2025.

The total of minimum future rental payments under these related

party lease agreements is $ 2.9 million as of June 30, 2025.

Segment Information

7 unchanged sentences

The Company’s limited partnership interests generally range from 65 % to 75 % (the range is 25 % - 99 %) in the Clinic Partnerships.

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.

The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnership interest in most

of the clinics (hereinafter referred to as “Clinic Partnerships”).

Some of the Clinic Partnerships serve as management services organizations which manage and provide staffing and a variety of administrative services to physical therapy provider

entities in which the Company does not have an ownership interest.

These Clinic Partnerships similarly are owned collectively by the Company and one or more physical therapists who are involved in the management of the operations.

To a lesser extent, th e Company operates some

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

extent, the Company operates some clinics, through wholly-owned subsidiaries (hereinafter referred to as “Wholly-Owned Facilities).

The Company continues to seek to attract for employment

1 unchanged sentence

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.

for managing the clinic operations.

Wholly-Owned Facilities operate more than one clinic location.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 n on-c ontrolling 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

1 unchanged sentence

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

2 unchanged sentences

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 contractor s.

IIP services are performed through

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

Other clients include large insurers and their contractors.

IIP services are

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

Segment Financials

The Company, including its chief operating decision maker, the Chief Executive Officer, uses gross profit in its budget-to-actual, forecasting, and other analytical processes to assess segment

performance and allocate resources.

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

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.

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company has provided additional information regarding its reportable segments which contributes to the understanding of the

Company and provides useful information.

Three Months Ended

March 31, 2025

March 31, 2024

Six Months Ended

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

(In thousands)

Physical therapy operations

31 unchanged sentences

Interest income from investments

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

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

Change in revaluation of put-right liability

3 unchanged sentences

Income before taxes

March 31, 2025

June 30, 2025

December 31, 2024

1 unchanged sentence

Industrial injury prevention services

Total goodwil

Total goodwill

All other assets:

2 unchanged sentences

Total all other assets

PHYSICAL THERAPY, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Investment in Unconsolidated

3 unchanged sentences

The investment

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

balance of this joint venture as of June 30, 2025, is $ 12.3 million and the earnings amounted to approximately $ 0.4 million and $ 0.8 million for the three and six months

ended June 30, 2025, respectively.

Earnings were $ 0.3 million and $ 0.5 million for the three and six months ended June 30, 2024, respectively.

Subsequent Events

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 .

On July 31, 2025, the Company acquired a 60 % equity interest in a three -clinic physical therapy practice with the original practice owners together retaining a 40 % equity interest.

The Company’s Board of Directors declared a quarterly dividend of $ 0.45 per share payable on September 12, 2025 ,

to shareholders of record on August 22, 2025 .

The Company’s Board

of Directors approved a share repurchase program effective August 5, 2025.

The program authorizes the repurchase by the Company of up to $ 25

million of its outstanding shares of common stock over the period ending on December 31, 2026.

Under the share repurchase program, shares may be repurchased from time to time in the open market or negotiated transactions at prevailing market

rates, or by other means in accordance with federal securities laws.

The timing and amount of share repurchases under the share repurchase program, if any, will depend on several factors, including the Company’s stock price performance, ongoing

capital allocation priorities and general market conditions.

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