U S PHYSICAL THERAPY INC /NV 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We maintain an interest rate swap arrangement which is considered a derivative instrument. Our indebtedness as of December 31, 2025, was the outstanding balance on our Senior Credit Facilities of $161.8 million and the outstanding balance of seller notes from our acquisitions of $1.3 million. The Revolving Facility within our Senior Credit Facilities has a balance of $30.5 million as of December 31, 2025, and is subject to fluctuating interest rates. A 1% change in the interest rate would yield an additional $0.3 million of interest expense. See Item 8, Note 11 to our audited consolidated financial statements. 53 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND RELATED INFORMATION Reports of Independent Registered Public Accounting Firm—Grant Thornton LLP (PCAOB ID Number 248 ) 55 Audited Financial Statements: Consolidated Balance Sheets as of December 31, 2025 and 2024 58 Consolidated Statements of Net Income for the years ended December 31, 2025, 2024 and 2023 59 Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024 and 2023 60 Consolidated Statements of Changes in Equity for the years ended December 31, 2025, 2024 and 2023 61 Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023 62 Notes to Consolidated Financial Statements 63 54 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders U.S. Physical Therapy, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of U.S. Physical Therapy, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of net income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 27, 2026 expressed an unqualified opinion. Basis for opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Measurement of Patient Revenue Net of Contractual Adjustments As further discussed in Note 2 to the consolidated financial statements, revenues are recognized in the period in which services are rendered. Net patient revenues (patient revenues less estimated contractual adjustments) are recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. The Company has agreements with third-party payors that provide for payments at amounts different from its established rates. Each month the Company estimates its contractual adjustment for each clinic based on the terms of third-party payor contracts and the historical collection and write-off experience of the clinic and applies a contractual adjustment reserve percentage to the gross accounts receivable balances. The Company then performs a comparison of cash collections to corresponding net revenues for the prior twelve months. We identified the measurement of contractual adjustments as a critical audit matter. 55 Table of Contents The principal consideration for our determination that the measurement of contractual adjustments is a critical audit matter is that the estimate requires a high degree of auditor subjectivity in evaluating management’s assumptions related to developing future collection patterns across the various clinic locations. Our audit procedures related to the Company’s measurement of contractual adjustments included the following, among others. ● We tested the design and operating effectiveness of controls relating to billing and cash collections, net rate trend analysis and cash collections versus net revenue trend analysis. ● For a sample of patient visits, we inspected and compared underlying documents for each transaction, which included gross billing rates and cash collected (net revenue). ● For a sample of patient visits, we traced gross billings and net revenue to net revenue recorded in the general ledger and to each report used in determining and assessing the contractual adjustment calculation. ● We compared cash collections to recorded net revenue for the twelve months period ended December 31, 2025 and again for the twelve-month period ended in the first month subsequent to period end, to identify whether there were unusual trends that would indicate that the usage of historical collection patterns would no longer be reasonable to predict future collection patterns. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2004. Houston, TX February 27, 2026 56 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders U.S. Physical Therapy, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of U.S. Physical Therapy, Inc. (a Nevada corporation) and subsidiaries (the “Company”) as of December 31, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2025, and our report dated February 27, 2026 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Houston, Texas February 27, 2026 57 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ( IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS ) December 31, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 35,570 $ 41,362 Patient accounts receivable, less provision for credit losses of $ 3,775 and $ 3,506 , respectively 64,249 59,040 Accounts receivable - other 24,087 26,626 Other current assets 16,084 10,555 Total current assets 139,990 137,583 Fixed assets: Furniture and equipment 67,891 68,128 Leasehold improvements 58,985 51,105 Fixed assets, gross 126,876 119,233 Less accumulated depreciation and amortization ( 91,225 ) ( 87,093 ) Fixed assets, net 35,651 32,140 Operating lease right-of-use assets 144,197 133,936 Investment in unconsolidated affiliate 12,275 12,190 Goodwill 692,392 667,152 Other identifiable intangible assets, net 172,861 179,311 Other assets 6,644 5,155 Total assets $ 1,204,010 $ 1,167,467 LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTEREST Current liabilities: Accounts payable - trade $ 6,059 $ 5,936 Accrued expenses 80,982 59,513 Current portion of operating lease liabilities 42,134 39,835 Current portion of term loan and notes payable 9,865 10,999 Total current liabilities 139,040 116,283 Notes payable, net of current portion 417 903 Revolving facility 30,500 11,000 Term loan, net of current portion and deferred financing costs 121,677 130,627 Deferred taxes 28,391 29,465 Operating lease liabilities, net of current portion 110,572 101,868 Other long-term liabilities 3,214 18,275 Total liabilities 433,811 408,421 Redeemable non-controlling interest - temporary equity 293,311 269,025 Commitments and Contingencies U.S. Physical Therapy, Inc. (“USPH”) shareholders’ equity: Preferred stock, $ 0.01 par value, 500,000 shares authorized, no shares issued and outstanding - - Common stock, $ 0.01 par value, 20,000,000 shares authorized, 17,418,621 and 17,309,120 shares issued, respectively 174 172 Additional paid-in capital 285,522 290,321 Accumulated other comprehensive gain 714 2,799 Retained earnings 227,216 227,265 Treasury stock at cost, ( 2,296,059 and 2,214,737 shares at December 31, 2025 and 2024, respectively) ( 37,194 ) ( 31,628 ) Total USPH shareholders’ equity 476,432 488,929 Non-controlling interest - permanent equity 456 1,092 Total USPH shareholders’ equity and non-controlling interest - permanent equity 476,888 490,021 Total liabilities, redeemable non-controlling interest, USPH shareholders’ equity and non-controlling interest - permanent equity $ 1,204,010 $ 1,167,467 The accompanying notes are an integral part of these Consolidated Financial Statements. 58 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET INCOME ( IN THOUSANDS, EXCEPT PER SHARE AMOUNTS ) For the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 Net patient revenue $ 650,429 $ 560,553 $ 514,556 Other revenue 130,561 110,792 90,246 Net revenue 780,990 671,345 604,802 Operating cost: Salaries and related costs 461,890 399,394 353,390 Rent, supplies, contract labor and other 140,431 118,910 108,596 Depreciation and amortization 21,059 17,853 14,960 Provision for credit losses 7,647 6,912 6,172 Clinic closure costs - lease and other 270 4,355 175 Total operating cost 631,297 547,424 483,293 Gross profit 149,693 123,921 121,509 Corporate office costs 69,260 58,290 51,953 (Gain) loss on change in fair value of contingent earn-out consideration ( 6,244 ) 219 1,550 Impairment of goodwill and other intangible assets - - 17,495 Impairment on assets held for sale - 2,418 - Operating income 86,677 62,994 50,511 Other (expense) income Interest expense, debt and other ( 9,459 ) ( 8,015 ) ( 9,303 ) Interest income from investments 105 3,941 3,774 Change in revaluation of put-right liability ( 1,322 ) ( 82 ) 2,582 Equity in earnings of unconsolidated affiliate 1,477 1,014 955 Loss on sale of partnership ( 123 ) - - Relief Funds - - 467 Other 458 357 390 Total other expense ( 8,864 ) ( 2,785 ) ( 1,135 ) Income before taxes 77,813 60,209 49,376 Provision for income taxes 19,808 14,609 12,156 Net income 58,005 45,600 37,220 Less: Net income attributable to non-controlling interest: Redeemable non-controlling interest - temporary equity ( 13,849 ) ( 10,044 ) ( 4,426 ) Non-controlling interest - permanent equity ( 4,573 ) ( 4,132 ) ( 4,555 ) ( 18,422 ) ( 14,176 ) ( 8,981 ) Net income attributable to USPH shareholders $ 39,583 $ 31,424 $ 28,239 Basic and diluted earnings per share attributable to USPH shareholders $ 1.42 $ 1.84 $ 1.28 Shares used in computation - basic and diluted 15,175 15,064 14,188 Dividends declared per common share $ 1.80 $ 1.76 $ 1.72 The accompanying notes are an integral part of these Consolidated Financial Statements. 59 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS) Year Ended December 31, 2025 December 31, 2024 December 31, 2023 Net income $ 58,005 $ 45,600 $ 37,220 Other comprehensive income Unrealized (loss) gain on cash flow hedge ( 2,838 ) 23 ( 1,642 ) Tax effect at statutory rate (federal and state) 753 ( 6 ) 420 Comprehensive income $ 55,920 $ 45,617 $ 35,998 Comprehensive income attributable to non-controlling interest ( 18,422 ) ( 14,176 ) ( 8,981 ) Comprehensive income attributable to USPH shareholders $ 37,498 $ 31,441 $ 27,017 The accompanying notes are an integral part of these Consolidated Financial Statements. 60 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY ( IN THOUSANDS ) U.S. Physical Therapy, Inc. Common Stock Additional Accumulated Other Retained Treasury Stock Total Shareholders’ Non-Controlling Shares Amount Paid-In Capital Comprehensive Gain Earnings Shares Amount Equity Interests Total Balance January 1, 2023 15,216 $ 152 $ 110,317 $ 4,004 $ 232,948 ( 2,215 ) $ ( 31,628 ) 315,793 $ 1,260 317,053 Net income attributable to USPH shareholders - - - - 28,239 - - 28,239 - 28,239 Net income attributable to non-controlling interest - permanent equity - - - - - - - - 4,555 4,555 Issuance of restricted stock, net of cancellations 70 - - - - - - - - - Issuance of common stock, pursuant to the secondary public offering, net of issuance costs 1,916 20 163,626 - - - - 163,646 - 163,646 Revaluation of redeemable non-controlling interest - - - - ( 13,564 ) - - ( 13,564 ) - ( 13,564 ) Compensation expense - equity-based awards - - 7,236 - - - - 7,236 - 7,236 Sale of non-controlling interest - - - - - - - - 4 4 Purchase of partnership interests - non-controlling interest - - ( 83 ) - - - - ( 83 ) ( 36 ) ( 119 ) Dividends payable to USPH shareholders - - - - ( 24,128 ) - - ( 24,128 ) - ( 24,128 ) Distributions to non-controlling interest partners - permanent equity - - - - - - - - ( 4,567 ) ( 4,567 ) Deferred taxes related to redeemable non-controlling interest - temporary equity - - - - 587 - - 587 - 587 Other comprehensive loss - - - ( 1,222 ) ( 2 ) - - ( 1,224 ) - ( 1,224 ) Other - - - - ( 308 ) - - ( 308 ) - ( 308 ) Balance December 31, 2023 17,202 $ 172 $ 281,096 $ 2,782 $ 223,772 ( 2,215 ) $ ( 31,628 ) $ 476,194 $ 1,216 $ 477,410 U.S. Physical Therapy, Inc. Common Stock Additional Accumulated Other Retained Treasury Stock Total Shareholders’ Non-Controlling Shares Amount Paid-In Capital Comprehensive Gain Earnings Shares Amount Equity Interests Total Balance January 1, 2024 17,202 $ 172 $ 281,096 $ 2,782 $ 223,772 ( 2,215 ) $ ( 31,628 ) 476,194 $ 1,216 477,410 Net income attributable to USPH shareholders - - - - 31,424 - - 31,424 - 31,424 Net income attributable to non-controlling interest - permanent equity - - - - - - - - 4,132 4,132 Issuance of restricted stock, net of cancellations 107 - 1,500 - - - - 1,500 - 1,500 Revaluation of redeemable non-controlling interest - - - - ( 4,964 ) - - ( 4,964 ) - ( 4,964 ) Compensation expense - equity-based awards - - 7,656 - - - - 7,656 - 7,656 Sale of non-controlling interest - - 229 - - - - 229 - 229 Purchase of partnership interests - non-controlling interest - - ( 760 ) - - - - ( 760 ) ( 124 ) ( 884 ) Dividends payable to USPH shareholders - - - - ( 26,540 ) - - ( 26,540 ) - ( 26,540 ) Distributions to non-controlling interest partners - permanent equity - - - - - - - - ( 4,133 ) ( 4,133 ) Deferred taxes related to redeemable non-controlling interest - temporary equity - - - - 540 - - 540 - 540 Other comprehensive gain - - - 17 - - - 17 - 17 Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans - - 600 - - - - 600 - 600 Transfer of RNCI due to separation agreement - - - - 3,033 - - 3,033 - 3,033 Other - - - - - - - - 1 1 Balance December 31, 2024 17,309 $ 172 $ 290,321 $ 2,799 $ 227,265 ( 2,215 ) $ ( 31,628 ) $ 488,929 $ 1,092 $ 490,021 U.S. Physical Therapy, Inc. Common Stock Additional Accumulated Other Retained Treasury Stock Total Shareholders’ Non-Controlling Shares Amount Paid-In Capital Comprehensive Loss Earnings Shares Amount Equity Interests Total Balance January 1, 2025 17,309 $ 172 $ 290,321 $ 2,799 $ 227,265 ( 2,215 ) $ ( 31,628 ) $ 488,929 $ 1,092 $ 490,021 Net income attributable to USPH shareholders - - - - 39,583 - - 39,583 - 39,583 Net income attributable to non-controlling interest - permanent equity - - - - - - - - 4,573 4,573 Issuance of restricted stock, net of cancellations 110 2 - - - - - 2 - 2 Revaluation of redeemable non-controlling interest - - - - ( 24,521 ) - - ( 24,528 ) - ( 24,528 ) Compensation expense - equity-based awards - - 7,812 - - - - 7,812 - 7,812 Sale of non-controlling interest - - ( 76 ) - - - - ( 76 ) ( 26 ) ( 102 ) Dividends paid to USPH shareholders - - - - ( 27,362 ) - - ( 27,362 ) - ( 27,362 ) Distributions to non-controlling interest partners - permanent equity - - - - - - - - ( 4,499 ) ( 4,499 ) Deferred taxes related to redeemable non-controlling interest - temporary equity - - - - 11,998 - - 11,998 - 11,998 Other comprehensive gain - - - ( 2,085 ) - - - ( 2,085 ) - ( 2,085 ) Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans - - 721 - - - - 721 - 721 Purchase of non-controlling interest (permanent equity) - - ( 7,836 ) - - - - ( 7,836 ) ( 307 ) ( 8,143 ) Transfer from non-controlling interest (permanent equity) to redeemable non-controlling interest (temporary equity) - - ( 5,236 ) - - - - ( 5,236 ) ( 518 ) ( 5,754 ) Repurchase of common stock - - - - - ( 81 ) ( 5,566 ) ( 5,566 ) - ( 5,566 ) Other - - ( 184 ) - 253 - - 76 141 217 Balance December 31, 2025 17,419 $ 174 $ 285,522 $ 714 $ 227,216 $ ( 2,296 ) $ ( 37,194 ) $ 476,432 $ 456 $ 476,888 The accompanying notes are an integral part of these Consolidated Financial Statements . 61 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ( IN THOUSANDS ) Year Ended December 31, 2025 December 31, 2024 December 31, 2023 OPERATING ACTIVITIES Net income including non-controlling interest $ 58,005 $ 45,600 $ 37,220 Adjustments to reconcile net income including non-controlling interest to net cash provided by operating activities: Depreciation and amortization 22,391 18,681 15,695 Provision for credit losses 7,647 6,912 6,172 Equity-based awards compensation expense 8,270 7,823 7,236 Amortization of debt issue costs 422 422 420 Change in deferred income taxes 11,406 5,365 4,490 Change in revaluation of put-right liability 1,322 82 ( 2,582 ) Change in fair value of contingent earn-out consideration ( 6,244 ) 219 1,550 Equity of earnings in unconsolidated affiliate ( 1,477 ) ( 1,014 ) ( 955 ) Loss on sale of clinics and fixed assets 383 836 166 Loss on sale of partnership 123 - - Impairment of goodwill and other intangible assets - - 17,495 Impairment of assets held for sale - 2,418 - Changes in operating assets and liabilities: Patient accounts receivable, net ( 11,955 ) ( 5,346 ) ( 5,645 ) Accounts receivable - other 2,895 ( 6,548 ) ( 356 ) Other current and long term assets ( 10,418 ) ( 818 ) ( 197 ) Accounts payable and accrued expenses ( 7,798 ) 1,713 15 Other long-term liabilities 86 ( 1,405 ) 1,254 Net cash provided by operating activities 75,058 74,940 81,978 INVESTING ACTIVITIES Purchase of fixed assets ( 14,071 ) ( 9,186 ) ( 9,294 ) Purchase of majority interest in businesses, net of cash acquired ( 15,674 ) ( 133,087 ) ( 26,582 ) Purchase of redeemable non-controlling interest, temporary equity ( 9,917 ) ( 8,052 ) ( 10,986 ) Purchase of non controlling interest, permanent equity ( 273 ) ( 1,004 ) ( 281 ) Proceeds on sale of non-controlling interest, permanent equity 30 26 102 Repayment of notes receivable related to sales of redeemable non-controlling interest 531 551 510 Proceeds on sale of partnership interest - redeemable non-controlling interest, temporary equity 186 79 875 Distributions from unconsolidated affiliate 1,411 1,080 830 Proceeds on sale of partnership interest, clinics and fixed assets 700 - - Other 364 143 ( 189 ) Net cash used in investing activities ( 36,713 ) ( 149,450 ) ( 45,015 ) FINANCING ACTIVITIES Proceeds from issuance of common stock pursuant to the secondary public offering, net of issuance costs - - 163,646 Proceeds from revolving facility 189,500 19,000 24,000 Distributions to non-controlling interest, permanent and temporary equity ( 19,269 ) ( 14,711 ) ( 16,100 ) Cash dividends paid to shareholders ( 27,362 ) ( 26,540 ) ( 24,128 ) Payments on revolving facility ( 170,000 ) ( 8,000 ) ( 55,000 ) Payments on term loan ( 9,375 ) ( 3,750 ) ( 3,750 ) Cash used for the repurchase of common stock ( 5,566 ) - - Principal payments on notes payable ( 2,065 ) ( 2,952 ) ( 4,400 ) Net cash (used in) provided by financing activities ( 44,137 ) ( 36,953 ) 84,268 Net (decrease) increase in cash and cash equivalents ( 5,792 ) ( 111,463 ) 121,231 Cash and cash equivalents - beginning of period 41,362 152,825 31,594 Cash and cash equivalents - end of period $ 35,570 $ 41,362 $ 152,825 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Income taxes $ 14,348 $ 4,823 $ 4,926 Interest paid 9,431 7,209 8,655 Non-cash investing and financing transactions during the period: Purchase of businesses - seller financing portion 300 2,060 1,815 Liabilities assumed associated with a purchase of a business - 670 524 Fair market value of initial contingent consideration related to purchase of businesses 5,292 17,672 200 Notes payable related to purchase of redeemable non-controlling interest, temporary equity 173 71 1,087 Payable related to the purchase of redeemable non-controlling interest, temporary equity 3,934 - - Offset to notes receivable associated with purchase of redeemable non-controlling interest 358 726 - Notes receivable related to sale of redeemable non-controlling interest - 1,890 4,136 Notes payable related to the purchase of non-controlling interest, permanent equity - - 200 Payable related to the purchase of non-controlling interest, permanent equity 8,144 - - Notes receivable related to the sale of non-controlling interest, permanent equity 73 282 458 Issuance of restricted stock related to purchase of business - 1,500 - The accompanying notes are an integral part of these Consolidated Financial Statements. 62 Table of Contents U.S. PHYSICAL THERAPY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2025, 2024 and 2023 1. Organization, Nature of Operations and Basis of Presentation The consolidated financial statements include the accounts of U.S. Physical Therapy, Inc., its subsidiaries, and variable interest entities for which the Company has determined it is the primary beneficiary (the “Company”). All significant intercompany transactions and balances have been eliminated. The Company operates its business through two reportable business segments. The Company’s reportable segments include the physical therapy operations segment and the industrial injury prevention services (“IIP”) segment. The Company’s physical therapy operations consist of physical therapy and occupational therapy clinics that provide pre-and post-operative care and treatment for orthopedic-related disorders, sports-related injuries, preventive care, rehabilitation of injured workers and neurological injuries. Services provided by the IIP segment include onsite injury prevention and rehabilitation, performance optimization and ergonomic assessments. During the last three years, the Company completed the acquisitions of the following clinic practices and IIP businesses detailed below: % Interest Number of Acquisition Date Acquired Clinics July 2025 Acquisition July 31, 2025 60 % 3 April 2025 Acquisition April 30, 2025 40 %* ** February 2025 Acquisition February 28, 2025 65 % 3 November 2024 Acquisition November 30, 2024 75 % 8 October 2024 Acquisition October 31, 2024 50 % 50 August 2024 Acquisition August 31, 2024 70 % 8 April 2024 Acquisition April 30, 2024 *** **** March 2024 Acquisition March 29, 2024 50 % 9 October 2023 Acquisition October 31, 2023 ***** **** September 2023 Acquisition 1 September 29, 2023 70 % 4 September 2023 Acquisition 2 September 29, 2023 70 % 1 July 2023 Acquisition July 31, 2023 70 % 7 May 2023 Acquisition May 31, 2023 45 % 4 February 2023 Acquisition February 28, 2023 80 % 1 * 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. (“Metro”). 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 ***** On October 31, 2023, we concurrently acquired 100 % of an IIP business and a 55 % equity interest in an ergonomics software business (“October 2023 Acquisition”). Besides the multi-clinic acquisitions referenced in the table above, during 2025, 2024, and 2023 we purchased the assets and businesses of fourteen, eight and nine physical therapy clinics, respectively, which were tucked into larger partnerships in separate transactions. In May 2023, the Company completed a secondary offering of 1,916,667 shares of its common stock at an offering price of $ 90.00 per share. Upon completion of the offering, the Company received net proceeds of approximately $ 163.6 million, after deducting an underwriting discount of $ 8.6 million and recognizing related fees and expenses of $ 0.2 million. A portion of the net proceeds was used to repay the $ 35.0 million then outstanding under the Company’s credit facility while the remainder was used primarily for additional acquisitions. 63 Table of Contents 2. Significant Accounting Policies Cash Equivalents The Company maintains its cash and cash equivalents at financial institutions. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The combined account balances at several institutions typically exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Management believes that this risk is not significant. Long-Lived Assets Fixed assets are stated at cost. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets. Estimated useful lives for furniture and equipment range from three to eight years and for software purchased from three to seven years . Leasehold improvements are amortized over the shorter of the related lease term or estimated useful lives of the assets, which is generally three to five years . Goodwill and Other Indefinite-Lived Intangible Assets Goodwill represents the excess of the amount paid and fair value of the non-controlling interests over the fair value of the acquired business assets, which include certain identifiable intangible assets. Historically, goodwill has been derived from acquisitions and, prior to 2009 , from the purchase of some or all of a particular local management’s equity interest in an existing clinic. Effective January 1, 2009 , if the purchase price of a non-controlling interest by the Company exceeds or is less than the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic impairment evaluations. The fair value of goodwill and other identifiable intangible assets with indefinite lives are evaluated for impairment at least annually and upon the occurrence of certain events or conditions and are written down to fair value if considered impaired. These events or conditions include but are not limited to a significant adverse change in the business environment, regulatory environment, or legal factors; a current period operating, or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. The Company evaluates indefinite-lived tradenames in conjunction with our annual goodwill impairment test and upon the occurrence of certain events and conditions mentioned above. 64 Table of Contents Impairment of Goodwill, Other Indefinite-Lived Intangible Assets and Long-Lived Assets The Company operates its business through two segments consisting of physical therapy clinics and an IIP business. For purposes of goodwill impairment analysis, our operating segments are further disaggregated into reporting units. Reporting units within our physical therapy business are comprised of seven regions, which are primarily based on each clinic’s geographic location and are consistent with the manner in which management organizes operations and evaluates performance. In addition to the seven regions in 2025 and 2024 and six regions in 2023, the IIP business consisted of two reporting units for 2025, 2024 and 2023. As part of the impairment analysis, the Company is first required to assess qualitatively if it can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, it is then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount. In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company considers relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. The Company considers both the income and market approach in determining the fair value of its reporting units when performing a quantitative analysis. An impairment loss generally would be recognized when the carrying amount of the net assets of a reporting unit, inclusive of goodwill and other identifiable intangible assets, exceeds the estimated fair value of the reporting unit. Additionally, the Company reviews property and equipment and intangible assets with finite lives for impairment upon the occurrence of certain events or circumstances that indicate the related amounts may be impaired. No impairment charges were recognized in 2025. The Co mpany recorded a non-cash impairment c harge of $ 2.4 million related to assets held-for-sale (described in Note 7 , Assets Held for Sale ), of which $ 1.6 million was attributed to referral relationships, $ 0.5 million was attributed to tradename and $ 0.3 million was attributed to other assets, during the year ended December 31, 2024, and a non-cash impairment charge of $ 17.5 million, of which $ 15.8 million of goodwill and $ 1.7 million of tradename, during the year ended December 31, 2023. The impairment charge during the year ended December 31, 2023 was related to a reporting unit in the IIP business as a result of a change in the reporting unit’s current and projected operating income as well as various market inputs based on current market conditions. The Company will continue to monitor for any triggering events or other indicators of impairment. Variable interest entities A variable interest entity (“VIE”) is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support, or is structured such that its equity holders do not have power over the activities of the entity; have voting rights, as a group, that are not proportionate to their economic interests; or are not exposed to the residual losses or benefits of the entity. At the inception of a contractual agreement, the Company determines whether it holds a variable interest in a legal entity that is a VIE and whether it is the primary beneficiary of the VIE. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. If the Company concludes it is the primary beneficiary of a VIE, the Company consolidates the accounts of that VIE. The Company regularly reviews and reconsiders previous conclusions regarding whether the Company holds a variable interest in a potential VIE, the status of an entity as a VIE, and whether it is the primary beneficiary of a VIE. Investment in unconsolidated affiliates Investments in unconsolidated affiliates, in which the Company has less than a controlling interest, are accounted for under the equity method of accounting and, accordingly, are adjusted for capital contributions, distributions and the Company’s equity in net earnings or loss of the respective joint venture. 65 Table of Contents Redeemable Non-Controlling Interest The non-controlling interest that is reflected as redeemable non-controlling interest in the consolidated financial statements consists of those in which the owners and the Company have certain redemption rights, whether currently exercisable or not, and which currently, or in the future, require that the Company purchase or the owner sell the non-controlling interest held by the owner, if certain conditions are met. The purchase price is derived at a predetermined formula based on a multiple of trailing twelve months earnings performance as defined in the respective limited partnership agreements. Most of these redemption rights can be triggered by the owner or the Company at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction, typically three to five years , as defined in the limited partnership agreement. Other redemption rights can be triggered by the owner after the passage of a certain period of time. The redemption rights are not automatic or mandatory (even upon death) and require either the owner or the Company to exercise its rights when the conditions triggering the redemption rights have been satisfied. On the date the Company acquires a controlling interest in a partnership, and the limited partnership agreement for such partnership contains redemption rights not under the control of the Company, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the ca ption—Redeemab le non-controlling interest – temporary equity. Then, in each reporting period thereafter until it is purchased by the Company, the redeemable non-controlling interest is adjusted to the greater of its then current redemption value or initial carrying value, based on the predetermined formula defined in the respective limited partnership agreement. As a result, the value of the non-controlling interest is not adjusted below its initial carrying value. The Company records any adjustment in the redemption value, net of tax, directly to retained earnings and are not reflected in the consolidated statements of net income. Although the adjustments are not reflected in the consolidated statements of net income, current accounting rules require that the Company reflects the adjustments, net of tax, in the earnings per share calculation. The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statements of net income. Management believes the redemption value (i.e. the carrying amount) and fair value are the same. Non-Controlling Interest The Company recognizes non-controlling interest, in which the Company has no obligation but the right to purchase the non-controlling interest, as permanent equity in the consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the statements of net income. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the non-controlling equity investment on the deconsolidation date. When the purchase price of a non-controlling interest by the Company exceeds the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital. Additionally, operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606. For ASC 606, there is an implied contract between us and the patient upon each patient visit. Separate contractual arrangements exist between us and third-party payors (e.g. insurers, managed care programs, government programs, workers’ compensation) which establish the amounts the third parties pay on behalf of the patients for covered services rendered. While these agreements are not considered contracts with the customer, they are used for determining the transaction price for services provided to the patients covered by the third-party payors. The payor contracts do not indicate performance obligations for us but indicate reimbursement rates for patients who are covered by those payors when the services are provided. At that time, the Company is obligated to provide services for the reimbursement rates stipulated in the payor contracts. The execution of the contract alone does not indicate a performance obligation. For self-paying customers, the performance obligation exists when we provide the services at established rates. The difference between the Company’s established rate and the anticipated reimbursement rate is accounted for as an offset to revenue — contractual allowance. Payments for services rendered are typically due 30 to 120 days after receipt of the invoice. 66 Table of Contents Patient revenue Net patient revenue consists of revenues for physical therapy and occupational therapy clinics that provide pre-and post-operative care and treatment for orthopedic related disorders, sports-related injuries, preventative care, rehabilitation of injured workers and neurological-related injuries. Net patient revenues (patient revenues less estimated contractual adjustme nts, see – Contractual Adjustments , f or additional information) ar e recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Generally, this occurs as the Company (or a physical therapist owned practice managed by the Company) provides physical and occupational therapy services, as each service provided is distinct and future services rendered are not dependent on previously rendered services. The Company has agreements with third-party payors that provide payments to the Company at amounts different from its established rates. Other Revenue Revenue from the IIP business, which is included in other revenue in the consolidated statements of net income, is derived from onsite services the Company provides to clients’ employees including injury prevention, rehabilitation, ergonomic assessments , post-offer employment testing and performance optimization. Revenue from the Company’s IIP business is recognized when obligations under the terms of the contract are satisfied. Revenues are recognized at an amount equal to the consideration the company expects to receive in exchange for providing injury prevention services to its clients. The revenue is determined and recognized based on the number of hours and respective rate for services provided in a given period. Revenue from management agreements with third-party physicians and hospitals, which is also included in other revenue, is derived from contractual arrangements whereby the Company manages a clinic for third party physicians and hospitals. The Company does not have any ownership interest in these clinics. Typically, revenue is determined based on the number of visits conducted at the clinic and recognized at a point in time when services are performed. Costs, typically salaries for the Company’s employees, are recorded when incurred. Management contract revenue was $ 9.6 million, $ 9.8 million, and $ 8.6 million for the years ended December 31, 2025, December 31, 2024, and December 31, 2023, respectively. Additionally, other revenue from physical therapy operations includes services the Company provides on-site at locations such as schools and industrial worksites for physical or occupational therapy services, athletic trainers and gym membership fees. Contract terms and rates are agreed to in advance between the Company and the third parties. Services are typically performed over the contract period and revenue is recorded at the point of service. If the services are paid in advance, revenue is recorded as a contract liability over the period of the agreement and recognized at the point in time, when the services are performed. Contractual Allowances The allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience. Contractual allowances result from the differences between the rates charged for services performed and expected reimbursements by both insurance companies and government sponsored healthcare programs for such services. Medicare regulations and the various third-party payors and managed care contracts are often complex and may include multiple reimbursement mechanisms payable for the services provided in Company clinics. The Company estimates contractual allowances based on its interpretation of the applicable regulations, payor contracts and historical calculations. Each month the Company estimates its contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and applies an appropriate contractual allowance reserve percentage to the gross accounts receivable balances for each payor of the clinic. Based on the Company’s historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow the Company to provide the necessary detail and accuracy with its collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from the Company’s estimates. Payor terms are periodically revised necessitating continual review and assessment of the estimates made by management. The Company’s billing system does not capture the exact change in its contractual allowance reserve estimate from period to period in order to assess the accuracy of its revenues and hence its contractual allowance reserves. Management regularly compares its cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis. In the aggregate, historically the difference between net revenues and corresponding cash collections for any fiscal year has generally reflected a difference not exceeding 1.5 % of net revenues. 67 Table of Contents Provision for Credit Losses The Company determines allowances for credit losses based on the specific agings and payor classifications at each clinic. The provision for credit losses is included in operating costs in the consolidated statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and provision for credit losses, includes only those amounts the Company estimates to be collectible. The Company’s accounts receivable balance, less provision for credit losses was $ 64.2 million as of December 31, 2025, $ 59.0 million as of December 31, 2024 and $ 51.8 million as of December 31, 2023. L eases We account for leases in accordance with ASC 842 - Leases which requires certain leases to be recognized on the balance sheet. The Company evaluates whether a contract is or contains a lease at the inception of the contract. Upon lease commencement, the date on which a lessor makes the underlying asset available to the Company for use, the Company classifies the lease as either an operating or finance lease. Most of the Company’s facility leases are classified as operating leases. A right-of-use asset represents the Company’s right to use an underlying asset for the lease term while the lease liability represents an obligation to make lease payments arising from a lease. Right-of-use assets and lease liabilities are measured at the present value of the remaining fixed lease payments at lease commencement. As most of the Company’s leases do not specify an implicit rate, the Company uses its incremental borrowing rate, which coincides with the lease term at the commencement of a lease, in determining the present value of its remaining lease payments. The Company’s operating lease terms are generally five years or less. The Company’s leases may also specify extension or termination clauses; these options are factored into the measurement of the lease liability when it is reasonably certain that the Company will exercise the option. 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. These variable lease payment amounts include, but are not limited to, taxes, insurance, utilities, common area maintenance, and other operating costs. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount to be recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. 68 Table of Contents The CARES Act includes changes to certain tax law related to net operating losses and the deductibility of interest expense and depreciation. ASC 740, Income Taxes requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. The legislation had no effect on the Company’s deferred income taxes and current income taxes payable during the years ended December 31, 2025, 2024 and 2023. The Company records interest or penalties in interest and other expense, in the consolidated statements of net income. The Company did no t have any interest or penalties in each of the years ended December 31, 2025, 2024 and 2023. On July 4, 2025, the President signed H.R. 1, the One Big Beautiful Bill Act, into law. The legislation did not have a material impact on the Company’s income tax expense for the year ended December 31, 2025, nor did it materially change the Company’s effective income tax rate for 2025. The Company will continue to evaluate interpretive guidance and any incremental impacts in subsequent 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. • Level 1 – Quoted prices in active markets for identical assets or liabilities. • Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. • Level 3 – Unobservable inputs based on the Company’s own assumptions. The carrying amounts reported in the balance sheets for cash and cash equivalents, contingent earn-out payments, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term maturity of these financial instruments. The carrying amount under the Credit Agreement approximates the fair value due to the proximity of the debt issue date and the balance sheet date and the variable component of interest on debt. The interest rate on the Credit Agreement is variable and is based, at the Company’s election, on either the Secured Overnight Financing Rate (“SOFR”) or the prime rate, in each case plus an applicable margin. The put right allows the current owners of an IIP business to sell up to 94 % of their equity interests to the Company. The put right represents a derivative liability and is measured at fair value on a recurring basis using Level 3 inputs. Gains or losses from the remeasurement of this liability are recognized in the income statement as a component of other income (expense). The put right was valued at approximately $ 2.3 million and $ 1.0 million on December 31, 2025 and 2024, respectively, and is included in Other long-term liabilities in the Company’s consolidated balance sheets. In determining the value of the put right as of December 31, 2025 and 2024, the Company used a Monte Carlo simulation model utilizing the following unobservable inputs: (i) the current estimated market value of the equity interests (ii) expected volatility based on observable trading history of peer companies and (iii) discount rate. The estimated market value of the equity interests was $ 68.4 million and $ 38.2 million as of December 31, 2025 and December 31, 2024, respectively. The expected volatility was 20 % for both December 31, 2025 and 2024.The discount rate used in the Monte Carlo simulation was 10.91 % and 11.59 % as of December 31, 2025, and 2024 respectively. The holders of the put right may first exercise this right beginning in January 2027. Whether the holders exercise the put right is outside of the Company’s control. If the put right is exercise d, the Company is required to purchase a designated portion of the separate company’s equity interests at a purchase price based on the separate business’ historical earnings, multiplied by the EBITDA multiple expressed in the agreement, and multiplied again by the percentage of equity interests subject to the put right. If the put right were to be exercised at December 31, 2025, it is estimated that the Company would pay $ 52.4 million for an 80 % stake in the business. Because the formula in the put right uses a pre-determined multiple of the separate business’ historical earnings, the resulting purchase price may vary compared to the fair value of such equity interests at the time of exercise. 69 Table of Contents The valuation of the Company’s interest rate derivative is measured as the present value of all expected future cash flows based on SOFR-based yield curves. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty which is a Level 2 fair value measurement. The fair value of the interest rate swap on December 31, 2025, was $ 0.9 million, of which $ 0.7 million has been included within other current assets and $ 2.0 million has been included in other assets in the accompanying Consolidated Balance Sheet. The impact of the interest rate swap on the accompanying Consolidated Statements of Comprehensive Income was an unrealized loss of $ 2.1 million, net of tax for the year December 31, 2025, and an unrealized gain of $ 0.1 million, net of tax, for the year ended December 31, 2024. The consideration for some of the Company’s acquisitions includes future payments that are conti ngent upon the occurrence of future operational objectives being met. The Company estimates the fair value of contingent consideration obligations through valuation models designed to estimate the probability of such contingent payments based on various assumptions and incorporating estimated success rates. These fair value measurements are based on significant inputs not observable in the market. Substantial judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense the Company records in any given period. The Company determined the fair value of its contingent consideration obligations to be $ 12.3 million and $ 17.6 million on December 31, 2025, and 2024, respectively. The redemption value of redeemable non-controlling interests approximates the fair value. See Note 6 for the changes in the fair value of redeemable non-controlling interest. Segment Reporting Operating segments are components of an enterprise for which separate financial information is available that is evaluated regularly by chief operating decision makers in determining the allocation of resources and in assessing performance. The Company currently operates through two segments: physical therapy operations and industrial injury prevention services. Use of Estimates In preparing the Company’s consolidated financial statements, management makes certain estimates and assumptions, especially in relation to, but not limited to, goodwill impairment, tradenames, allocations of purchase price, allowance for receivables, tax provision and contractual allowances, that affect the amounts reported in the consolidated financial statements and related disclosures. Actual results may differ from these estimates. Self-Insurance Program The Company utilizes a self-insurance plan for its employee group health and dental insurance coverage administered by a third party. Predetermined loss limits have been arranged with the insurance company to minimize the Company’s maximum liability and cash outlay. Accrued expenses include the estimated incurred but unreported costs to settle unpaid claims and estimated future claims. The management believes that the current accrued amounts are sufficient to pay claims arising from self-insurance claims incurred through December 31, 2025. Restricted Stock Restricted stock issued to employees and directors is subject to continued employment or continued service on the board, respectively. Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, the restrictions will lapse in equal quarterly installments during the first year after the date of grant. For those granted to officers and senior management, the restriction will lapse in equal quarterly installments during the four years following the date of grant. Compensation expense for grants of restricted stock is recognized based on the fair value per share on the date of grant amortized over the vesting period. The Company recognizes any forfeitures as they occur. The restricted stock issued is included in basic and diluted shares for the earnings per share computation. 70 Table of Contents Reclassification of Prior Period Presentation Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. Recently Adopted Accounting Guidance On July 4, 2025, the President signed H.R. 1, the One Big Beautiful Bill Act, into law. The legislation did not have a material impact on the Company’s income tax expense for the year ended December 31, 2025, nor did it materially change the Company’s effective income tax rate for 2025. On December 14, 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure on an annual basis, a tabular reconciliation, including both amount and percentage of specific categories of the effective tax rate reconciliation, including state and local income taxes (net of Federal taxes), foreign taxes, effects of changes in tax laws and regulations, effects of cross-border tax laws, tax credits, changes in valuation allowances, nontaxable and nondeductible items and changes in unrecognized tax benefits. Additional disclosures are required for certain items exceeding five percent of income from continuing operations multiplied by the statutory income tax rate. The standard also requires disclosure of income taxes paid between Federal, state and foreign jurisdictions, including further disaggregation of those payments exceeding five percent of the total income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company adopted this standard as of January 1, 2025, utilizing the prospective application as permitted in the standard and has included all required disclosures with this Form 10-K for the year ended December 31, 2025. See Note 14 for further information on the Company’s income taxes. Recently Accounting Guidance Not Yet Adopted In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) , which is intended to improve the disclosures of expenses by providing more detailed information about the types of expenses in commonly presented expense captions. The ASU requires entities to disclose the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included in each relevant expense caption; as well as a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The amendment also requires disclosure of the total amount of selling expense and, in annual reporting periods, an entity’s definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027; however early adoption is permitted. The ASU can be applied either prospectively or retrospectively. The Company is currently reviewing the impact that ASU 2024-03 will have on the disclosures in our consolidated financial statements. 3. Earnings Per Share Basic and diluted earnings per share is computed using the two-class method, which is an earnings allocation method that determines earnings per share for common shares and participating securities. The restricted stock the Company grants are participating securities containing non-forfeitable rights to receive dividends. Accordingly, any unvested shares of restricted stock is included in the basic and diluted earnings per share computation. Additionally, in accordance with current accounting guidance, the revaluation of redeemable non-controlling interest (see Note 6 Redeemable Non-Controlling Interest ), net of tax, charged directly to retained earnings is included in the earnings per basic and diluted share calculation. We compute basic and diluted earnings per common share by dividing net earnings by the respective weighted average number of common shares outstanding for the periods presented. 71 Table of Contents T he table below shows the calculation of basic and diluted earnings for the periods presented. The Company’s improved performance during the twelve months ended December 31, 2025, increased the value of redeemable non-controlling interests by $ 24.5 million, which reduced earnings per share. For the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 (In thousands, except per share data) Computation of earnings per share - USPH shareholders: Net income attributable to USPH shareholders $ 39,583 $ 31,424 $ 28,239 Charges to retained earnings: Revaluation of redeemable non-controlling interest ( 24,521 ) ( 4,964 ) ( 13,565 ) Tax effect at statutory rate (federal and state) 6,510 1,268 3,466 $ 21,572 $ 27,728 $ 18,140 Earnings per share (basic and diluted) $ 1.42 $ 1.84 $ 1.28 Shares used in computation: Basic and diluted earnings per share - weighted-average shares 15,175 15,064 14,188 4. Acquisitions of Businesses The Company’s strategy is to continue acquiring and managing multi-clinic outpatient physical therapy practices, to develop outpatient physical therapy clinics as satellites in existing partnerships and to continue acquiring companies that provide and serve the IIP sector. The consideration paid for each acquisition is derived through arm’s length negotiations and funded through working capital, borrowings under the Company’s revolving credit facilities or proceeds from the secondary offering discussed in Note 1. The finalized purchase prices plus the fair value of the non-controlling interests for the acquisitions in 2024 and 2023 were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, i.e. trade names, referral relationships and non-compete agreements, and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill. For the acquisitions in 2025, the Company is in the process of completing its formal valuation analysis to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities assumed. Thus, the final allocation of the purchase price may differ from the preliminary estimates used at December 31, 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. During 2025, 2024 and 2023, the Company acquired a majority interest in the following businesses: 72 Table of Contents 2025 Acquisitions % Interest Number of Acquisition Date Acquired Clinics July 2025 Acquisition July 31, 2025 60 % 3 April 2025 Acquisition April 30, 2025 40 %** * February 2025 Acquisition February 28, 2025 65 % 3 * Home-care business ** On April 30, 2025, the Company acquired an outpatient home care practice that provides speech and occupational therapy through its 50 % owned subsidiary Metro. 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 plus the fair value of the non-controlling interest for the acquisitions after December 31, 2024 was allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets (i.e. tradenames, referral relationships, customer 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 December 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 acquisitions after December 31, 2024. On July 31, 2025, the Company acquired a 60 % equity interest in a three -clinic practice with the practice owners retaining a 40 % equity interest. The purchase price for the 60 % equity interest was approximately $ 7.9 million, of which $ 7.6 million was paid in cash and $ 0.3 million is in the form of a note payable. The note accrues interest at 5.0 % per annum and the principal and interest is payable on July 31, 2027. As part of this transaction, the Company agreed to additional consideration if future operational objectives are met. The contingent consideration was valued at $ 2.8 million as of December 31, 2025. On April 30, 2025, the Company acquired an outpatient home-care physical and speech therapy practice through its 50 %-owned subsidiary, Metro. 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 met. The maximum amount of additional contingent consideration due under this agreement is $ 1.8 million . The contingent consideration was valued at $ 1.0 million as of December 31, 2025 . On February 28, 2025, the Company acquired a 65 % interest in a physical therapy practice with three clinic locations. The prior owner retained a 35 % ownership interest. The purchase price for the 65 % interest was approximately $ 3.8 million, which was paid in cash. As part of this transaction, the Company agreed to additional consideration if future operational objectives are met by the business. The maximum amount of additional contingent consideration due under this agreement is $ 1.3 million. The contingent consideration was valued at $ 0.5 million as of December 31, 2025. Besides the multi-clinic acquisitions referenced above, the Company purchased the assets and business of 14 physical therapy clinics during 2025, which were tucked into larger partnerships in separate transactions. The following table provides details on the preliminary purchase price allocation for the 2025 acquisitions described above. 73 Table of Contents Physical Therapy Operations (In thousands) Cash paid, net of cash acquired $ 15,614 Contingent payments 5,730 Payable 300 Total consideration $ 21,644 Estimated fair value of net tangible assets acquired: Total current assets $ 918 Total non-current assets 345 Total liabilities ( 495 ) Net tangible assets acquired 768 Customer and referral relationships 5,981 Non-compete agreement 310 Tradenames 1,442 Goodwill 21,198 Fair value of non-controlling interest (classified as redeemable non-controlling interest) ( 8,055 ) $ 21,644 Total current assets primarily represent accounts receivable while total non-current assets consist of fixed assets and equipment. For the acquisitions in 2025, the values assigned to the customer and referral relationships and non-compete agreement are being amortized on a straight-line basis over their respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 12.0 years. For the non-compete agreements, the weighted-average amortization period is 6.0 years. The values assigned to tradenames are tested annually for impairment. 2024 Acquisitions Acquisition Date Acquired Clinics November 2024 Acquisition November 30, 2024 75 % 8 October 2024 Acquisition October 31, 2024 50 % 50 August 2024 Acquisition August 31, 2024 70 % 8 April 2024 Acquisition April 30, 2024 ** * March 2024 Acquisition March 29, 2024 50 % 9 * IIP business ** On April 30, 2024, one of our 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. The owner of the practice retained 25 % of the equity interests. The purchase price for the 75 % equity interest was approximately $ 15.9 million, of which $ 15.7 million was paid in cash, and $ 0.2 million was in the form of a note payable. The note accrues interest at 5.0 % per annum and the principal and interest is payable on December 1, 2026. On October 31, 2024, the Company acquired a 50 % interest in Metro pursuant to an Equity Interest Purchase Agreement (the “Purchase Agreement”) dated October 7, 2024 among U.S. Physical Therapy, Ltd. (a subsidiary of the Company), Metro, the members of Metro, and Michael G. Mayrsohn, as Sellers’ Representative. The Company also became the managing member of Metro. 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 was valued at $ 7.4 million on December 31, 2025. 74 Table of Contents On August 31, 2024, the Company acquired a 70 % equity interest in an eight -clinic practice physical therapy and the original practice owners retained a 30 % equity interest (“August 2024 Acquisition”). The purchase price for the 70 % equity interest was approximately $ 2.0 million. As part of the transaction, the Company agreed to additional contingent consideration if future operational and financial objectives are met. The maximum amount of additional contingent consideration due under this agreement is $ 3.6 million. The contingent consideration was valued at $ 0.5 million on December 31, 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 principal and the interest has been paid as of December 31, 2025. As part of the transaction, the Company agreed to additional contingent consideration if future operational objectives are met by the business. The maximum amount of additional contingent consideration due under this agreement is $ 10.0 million. In August 2025, the Company paid $ 1.9 million in full settlement of the contingent consideration. On March 29, 2024, the Company acquired a 50 % equity interest in a nine -clinic physical therapy and hand therapy practice (“March 2024 Acquisition”) . The original owners of the practice retained the remaining 50 %. The purchase price for the 50 % equity interest was approximately $ 16.4 million, of which $ 0.5 million was in the form of a note payable. The note accrues interest at 4.5 % per annum and the principal and the interest are payable on March 29, 2026. As part of the transaction, the Company agreed to additional contingent consideration if future operational and financial objectives are met. There is no maximum payout. In November 2025, the Company paid $ 2.5 million in full settlement of the contingent consideration. For the year ended December 31, 2024, besides the multi-clinic acquisitions referenced above, the Company purchased the assets and business of eight physical therapy clinics, which were tucked into larger partnerships in separate transactions. The following table provides details on the purchase price allocations for the acquisitions completed in the twelve months ended December 31, 2024. For the Year Ended December 31 , 2024 Physical Therapy IIP Operations Total (In thousands) Cash paid, net of cash acquired $ 23,106 $ 109,981 $ 133,087 Seller note 455 1,220 1,675 Deferred payments - 1,500 1,500 Contingent payments 2,100 15,571 17,671 Note Payable - 302 302 Total consideration $ 25,661 $ 128,574 $ 154,235 Estimated fair value of net tangible assets acquired: Total current assets $ 1,132 $ 9,175 $ 10,307 Total non-current assets 563 30,360 30,923 Total liabilities ( 463 ) ( 29,403 ) ( 29,866 ) Net tangible assets acquired 1,232 10,132 11,364 Customer and referral relationships 6,500 46,554 53,054 Non-compete agreement 210 3,818 4,028 Tradenames 1,400 16,567 17,967 Goodwill 16,319 151,645 167,964 Fair value of non-controlling interest (classified as redeemable non-controlling interest) - ( 100,142 ) ( 100,142 ) $ 25,661 $ 128,574 $ 154,235 75 Table of Contents The purchase price plus the fair value of the non-controlling interests for the acquisitions in 2024 were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, (i.e. trade names, referral relationships and non-compete agreements) and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill. For the acquisitions in 2024, the values assigned to the customer and referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 15.6 years. For non-compete agreements, the weighted-average amortization period is 5.9 years. The values assigned to tradenames are tested annually for impairment. Following are the supplemental consolidated financial results of U.S. Physical Therapy Inc. on an unaudited pro forma basis , as if the 2024 acquisitions had been consummated on January 1 , 2024. For the Year Ended December 31 , 2024 December 31 , 2023 (In thousands) Net revenue $ 763,954 $ 678,743 Net income $ 52,927 $ 42,421 These pro forma results were based on estimates and assumptions which the Company believes are reasonable. They are not necessarily indicative of the Company ’ s consolidated results of operations in future periods. The pro forma results include adjustments related to purchase accounting , primarily amortization of intangible assets, and other adjustments which are included in the earliest period presented. Variable Interest Entities During 2024, the Company acquired interests in the March 2024 Acquisition and Metro and paid the purchase prices of approximately $ 16.4 million and $ 77 million, respectively, as of the dates and to the extent below. Acquisition Date Acquired Clinics Metro October 31, 2024 50 % 50 March 2024 Acquisition March 29, 2024 50 % 9 The Company’s acquisitions include future payments that are contingent upon the occurrence of future operational objectives being met. The Company estimates the fair value of contingent consideration obligations through valuation models designed to estimate the probability of such contingent payments based on various assumptions and incorporating estimated success rates. These fair value measurements are based on significant inputs not observable in the market. Substantial judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. As of December 31, 2025, the Company’s contingent consideration obligation totaled $ 7.4 million related to the Metro acquisition. The contingent consideration associated with the March 2024 acquisition, which had a fair value of $ 2.5 million, was paid in full in November 2025. Certain states prohibit the “corporate practice of medicine,” which restricts the Company from owning physical therapy practices which directly employ therapists and from exercising control over medical decisions by therapists. In these states, the Company enters into long-term management agreements with medical practices that are owned by licensed therapists, which, in turn, employ or contract with therapists who provide professional services. Based on the provisions of the management agreements, the Company determined that these entities are variable interest entities. The Company’s ownership percentages in these entities is 50% as of December 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 December 31, 2025, and December 31, 2024, the total assets of the Company’s VIEs were $ 255.3 million and $ 231.3 million, respectively. As of December 31, 2025, and December 31, 2024, the total liabilities of the Company’s VIEs were $ 49.5 million and $ 31.9 million respectively. The table below presents the operating results of the VIEs. 76 Table of Contents December 31 , 2025 December 31 , 2024 (In thousands) Net revenue $ 90,579 $ 19,138 Operating cost: Salaries and related costs 53,901 11,903 Rent , supplies, contract labor and other 19,704 3,760 Depreciation and amortization 3,863 1,123 Provision for credit losses 592 188 Total operating cost 78,060 16,974 Gross profit 12,519 2,164 (Gain) on fair value adjustments ( 758 ) - Other expense 14 3 Provision for income taxes 219 - Net Income $ 13,044 $ 2,161 2023 Acquisitions % Interest Number of Acquisition Date Acquired Clinics October 2023 Acquisition October 31, 2023 ** * September 2023 Acquisition 1 September 29, 2023 70 % 4 September 2023 Acquisition 2 September 29, 2023 70 % 1 July 2023 Acquisition July 31, 2023 70 % 7 May 2023 Acquisition May 31, 2023 45 % 4 February 2023 Acquisition February 28, 2023 80 % 1 * IIP business ** On October 31, 2023, we concurrently acquired 100 % of an IIP business and a 55 % equity interest in an ergonomics software business (“October 2023 Acquisition”). On October 31, 2023, the Company concurrently acquired 100 % of an IIP business and a 55 % equity interest in the ergonomics software business. The previous owner of the ergonomics software business retained a 45 % equity interest. The total purchase price of the combined businesses was approximately $ 4.0 million and was paid in cash. On September 29, 2023, the Company acquired a 70 % equity interest in a four -clinic physical therapy practice. The owner of the practice retained 30 % of the equity interests. The purchase price for the 70 % equity interest was approximately $ 6.0 million, of which $ 5.4 million was paid in cash, and $ 0.6 million was in the form of a note payable. The note accrues interest at 5.0 % per annum and the principal and interest are payable in two installments. The first payment of principal and interest of $ 0.3 million was paid in January 2024, and the second installment of $ 0.3 million was due on September 30, 2025. The note was paid in full in August 2025. In a separate transaction, on September 29, 2023, the Company acquired a 70 % equity interest in a single clinic physical therapy practice. The owner of the practice retained 30 % of the equity interests. The purchase price for the 70 % equity interest was approximately $ 7.8 million, of which $ 7.4 million was paid in cash and $ 0.4 million was due as a deferred payment in September 2025. The note was paid in full on September 30, 2025. On July 31, 2023, the Company acquired a 70 % equity interest in a five -clinic practice. The practice’s owners retained a 30 % equity interest. The purchase price for the 70 % equity interest was approximately $ 2.1 million, of which $ 1.8 million was paid in cash and $ 0.3 million was due as a deferred payment in June 2025. The note was paid in full on June 30, 2025. 77 Table of Contents On May 31, 2023, the Company and a local partner together acquired a 75 % interest in a four -clinic physical therapy practice. After the transaction, the Company’s ownership interest is 45 %, the Company’s local partner’s ownership interest is 30 %, and the practice’s pre-acquisition owners have a 25 % ownership interest. The purchase price for the 75 % equity interest was approximately $ 3.1 million, of which $ 1.7 million was paid in cash by the Company, $ 1.1 million was paid in cash by the local partner, and $ 0.3 million was in the form of a note payable. The note was paid in full on July 1, 2024 ($ 0.2 million was paid by the Company and $ 0.1 million was paid by the local partner). On February 28, 2023, the Company acquired an 80 % interest in a one -clinic physical therapy practice. The practice’s owners retained 20 % of the equity interests. The purchase price for the 80 % equity interest was approximately $ 6.2 million, of which $ 5.8 million was paid in cash and $ 0.4 million in the form of a note payable. The note accrues interest at 4.5 % per annum. The note was paid in full on February 28, 2025. The purchase price for the 2023 acquisitions has been allocated as follows. Physical Therapy IIP Operations Total (In thousands) Cash paid, net of cash acquired $ 3,955 $ 22,627 $ 26,582 Seller notes - 985 985 Contingent payments - 830 830 Total consideration - 200 200 $ 3,955 $ 24,642 $ 28,597 Total current assets $ 392 $ 1,141 $ 1,533 Total non-current assets 335 3,149 3,484 Total liabilities ( 41 ) ( 3,163 ) ( 3,204 ) Net tangible assets acquired 686 1,127 1,813 Customer and referral relationships 757 6,819 7,576 Non-compete agreements 37 329 366 Tradenames 187 1,680 1,867 Goodwill 2,562 25,521 28,083 Fair value of non-controlling interest (classified as redeemable non-controlling interest) ( 274 ) ( 10,834 ) ( 11,108 ) $ 3,955 $ 24,642 $ 28,597 Total current assets primarily represent accounts receivable while total non-current assets consist of fixed assets and equipment used in the practice. The purchase price plus the fair value of the non-controlling interests for the acquisitions in 2023 were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets, (i.e. trade names, referral relationships and non-compete agreements) and liabilities assumed based on the fair values at the acquisition date, with the amount exceeding the fair values being recorded as goodwill. For the acquisitions in 2023, the values assigned to the customer and referral relationships and non-compete agreements are being amortized to expense equally over the respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 12.0 years. For non-compete agreements, the weighted-average amortization period is 5.2 years. The values assigned to tradenames are tested annually for impairment. 5. Acquisitions and Sales of Non-Controlling Interests During 2025, 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 3 % to 35.0 %. The aggregated purchase price for acquired non-controlling interests – permanent equity was $ 8.4 million. The Company also sold interests in two partnerships for an aggregate price of $ 0.1 million. The non-controlling interests - permanent equity sold in each of the partnerships ranged from 1.0 % to 12.9 %. During 2024, the Company acquired additional interests in partnerships which are included in non-controlling interests - permanent equity. The additional interests purchased in each of the partnerships ranged from 0.1 % to 35.0 %. The aggregated purchase price for acquired non-controlling interests – permanent equity was $ 0.8 million. The Company also sold interests in six partnerships for an aggregate price of $ 0.3 million. The non-controlling interests - permanent equity sold in each of the partnerships ranged from 0.15 % to 10.0 %. 78 Table of Contents During 2023, the Company acquired additional interests in three partnerships which are included in non-controlling interests - permanent equity. The additional interests purchased in each of the partnerships ranged from 0.15 % to 35.0 %. The aggregated purchase price for these acquired interests was $ 0.5 million. The Company also sold interests in four partnerships for an aggregate price of $ 0.6 million. The non-controlling interests - permanent equity sold in each of the partnerships ranged from 0.5 % to 8.0 %. 6. Redeemable Non-Controlling Interest In most of the Company’s acquired partnerships, the former practice owner retains an equity interest in our subsidiary which the Company is required to purchase upon the exercise of either the put right or the call right. The applicable purchase price is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets. The terms and conditions regarding repurchase rights and obligations for most of the redeemable con-controlling interests, are summarized below under “Physical Therapy Practice Acquisitions”. However, the Company has an agreement that provides for different rights and obligations regarding the particular redeemable non-controlling interests involved in that agreement – described below under “ProgressiveHealth Acquisition”. Physical Therapy Practice Acquisitions When the Company acquires a majority interest (the “Acquisition”) in a physical therapy clinic (referred to as “Therapy Practice”), these Therapy Practice transactions typically occur in a series of steps which are described below. 1. Prior to the Acquisition, the Therapy Practice exists as a separate legal entity (the “Seller Entity”). The Seller Entity is owned by one or more individuals (the “Selling Shareholders”) most of whom are physical therapists that work in the Acquired Therapy Practice and provide physical therapy services to patients. 2. In conjunction with the Acquisition, the Seller Entity contributes the acquired Therapy Practice into a newly-formed limited partnership (“NewCo”), in exchange for one hundred percent ( 100 %) of the limited and general partnership interests in NewCo. Therefore, in this step, NewCo becomes a wholly-owned subsidiary of the Seller Entity. 3. The Company enters into an agreement (the “Purchase Agreement”) to acquire from the Seller Entity a majority (ranges from 50 % to 90 %) of the limited partnership interest and in all cases 100 % of the general partnership interest in NewCo . The Company does not purchase 100 % of the limited partnership interest because the Selling Shareholders, through the Seller Entity, want to maintain an ownership percentage. The consideration for the Acquisition is primarily payable in the form of cash at closing and a two-year note in lieu of an escrow (the “Purchase Price”). In some of the acquired therapy practice transactions, the Purchase Agreement contains an earn-out or other contingent consideration that is payable to the Seller Entity or the Selling Shareholders. 4. The Company and the Seller Entity also execute a partnership agreement (the “Partnership Agreement”) for NewCo that sets forth the rights and obligations of the limited and general partners of NewCo. After the Acquisition, the Company is the general partner of NewCo. 5. As noted above, the Company does not purchase 100% of the limited partnership interests in NewCo and the Seller Entity retains a portion of the limited partnership interest in NewCo (“Seller Entity Interest”). 6. In most cases, some or all of the Selling Shareholders enter into an employment agreement (the “Employment Agreement”) with NewCo with an initial term that ranges from three to five years (the “Employment Term”), with automatic one-year renewals, unless employment is terminated prior to the end of the Employment Term. As a result, a Selling Shareholder becomes an employee (“Employed Selling Shareholder”) of NewCo. The employment of an Employed Selling Shareholder can be terminated by the Employed Selling Shareholder or NewCo, with or without cause, at any time. In a few situations, a Selling Shareholder does not become employed by NewCo and is not involved with NewCo following the closing; in those situations, such Selling Shareholders sell their entire ownership interest in the Seller Entity as of the closing of the Acquisition. 79 Table of Contents 7. The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities based on other employees in similar capacities within NewCo, the Company and the industry. 8. The Company and the Selling Shareholder (including both Employed Selling Shareholders and Selling Shareholders not employed by NewCo) execute a non-compete agreement (the “Non-Compete Agreement”) which restricts the Selling Shareholder from engaging in competing Therapy Practice activities for a specified period of time (the “Non-Compete Term”). A Non-Compete Agreement is executed with the Selling Shareholders in all cases. That is, even if the Selling Shareholder does not become an Employed Selling Shareholder, the Selling Shareholder is restricted from engaging in a competing Therapy Practice during the Non-Compete Term. 9. The Non-Compete Term commences as of the date of the Acquisition and typically expires on the later of: a. Two years after the date an Employed Selling Shareholders’ employment is terminated (if the Selling Shareholder becomes an Employed Selling Shareholder) or b. Five to six years from the date of the Acquisition, as defined in the Non-Compete Agreement, regardless of whether the Selling Shareholder is employed by NewCo. 10. The Non-Compete Agreement applies to a restricted region which is defined as a mileage radius from the Acquired Therapy Practice. That is, an Employed Selling Shareholder is permitted to engage in competing Therapy Practices or activities outside the designated geography (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholder who is not employed by NewCo immediately is permitted to engage in the competing Therapy Practice or activities outside the designated geography. The Partnership Agreement contains provisions for the redemption of the Seller Entity Interest, either at the option of the Company (the “Call Right”) or at the option of the Seller Entity (the “Put Right”) as follows: 1. Put Right a. In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to a specified number of years following the Closing Date, the Seller Entity thereafter may have an irrevocable right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below. b. In the event that any Selling Shareholder is not employed by NewCo as of the specified date and the Company has not exercised its Call Right with respect to the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, Seller Entity thereafter has the Put Right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below. c. In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the specified date, the Seller Entity has the Put Right, and upon the exercise of the Put Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below. 80 Table of Contents 2. Call Right a. If any Selling Shareholder’s employment by NewCo is terminated prior to the specified date after the Closing Date, the Company thereafter has an irrevocable right to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, in each case at the purchase price described in “3” below. b. In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the specified date, the Company has the Call Right, and upon the exercise of the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below. 3. For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”). NewCo’s earnings are distributed monthly based on available cash within NewCo; therefore, the undistributed earnings amount is small, if any. 4. The Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that is used in the Put Right and the Call Right noted above. 5. The Put Right and the Call Right do not have an expiration date. The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling Shareholders sell their entire ownership interest in the Seller Entity at the closing of the Acquisition. An Employed Selling Shareholder’s ownership of his or her equity interest in the Seller Entity predates the Acquisition and the Company’s purchase of its partnership interest in NewCo. The Employment Agreement and the Non-Compete Agreement do not contain any provision to escrow or “claw back” the equity interest in the Seller Entity held by such Employed Selling Shareholder, nor the Seller Entity Interest in NewCo, in the event of a breach of the employment or non-compete terms. More specifically, even if the Employed Selling Shareholder is terminated for “cause” by NewCo, such Employed Selling Shareholder does not forfeit his or her right to his or her full equity interest in the Seller Entity and the Seller Entity does not forfeit its right to any portion of the Seller Entity Interest. The Company’s only recourse against the Employed Selling Shareholder for breach of either the Employment Agreement or the Non-Compete Agreement is to seek damages and other legal remedies under such agreements. There are no conditions in any of the arrangements with an Employed Selling Shareholder that would result in a forfeiture of the equity interest held in the Seller Entity or of the Seller Entity Interest. 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. 1. 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. 2. 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. 81 Table of Contents 3. 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”). 4. 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. 5. 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”). 6. 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”). 7. The Progressive Non-Compete Term commences as of the date of the Progressive acquisition and expires on the later of: a. Two years after the date a Progressive Selling Shareholder no longer is involved in the management of Progressive NewCo or b. Seven years from the date of the acquisition. 8. The Progressive Non-Compete Agreement applies to the entire United States. 9. 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: 1. Progressive Put Right a. 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. b. 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. 2. Progressive Call Rights a. 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. 3. 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. 82 Table of Contents 4. 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. 5. The Progressive Put Right and the Progressive Call Right do not have an expiration date. Neither the Progressive Operating Agreement nor the Progressive Non-Compete Agreement contain any provision to escrow or “claw back” the equity interest in Progressive NewCo held by the Progressive Selling Shareholders, in the event of a breach of the operating agreement or non-compete terms, or the management services agreement pursuant to which the Progressive Selling Shareholders perform services on behalf of Progressive NewCo. The Company’s only recourse against the Progressive Selling Shareholder for breach of any of these agreements is to seek damages and other legal remedies under such agreements. There are no conditions in any of the arrangements with a Progressive Selling Shareholder that would result in a forfeiture of the equity interest in Progressive NewCo held by a Progressive Selling Shareholder. Metro Acquisition On October 31, 2024, the Company acquired a fifty percent ( 50 %) equity interest in Metro, which is a management services organization providing management and administrative services to physical-therapist outpatient physical therapy clinics. The Company serves as the Managing Member of Metro. The Metro transaction was completed as described below. 1. The Company entered into an agreement (the “Metro Purchase Agreement”) to acquire from the Metro owners (the “Metro Owners”) a 50 % membership interest in Metro. The consideration for the acquisition was payable in the form of cash at closing and also contingent additional purchase price based on certain specified performance criteria (collectively, the “Metro Purchase Price”). 2. The Company and the Metro Owners also executed an amended and restated operating agreement (the “Metro Operating Agreement”) for Metro that sets forth the rights and obligations of the members of Metro. 3. As noted above, the Company did not purchase 100 % of the membership interests in Metro and the Metro Owners retained a portion of the membership interest in Metro (“Metro Owners’ Interest”). 4. The Company and the Metro Owners executed a non-compete agreement (the “Metro Non-Compete Agreement”) which restricts the Metro Owners from competing for a specified period of time (the “Metro Non-Compete Term”). 5. The Metro Non-Compete Term commences as of the date of the closing of the Metro acquisition (the “Metro Closing Date”) and expires six years from the Metro Closing Date. 6 The Metro Non-Compete Agreement applies to the geography that is within 20 miles of any outpatient physical therapy practice owned or managed by Metro as of the Closing Date. 7. The Metro Interim Put Right (as defined below) the Metro Put Right (as defined below), and the Metro Call Right (as defined below) do not have an expiration date. The Metro Operating Agreement contains provisions for the redemption of the Metro Owners’ Interest, either at the option of the Company (the “Metro Call Right”) or at the option of the Metro Owners (the “Metro Interim Put Right” and the “Metro Put Right”), as described below as follows: a. Metro Interim Put Right. The Metro Owners have the right to sell to the Company an aggregate of 20 % of the Metro owners’ interests commencing on the 3rd anniversary of the Metro Closing Date; b. Metro Put Right. Each of the Metro Owners has the right to sell their respective residual interests on or after the 6th anniversary of the Metro Closing Date, in the event the Metro chief executive officer (“Metro CEO”) no longer is employed by Metro, at the purchase price described below; and 83 Table of Contents c. Metro Call Right. If the Metro CEO’s employment with Metro is terminated, the Company thereafter shall have an irrevocable right to purchase from the Metro Owners their interests, in each case at the purchase price described below. For the Metro Interim Put Right, the Metro Put Right and the Metro Call Right, the purchase price is derived from a formula based on a specified multiple of Metro’s trailing twelve months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, less an allocable portion of any outstanding indebtedness (the “Metro Redemption Amount”). The Metro Interim Put Right, the Metro Put Right and the Metro Call Right do not have an expiration date. Neither the Metro Operating Agreement nor the Metro Non-Compete Agreement contain any provision to escrow or “claw back” the equity interest in Metro held by the Metro Owners, in the event of a breach of the operating agreement or non-compete terms, or the employment agreement pursuant to which the Metro Owners perform services on behalf of Metro. The Company’s only recourse against the Metro Owners for breach of any of these agreements is to seek damages and other legal remedies under such agreements. There are no conditions in any of the arrangements with a Metro Owner that would result in a forfeiture of the equity interest in Metro held by a Metro Owner. For the scenarios described above, an employed Metro Owner’s ownership of his or her equity interest in Metro predates the Metro Acquisition and the Company’s purchase of its membership interest in Metro. The employment agreement and the Metro Non-Compete Agreement do not contain any provision to escrow or “claw back” the equity interest in Metro held by such employed Metro Owners, in the event of a breach of the employment or non-compete terms. More specifically, even if the employed Metro Owner is terminated for “cause” by Metro, such employed Metro Owner does not forfeit his or her right to his or her full equity interest in Metro and Metro does not forfeit its right to any portion of the Metro Owners’ Interest. The Company’s only recourse against the Employed Metro Owner for breach of either the employment agreement or the Metro 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 Metro Owner that would result in a forfeiture of the equity interest held in Metro or of the Metro Interest. Carrying Amounts of Redeemable Non-Controlling Interests For the years ended December 31, 2025, 2024 and 2023, the following table details the changes in the carrying amount (fair value) of the redeemable non-controlling interests. For the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 (In thousands) Beginning balance $ 269,025 $ 174,828 $ 167,515 Net income allocated to redeemable non-controlling interest 13,849 10,044 4,426 Distributions to redeemable non-controlling interest partners ( 14,768 ) ( 10,579 ) ( 11,533 ) Changes in the fair value of redeemable non-controlling interest 24,521 4,964 13,565 Purchases of redeemable non-controlling interest ( 14,382 ) ( 8,122 ) ( 12,073 ) Acquired interest 7,991 100,336 11,007 Transfer from non-controlling interest to redeemable non-controlling interest (permanent equity) 5,753 - - Sales of redeemable non-controlling interest 2,433 1,969 5,012 Changes in notes receivable related to redeemable non-controlling interest ( 1,206 ) ( 1,016 ) ( 3,091 ) Reduction due to separation agreement - ( 3,033 ) - Adjustments in notes receivables related to the sales of redeemable non-controlling interest - ( 366 ) - Other 95 - - Ending balance $ 293,311 $ 269,025 $ 174,828 The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interests. 84 Table of Contents As of the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 (In thousands) Contractual time period has lapsed but holder’s employment has not terminated $ 79,773 $ 74,668 $ 96,876 Contractual time period has not lapsed and holder’s employment has not terminated 213,538 194,357 77,952 Holder’s employment has terminated and contractual time period has expired - - - Holder’s employment has terminated and contractual time period has not expired - - - $ 293,311 $ 269,025 $ 174,828 7. Assets Held for Sale In December 2024, the Company signed a non-binding Letter of Intent to sell an underperforming business unit within the physical therapy operations segment. The decision to divest was based on performance considerations and strategic realignment. As of December 31, 2024, the business unit met the criteria for classification as held for sale under ASC 360. A $ 2.4 million impairment charge was recorded to write down the business unit’s carrying value to fair value, less estimated costs to sell. The impairment was included in impairment on assets held for sale on the consolidated statements of net income. The impairment charges primarily related to intangible assets. Assets held for sale were valued at $ 0.6 million on December 31, 2024, and have been presented within other current assets in the accompanying balance sheets. The transaction was completed in February 2025 and the related loss on sale of $ 0.1 million was recognized in the consolidated statements of net income for the year ended December 31, 2025. 8. Goodwill The changes in the carrying amount of goodwill consisted of the following. For the Year Ended December 31, 2025 December 31, 2024 (In thousands) Beginning balance $ 667,152 $ 509,571 Acquisitions 21,198 164,529 Adjustments for purchase price allocation of businesses acquired in prior year 4,224 ( 6,551 ) Other ( 182 ) ( 397 ) Ending balance $ 692,392 $ 667,152 There was no goodwill impairment recognized in the twelve months ended December 31, 2025, or the twelve months ended December 31, 2024. 9. Intangible Assets, net The Company’s intangible assets, net, consisted of the following. As of the Year Ended December 31, 2025 December 31, 2024 Gross Amount Accumulated Amortization Net Carrying Amount Gross Amount Accumulated Amortization Net Carrying Amount (In thousands) Customer and referral relationships $ 155,056 $ ( 49,295 ) $ 105,761 $ 156,747 $ ( 39,218 ) $ 117,529 Tradenames 62,809 - 62,809 57,041 - 57,041 Non-compete agreements 13,826 ( 9,535 ) 4,291 13,077 ( 8,336 ) 4,741 $ 231,691 $ ( 58,830 ) $ 172,861 $ 226,865 $ ( 47,554 ) $ 179,311 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 16.0 years. Non-compete agreements are amortized over the respective terms 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. These impairment losses are presented in the impairment of goodwill and other intangible assets and impairment on assets held for sale in the Consolidated Statements of Income. 85 Table of Contents The following table details the amount of amortization expense recorded for intangible assets for the periods presented. For the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 (In thousands) Customer and referral relationships $ 10,077 $ 8,804 $ 6,678 Non-compete agreements 1,199 742 595 $ 11,276 $ 9,546 $ 7,273 The remaining balances of the customer and referral relationships and non-compete agreements are expected to be amortized as follows. For the Year Ending December 31, Customer and Referral Relationships Non-Compete Agreements (In thousands) 2026 $ 10,254 $ 1,079 2027 10,091 953 2028 9,822 874 2029 9,444 710 2030 9,279 650 Thereafter $ 56,871 $ 25 10. Accrued Expenses Accrued expenses consisted of the following for the periods presented. As of the Year Ended December 31, 2025 December 31, 2024 (In thousands) Salaries and related costs $ 37,270 $ 34,886 Contingency payable 12,275 3,043 Payable related to purchase of non-controlling interest (temporary and permanent equity) 12,078 - Credit balances due to patients and payors 6,468 6,359 Group health insurance claims 2,538 2,462 Closure costs 1,523 2,828 Federal income taxes payable 993 4,544 Professional fees 890 860 Interest payable 393 402 Other property taxes payable 313 371 Other 6,241 3,758 $ 80,982 $ 59,513 11. Borrowings Amounts outstanding under the Credit Agreement (as defined below) and notes payable consisted of the following. 86 Table of Contents As of the Year Ended December 31, 2025 December 31, 2024 Principal Amount Unamortized Debt Issuance Cost (2) Net Debt Principal Amount Unamortized Debt Issuance Cost (2) Net Debt (In thousands) Term Facility $ 131,250 $ ( 620 ) $ 130,630 $ 140,625 $ ( 1,049 ) $ 139,576 Revolving Facility 30,500 - 30,500 11,000 - $ 11,000 Other (1) 1,329 - 1,329 2,953 - $ 2,953 Total debt 163,079 ( 620 ) 162,459 154,578 ( 1,049 ) 153,529 Less: Current portion of long-term debt 10,287 ( 422 ) 9,865 11,422 ( 423 ) 10,999 Long-term debt, net of current portion $ 152,792 $ ( 198 ) $ 152,594 $ 143,156 $ ( 626 ) $ 142,530 (1) The long-term portion is included as part of Other Long-Term Liabilities in the Consolidated Balance Sheet. (2) Debt issuance costs are amortized over the term of the Term Loan and recorded to interest expense. Effective December 5, 2013, the Company entered into an Amended and Restated Credit Agreement with a commitment for a $ 125.0 million revolving credit facility. This agreement was amended and/or restated in August 2015, January 2016, March 2017, November 2017, and January 2021. On June 17, 2022, the Company entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”) among Bank of America, N.A., as administrative agent (“Administrative Agent”) and the lenders from time-to-time party thereto. The Credit Agreement, which matures on June 17, 2027 , provides for loans in an aggregate principal amount of $ 325 million. Such loans were made available through the following facilities (collectively, the “Senior Credit Facilities”): 1) Revolving Facility: $ 175 million , five-year , revolving credit facility (“Revolving Facility”), which includes a $ 12 million sublimit for the issuance of standby letters of credit and a $ 15 million sublimit for swingline loans (each, a “Swingline Loan”). 2) Term Facility: $ 150 million term loan facility (the “Term Facility”). The Term Facility amortizes in quarterly installments of: (a) 0.625 % in each of the first two years, (b) 1.250 % in the third and fourth year, and (c) 1.875 % in the fifth year of the Credit Agreement. The remaining outstanding principal balance of all term loans is due on the maturity date. The proceeds of the Revolving Facility shall be used by the Company for working capital and other general corporate purposes of the Company and its subsidiaries, including to fund future acquisitions and invest in growth opportunities. The proceeds of the Term Facility were used by the Company to refinance the indebtedness outstanding under the Amended Credit Agreement, to pay fees and expenses incurred in connection with the transactions involving the loan facilities, for working capital and other general corporate purposes of the Company and its subsidiaries. The Company is permitted to increase the Revolving Facility and/or add one or more tranches of term loans in an aggregate amount not to exceed the sum of (i) $ 100 million plus (ii) an unlimited additional amount, provided that (in the case of clause (ii)), after giving effect to such increases, the pro forma Consolidated Leverage Ratio (as defined in the Credit Agreement) would not exceed 2.0 :1.0, and the aggregate amount of all incremental increases under the Revolving Facility does not exceed $ 50,000,000 . The interest rates per annum applicable to the Senior Credit Facilities (other than in respect of Swingline Loans) will be Term SOFR (as defined in the Credit Agreement) plus an applicable margin or, at the option of the Company, an alternate base rate plus an applicable margin. Each Swingline Loan shall bear interest at the base rate plus the applicable margin. The applicable margin for Term SOFR borrowings ranges from 1.50 % to 2.25 %, and the applicable margin for alternate base rate borrowings ranges from 0.50 % to 1.25 %, in each case, based on the Consolidated Leverage Ratio of the Company and its subsidiaries. Interest is payable at the end of the selected interest period but no less frequently than quarterly and on the date of maturity. The Company is also required to pay to the Administrative Agent, for the account of each lender under the Revolving Facility, a commitment fee equal to the actual daily excess of each lender’s commitment over its outstanding credit exposure under the Revolving Facility (“unused fee”). Such unused fee will range between 0.25 % and 0.35 % per annum and is also based on the Consolidated Leverage Ratio of the Company and its subsidiaries. The Company may prepay and/or repay the revolving loans and the term loans, and/or terminate the revolving loan commitments, in whole or in part, at any time without premium or penalty, subject to certain conditions. 87 Table of Contents The Credit Agreement contains customary covenants limiting, among other things, the incurrence of additional indebtedness, the creation of liens, mergers, consolidations, liquidations and dissolutions, sales of assets, dividends and other payments in respect of equity interests, acquisitions, investments, loans and guarantees, subject, in each case, to customary exceptions, thresholds and baskets. The Credit Agreement includes certain financial covenants which include the Consolidated Fixed Charge Coverage Ratio, and the Consolidated Leverage Ratio, as defined in the Credit Agreement. The Credit Agreement also contains customary events of default. The Company’s obligations under the Credit Agreement are guaranteed by its wholly-owned material domestic subsidiaries (each, a “Guarantor”), and the obligations of the Company and any Guarantors are secured by a perfected first priority security interest in substantially all of the existing and future personal property of the Company and each Guarantor, subject to certain exceptions. As of December 31, 2025, $ 131.3 million was outstanding on the Term Facility while $ 30.5 million was outstanding under the Revolving Facility resulting in $ 144.5 million of credit availability. As of December 31, 2025, the Company was in compliance with all of the covenants contained in the Credit Agreement. The Company generally enters into various notes payable as a means of financing acquisitions. As of December 31, 2025, the Company’s remaining outstanding balance on these notes amounted to $ 1.3 million, of which less than $ 0.8 million is due in 2026, $ 0.4 million is due in 2027, and less than $ 0.1 million is due in 2028. 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. 12. Derivative Instruments The Company is exposed to certain market risks during the ordinary course of business due to adverse changes in interest rates. The exposure to interest rate risk primarily results from the Company’s variable-rate borrowing. The Company may elect to use derivative financial instruments to manage risks from fluctuations in interest rates. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in interest rates can be volatile and the Company’s risk management activities do not eliminate these risks. Interest Rate Swap In May 2022, the Company entered into an interest rate swap agreement, effective on June 30, 2022, with Bank of America, N.A. The swap has a $ 150 million notional value adjusted concurrently with scheduled principal payments made on the term loan. The swap has a maturity date of June 30, 2027 . Beginning in July 2022, the Company receives a 1-month SOFR, and pays a fixed rate of interest of 2.815 % on 1-month SOFR on a quarterly basis. The total interest rate in any period will also include an applicable margin based on the Company’s consolidated leverage ratio. In connection with the swap, no cash was exchanged between the Company and the counterparty. The Company designated its interest rate swap as a cash flow hedge and structured it to be highly effective. Consequently, unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income (loss), net of tax. Savings from the interest rate swap arrangement totaled $ 2.0 million for the year ended December 31, 2025, compared to $ 3.4 million for the year ended December 31, 2024. These savings reduce the amount of interest expense, debt and other in the accompanying consolidated statements of income. The impacts of the Company’s derivative instruments on the accompanying Consolidated Statements of Comprehensive Income are presented in the table below. 88 Table of Contents For the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 (In thousands) Net income $ 58,005 $ 45,600 $ 37,220 Other comprehensive (loss) gain Unrealized (loss) gain on cash flow hedge ( 2,838 ) 23 ( 1,642 ) Tax effect at statutory rate (federal and state) 753 ( 6 ) 420 Comprehensive income $ 55,920 $ 45,617 $ 35,998 Comprehensive income attributable to non-controlling interest ( 18,422 ) ( 14,176 ) ( 8,981 ) Comprehensive income attributable to USPH shareholders $ 37,498 $ 31,441 $ 27,017 The valuations of the Company’s interest rate derivatives are measured as the present value of all expected future cash flows based on SOFR-based yield curves. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparty, which is a Level 2 fair value measurement. The carrying and fair value of the Company’s interest rate derivatives (included in other current assets and other assets) were as follows: As of the Year Ended December 31, 2025 December 31, 2024 (In thousands) Other current assets $ 743 $ 1,752 Other assets 177 2,006 $ 920 $ 3,758 13. Leases The Company has operating leases for its corporate offices and operating facilities. The Company determines if an arrangement is a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent net present value of the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and operating lease liabilities are recognized at commencement date based on the net present value of the fixed lease payments over the lease term. The Company’s operating lease terms are generally five years or less. The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating fixed lease expense is recognized on a straight-line basis over the lease term. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage are not included in the right-of-use assets or operating lease liabilities. These are expensed as incurred and recorded as variable lease expense. The components of lease expense were as follows. For the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 (In thousands) Operating lease cost $ 49,031 $ 41,751 $ 38,559 Short-term lease cost 1,469 1,163 1,353 Variable lease cost 9,891 9,739 9,438 Sublease income ( 437 ) ( 481 ) ( 526 ) Total lease cost $ 59,954 $ 52,172 $ 48,824 Lease costs are reflected in the consolidated statements of net income in the line item — rent, supplies, contract labor and other. 89 Table of Contents The supplemental cash flow information related to leases was as follows. For the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 (In thousands) Cash paid for amounts included in the measurement of operating lease liabilities $ 49,455 $ 42,934 $ 39,813 Right-of-use assets obtained in exchange for new operating lease liabilities $ 54,192 $ 70,729 $ 36,264 The aggregate future lease payments for operating leases as of December 31, 2025, were as follows. Fiscal Year Amount (In thousands) 2026 $ 48,399 2027 39,300 2028 28,965 2029 20,167 2030 and thereafter 35,251 Total lease payments $ 172,082 Less: imputed interest 19,376 Total operating lease liabilities $ 152,706 Average lease terms and discount rates were as follows: As of the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 Weighted-average remaining lease term 4.8 years 4.5 years 3.9 years Weighted-average discount rate 5.0 % 4.7 % 4.0 % The Company leases certain properties from Michael G. Mayrsohn (lessor), who is the President of Metro. Mr. Mayrsohn was also 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 . During the year ended December 31, 2025, the Company paid a total of $ 0.5 million of lease payments to Mr. Mayrsohn. Metro has made leasehold improvements valued at $ 0.3 million as of December 31, 2025. The total of minimum future rental payments under these related party lease agreements is $ 2.6 million as of December 31,2025. 14. Income Taxes Significant components of deferred tax assets and liabilities included in the consolidated balance sheets as of the periods below were as follows. 90 Table of Contents As of the Year Ended December 31, 2025 December 31, 2024 (In thousands) Deferred tax assets: Compensation $ 2,045 $ 2,370 Provision for credit losses 792 747 Lease obligations - including closed clinics 29,888 36,205 Other 94 - Deferred tax assets $ 32,819 $ 39,322 Deferred tax liabilities: Depreciation and amortization $ ( 31,274 ) $ ( 32,392 ) Operating lease right-of-use assets ( 28,109 ) ( 34,221 ) Gain on cash flow hedge ( 244 ) ( 960 ) Change in revaluation of put-right liability ( 312 ) ( 638 ) Other ( 1,271 ) ( 576 ) Deferred tax liabilities ( 61,210 ) ( 68,787 ) Net deferred tax liabilities $ ( 28,391 ) $ ( 29,465 ) The deferred tax assets and liabilities related to purchased interests not yet finalized may result in an immaterial adjustment. As of December 31, 2025, the Company has a federal tax payable of $ 0.9 million and state tax receivables of $ 3.1 million. The federal tax payable is included in accrued expenses and the state income tax receivable is included in other current assets on the accompanying consolidated balance sheets. For the years ended December 31, 2025, 2024, and 2023 income taxes for financial reporting purposes differ from the amount computed by applying the statutory federal income tax rate of 21 % as shown as in the following table: Year Ended December 31, 2025 U.S. federal statutory rate $ 12,472 21.0 % State and local income taxes, net of federal income tax effect (1) 5,068 8.5 % Non-deductible expenses 133 0.2 % Shortfall equity compensation deduction 330 0.6 % Non-deductible executive compensation 1,186 2.0 % Other reconciling items 619 1.1 % Income tax expense $ 19,808 33.4 % (1) State and local income taxes primarily consist of taxes in Tennessee, Maryland, Pennsylvania, Oregon, Georgia, New Jersey, and Virginia (which collectively represent the majority of this category). Year Ended December 31, 2024 U.S. tax at statutory rate $ 9,667 21.0 % State income taxes, net of federal benefit 2,946 6.4 % Shortfall equity compensation deduction 75 0.2 % Non-deductible expenses 907 2.0 % Return to provision adjustments 1,014 2.1 % Income tax expense $ 14,609 31.7 % Year Ended December 31, 2023 U.S. tax at statutory rate $ 8,483 21.0 % State income taxes, net of federal benefit 2,135 5.3 % Shortfall equity compensation deduction 123 0.3 % Non-deductible expenses 710 1.8 % Return to provision adjustments 705 1.7 % Income tax expense $ 12,156 30.1 % 91 Table of Contents Significant components of the provision for income taxes for the years ended December 31, 2025, 2024 and 2023 were as follows (in thousands): December 31, 2025 December 31, 2024 December 31, 2023 Current income tax expense: Federal $ 6,753 $ 5,805 $ 6,996 State 2,456 3,930 512 Total current expense 9,209 9,735 7,508 Deferred income tax expense: Federal 7,471 4,006 3,819 State 3,128 868 829 Total deferred expense 10,599 4,874 4,648 Total income tax expense $ 19,808 $ 14,609 $ 12,156 The components of income taxes paid for the period ended December 31, 2025, were as follows: December 31, 2025 Total Income Taxes Paid $ 14,348 Federal $ 9,647 State & Local: TN $ 1,181 Other $ 3,520 For 2025, 2024 and 2023, the Company performed a detailed reconciliation of its federal and state taxes payable and receivable accounts along with its federal and state deferred tax asset and liability accounts. The adjustments were immaterial. The Company considers this reconciliation process to be an annual control. The Company is required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income in the periods which the deferred tax assets are deductible, management believes that a valuation allowance is not required, as it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. The Company’s U.S. federal returns remain open to examination for 2022 through 2024 and U.S. state jurisdictions are open for periods ranging from 2021 through 2024 . The Company does not believe that it has any significant uncertain tax positions at December 31, 2025 and December 31, 2024, nor is this expected to change within the next twelve months due to the settlement and expiration of statutes of limitation. The Company did no t have any accrued interest or penalties associated with any unrecognized tax benefits nor was any interest expense recognized during the years ended December 31, 2025, 2024 and 2023. 15. Segment Information The Company’s reportable segments include the physical therapy operations segment and the IIP segment. Also included in the physical therapy operations segment are revenues from management contract services and other services which include services the Company provides on-site, such as athletic trainers for schools . 92 Table of Contents Physical Therapy Operations The physical therapy operations segment primarily operates through subsidiary clinic partnerships (“Clinic Partnerships”), in which the Company generally owns a 1 % general partnership interest in all the Clinic Partnerships. The Company’s limited partnership interests generally range from 65 % to 75 % (the range is 30 % - 99 %) in the Clinic Partnerships. The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnership interest in most of the clinics (hereinafter referred to as “Clinic Partnerships”). Some of the Clinic Partnerships serve as management services organizations which manage and provide staffing and a variety of administrative services to physical therapy provider entities in which the Company does not have an ownership interest. These Clinic Partnerships similarly are owned collectively by the Company and one or more physical therapists who are involved in the management of the operations. To a lesser extent, the Company operates some clinics through wholly-owned subsidiaries (hereinafter referred to as “Wholly-Owned Facilities”). The Company continues to seek to attract for employment physical therapists who have established relationships with physicians and other referral sources, by offering these therapists a competitive salary and incentives based on the profitability of the clinic that they manage. For multi-site clinic practices in which a controlling interest is acquired by the Company, the prior owners typically continue on as employees to manage the clinic operations, retain a non-controlling ownership interest in the clinics and receive a competitive salary for managing the clinic operations. In addition, the Company has developed satellite clinic facilities as part of existing Clinic Partnerships and Wholly-Owned Facilities, with the result that a substantial number of Clinic Partnerships and Wholly-Owned Facilities operate more than one clinic location. Clinic Partnerships For non-acquired Clinic Partnerships, the earnings and liabilities attributable to the non-controlling interests, typically owned by the managing therapist, directly or indirectly, are recorded within the balance sheets and income statements as non-controlling interest—permanent equity . For acquired Clinic Partnerships with redeemable non-controlling interests, the earnings attributable to the redeemable non-controlling interests are recorded within the consolidated balance sheets and income statements as redeemable non-controlling interest—temporary equity . Wholly-Owned Facilities For Wholly-Owned Facilities with profit sharing arrangements, an appropriate accrual is recorded for the amount of profit sharing due the clinic partners/directors. The amount is expensed as compensation and included in clinic operating costs—salaries and related costs. The respective liability is included in current liabilities— accrued expenses on the consolidated balance sheets. Industrial Injury Prevention Services Services provided in the IIP segment include onsite injury prevention and rehabilitation, performance optimization, post offer employment testing, functional capacity evaluations, and ergonomic assessments. The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Other clients include large insurers and their contractors. The Company performs these services through industrial sports medicine professionals, consisting primarily of specialized certified athletic trainers. Segment Financials The Company, including its chief operating decision maker, the Chief Executive Officer, uses gross profit in its budget-to-actual, forecasting, and other analytical processes to assess segment performance and allocate resources. The Company has provided additional information regarding its reportable segments which contributes to the understanding of the Company and provides useful information. 93 Table of Contents For the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 ( In thousands) Net revenue: Physical therapy operations $ 666,589 $ 574,433 $ 526,548 Industrial injury prevention services 114,401 96,912 78,254 Total Company $ 780,990 $ 671,345 $ 604,802 Operating Costs: Salaries and related costs: Physical therapy operations $ 388,641 $ 337,466 $ 302,765 Industrial injury prevention services 73,249 61,928 50,625 Total salaries and related costs $ 461,890 $ 399,394 $ 353,390 Rent supplies, contract labor and other: Physical therapy operations $ 124,226 $ 105,019 $ 97,873 Industrial injury prevention services 16,205 13,891 10,723 Total rent, supplies, contract labor and other $ 140,431 $ 118,910 $ 108,596 Depreciation and amortization: Physical therapy operations $ 17,834 $ 14,775 $ 12,576 Industrial injury prevention services 3,225 3,078 2,384 Total depreciation and amortization $ 21,059 $ 17,853 $ 14,960 Provision for credit losses: Physical therapy operations $ 7,562 $ 6,904 $ 6,129 Industrial injury prevention services 85 8 43 Total provision for credit losses $ 7,647 $ 6,912 $ 6,172 Clinic closure costs: Physical therapy operations $ 270 $ 4,355 $ 175 Industrial injury prevention services - - - Total clinic closure costs $ 270 $ 4,355 $ 175 Total Company $ 631,297 $ 547,424 $ 483,293 Gross profit: Physical therapy operations $ 128,056 $ 105,914 $ 107,030 Industrial injury prevention services 21,637 18,007 14,479 Total Company $ 149,693 $ 123,921 $ 121,509 Impairment of goodwill and other intangible assets Industrial injury prevention services $ - $ - $ 17,495 Total impairment of goodwill and other intangible assets $ - $ - $ 17,495 Impairment of assets held for sale Physical therapy operations $ - $ 2,418 $ - Total impairment of assets held for sale $ - $ 2,418 $ - Unallocated amounts Corporate office costs $ 69,260 $ 58,290 $ 51,953 Interest expense, debt and other 9,459 8,015 9,303 Interest income from investments ( 105 ) ( 3,941 ) ( 3,774 ) Change in fair value of contingent earn-out consideration ( 6,244 ) 219 1,550 Change in revaluation of put-right liability 1,322 82 ( 2,582 ) Equity in earnings of unconsolidated affiliate ( 1,477 ) ( 1,014 ) ( 955 ) Loss on sale of partnership 123 - - Relief Funds - - ( 467 ) Other ( 458 ) ( 357 ) ( 390 ) Total unallocated amounts 71,880 61,294 54,638 Income before taxes $ 77,813 $ 60,209 $ 49,376 December 31, 2025 December 31, 2024 Assets: Goodwill: Physical therapy operations $ 604,440 $ 579,046 Industrial injury prevention services 87,952 88,106 Total goodwil $ 692,392 $ 667,152 All other assets: Physical therapy operations 434,804 $ 415,039 Industrial injury prevention services 76,814 85,276 Total all other assets 511,618 500,315 Total Assets $ 1,204,010 $ 1,167,467 Amortization of certain intangible assets was reallocated between the physical therapy operations and IIP segments. Prior year amounts were reallocated to conform with current presentation. 94 Table of Contents 16. Investment in Unconsolidated Affiliate Through one of its subsidiaries, the Company has a 49 % joint venture interest in a company which provides physical therapy services for patients at hospitals. Since the Company is deemed to not have a controlling interest in the company, the Company’s investment is accounted for using the equity method of accounting. The investment balance of this joint venture as of December 31, 2025, is $ 12.3 million and the earnings amounted to approximately $ 1.5 million. The investment balance of this joint venture as of December 31, 2024, was $ 12.2 million and the earnings amounted to approximately $ 1.0 million. 17. Equity Based Plans U.S. Physical Therapy Stock Incentive Plans Amended and Restated 1999 Employee Stock Option Plan The Amended and Restated 1999 Employee Stock Option Plan (the “Amended 1999 Plan”) permits the Company to grant to non-employee directors and employees of the Company up to 600,000 non-qualified options to purchase shares of common stock and restricted stock (subject to proportionate adjustments in the event of stock dividends, splits, and similar corporate transactions). The exercise prices of options granted under the Amended 1999 Plan are determined by the Compensation Committee. The period within which each option will be exercisable is determined by the Compensation Committee. Amended and Restated 2003 Stock Option Plan The Amended and Restated 2003 Stock Option Plan (the “Amended 2003 Plan”) permits the Company to grant to key employees and outside directors of the Company incentive and non-qualified options and shares of restricted stock covering up to 2,600,000 shares of common stock (subject to proportionate adjustments in the event of stock dividends, splits, and similar corporate transactions). As of December 31, 2025, there were 0.3 million shares remaining that can be subject to new awards under the Amended 2003 Plan. Stock-based compensation expense related to the Amended 1999 Plan and Amended 2003 Plan was approximately $ 8.3 million, $ 7.8 million, and $ 7.7 million for the years ended December 31, 2025, 2024 and 2023 respectively. As of December 31, 2025, the remaining $ 11.7 million compensation expense will be recognized over a weighted average period of 2.47 years. Restricted Stock Awards During 2025, 2024 and 2023, the Company granted the following shares of restricted stock to directors, officers, and employees pursuant to its equity plans as follows: Weighted Average Fair Year Granted Number of Shares Value Per Share 2025 110,079 $ 88.98 2024 90,810 $ 101.30 2023 73,384 $ 102.79 During 2025, 2024 and 2023, the following shares were cancelled due to employee terminations prior to restrictions lapsing: 95 Table of Contents Weighted Average Fair Year Cancelled Number of Shares Value Per Share 2025 578 $ 94.98 2024 2,339 $ 103.81 2023 4,086 $ 103.99 Generally, restrictions on the stock granted to employees lapse in equal annual installments on the following four anniversaries of the date of grant. For those shares granted to directors, the restrictions will lapse in equal quarterly installments during the first year after the date of grant. For those granted to officers, the restriction will lapse in equal quarterly installments during the four years following the date of grant. There were 164,163 and 140,276 shares outstanding as of December 31, 2025, and December 31, 2024, respectively, for which restrictions had not lapsed. The restrictions will lapse from 2026 through 2029 . Metro Equity Incentive Plan The MSO Metro LLC 2024 Incentive Plan (“Metro Plan”) was approved on October 31, 2024. The Metro Plan permits MSO Metro to grant to employee participants up to 5,000 Units of MSO Metro upon the attainment of certain EBITDA thresholds, subject to continuous employment. Upon vesting, the Units will contain both a call right and a put right at a fixed price based on the level of EBITDA that is reached. As the Units are subject to repurchase upon issuance at a fixed purchase price, the share-based compensation is classified as a liability. The following table summarizes the Metro Plan activity during the years ended December 31, 2025 and December 31, 2024: Number of Units Grant-Date Fair Value per Unit Unvested as of January 1, 2024 - - Granted 4,650 1,530 Vested - - Unvested as of December 31, 2024 4,650 1,530 Granted - - Vested - - Unvested as of December 31, 2025 4,650 1,530 The Company recognized $ 0.7 million of compensation expense related to the Metro Plan for the twelve months ended December 31, 2025. During the same period the fair value of the associated liability decreased $ 3.2 million. Unrecognized compensation expense related to the Metro Plan was $ 2.1 million as of December 31, 2025, to be amortized over a remaining period of approximately 4.0 years . There were no forfeitures during the twelve months ended December 31, 2025. 18. Preferred and Common Stock Preferred Stock The Board is empowered, without approval of the shareholders, to cause shares of preferred stock to be issued in one or more series and to establish the number of shares to be included in each such series and rights, powers, preferences, and limitations of each series. There are no provisions in the Company’s Articles of Incorporation specifying the vote required by the holders of preferred stock to take action. All such provisions would be set out in the designation of any series of preferred stock established by the Board. The bylaws of the Company specify that, when a quorum is present at any meeting, the vote of the holders of at least a majority of the outstanding shares entitled to vote who are present, in person or by proxy, shall decide any question brought before the meeting, unless a different vote is required by law of the Company’s Articles of Incorporation. 96 Table of Contents Because the Board has the power to establish the preferences and rights of each series, it may afford the holders of any series of preferred stock, preferences, powers, and rights, voting or otherwise, senior to the right of holders of common stock. The issuance of the preferred stock could have the effect of delaying or preventing a change in control of the Company. Common Stock In May 2023, the Company completed a secondary offering of 1,916,667 shares of its common stock at an offering price of $ 90.00 per share. Upon completion of the offering, the Company received net proceeds of approximately $ 163.6 million, after deducting an underwriting discount of $ 8.6 million and recognizing related fees and expenses of $ 0.2 million. From September 2001 through December 31, 2008, the Board authorized the Company to purchase, in the open market or in privately negotiated transactions, up to 2,250,000 shares of the Company’s common stock. In March 2009, the Board authorized the repurchase of up to 10 % or approximately 1,200,000 shares of its common stock (“March 2009 Authorization”). Under the March 2009 Authorization, the Company has purchased a total of 859,499 shares. The Company is required to retire shares purchased under the March 2009 Authorization. In November 2023, the Board terminated the March 2009 Authorization such that any such proposed repurchase of our common stock would be considered and determined by the Board at such time. The Company’s Board of Directors approved a share repurchase program effective August 5, 2025. The program authorizes the repurchase by the Company of up to $ 25.0 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. During the year ended December 31, 2025, the Company purchased 81,322 shares of its common stock under the Share Repurchase Program that were each cancelled at the time of repurchase for a total of $ 5.6 million. As of December 31, 2025, $ 19.4 million remained available for repurchases under the Company’s share repurchase program. The following table summarizes the Company’s repurchase activity for the periods presented. The cost of repurchased shares is presented as treasury stock in the consolidated balance sheets. For the Month Ended December 31, 2025 November 30, 2025 October 31, 2025 Number of shares repurchased - 81,322 - Total cost of shares repurchased $ - $ 5,566,165 $ - Average price (including brokers’ commission) $ - $ 68.45 $ - 19. Defined Contribution Plan The Company has several 401(k) profit sharing plans covering certain employees with three months of service. For certain plans, the Company makes matching contributions. The Company may also make discretionary contributions of up to 50 % of employee contributions. The Company did no t make any discretionary contributions for the years ended December 31, 2025, 2024 and 2023. The Company matching contributions totaled $ 3.7 million, $ 2.6 million and $ 2.2 million, respectively, for the years ended December 31, 2025, 2024 and 2023. 20. Contingencies The Company is a party to various legal actions, proceedings, and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of our business. 97 Table of Contents 21. Subsequent Events On January 2, 2026, the Company acquired an eight -clinic practice with eight clinic locations. The prior owners retained 50 % ownership interest. On January 31, 2026, the Company acquired 70 % of an industrial injury prevention business. The previous owners retained a 30 % ownership interest. On February 2, 2026, we announced a 10 -year strategic alliance between our subsidiary partner, Metro, and a prominent New York hospital system, whereby 60 of Metro’s existing outpatient physical therapy clinics in New York will become part of the hospital system’s clinical services network. The alliance is expected to begin operations with an initial group of clinics in mid-2026, with all 60 clinics anticipated to be operational by year-end 2026. On February 24, 2026 , the Company’s Board of Directors raised the Company’s quarterly dividend rate from $ 0.45 per share to $ 0.46 per share, effective immediately, and declared a quarterly dividend for the first quarter of 2026 at the higher rate. The dividend will be payable on April 10, 2026 , to shareholders of record on March 13, 2026 . On February 25, 2026, the Company announced a 10 -year strategic alliance between another of its subsidiary partners and a local hospital system whereby the subsidiary partner’s existing 10 outpatient physical therapy clinics will become part of the hospital system’s clinical services network. 98 Table of Contents ITEM 9. CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.