XML 21 R10.htm IDEA: XBRL DOCUMENT
v3.24.3

Acquisitions of Businesses | 9 Months Ended
--- | ---
Sep. 30, 2024
Acquisitions of Businesses [Abstract] |
Acquisitions of Businesses | 3. Acquisitions of Businesses The Company’s strategy is to continue acquiring outpatient physical therapy practices, to develop outpatient physical therapy clinics as satellites in existing partnerships and to continue acquiring companies that provide and serve the IIP sector. The consideration paid for each acquisition is derived through arm’s length negotiations and funded through working capital, borrowings under the Revolving Facility (as defined in Note 8. Borrowings) or proceeds from the secondary equity offering completed in May 2023. The purchase price plus the fair value of the non-controlling interest for the acquisitions after September 30, 2023, were allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets (i.e. tradenames, referral relationships and non-compete agreements) and liabilities assumed based on the estimated fair values at the acquisition date, with the amount in excess of fair values being recorded as goodwill. The Company is in the process of completing its formal valuation analysis of the above-mentioned acquisitions, to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities assumed. Thus, the final allocation of the purchase price may differ from the preliminary estimates used on September 30, 2024, based on additional information obtained and completion of the valuation of the identifiable intangible assets. Changes in the estimated valuation of the tangible assets acquired, the completion of the valuation of identifiable intangible assets and the completion by the Company of the identification of any unrecorded pre-acquisition contingencies, where the liability is probable and the amount can be reasonably estimated, will likely result in adjustments to goodwill. The Company does not expect the adjustments to be material. The Company continues to evaluate the components for the purchase price allocations for other acquisitions in 2023 and 2024. The results of operations of the acquisitions below have been included in the Company’s unaudited consolidated financial statements from their respective date of acquisition. Unaudited proforma consolidated financial information for the acquisitions has not been included, as the results, individually and in the aggregate, were not material to current operations. 2024 Acquisitions
|  |  |  | % Interest |  |  | Number of |
Acquisition |  | Date |  | Acquired |  |  | Clinics |
August 2024 Acquisition |  | August 31, 2024 |  |  | 70% |  |  |  | 8 |
April 2024 Acquisition |  | April 30, 2024 |  |  | ** |  |  |  | * |
March 2024 Acquisition |  | March 29, 2024 |  |  | 50% |  |  |  | 9 |
* | IIP business.
** | On April 30, 2024, one of the Company’s primary IIP businesses, Briotix Health Limited Partnership, acquired 100% of an IIP business.
On August 31, 2024, the Company acquired a 70% equity interest in an eight-clinic practice physical therapy and the original practice owners retained a 30% equity interest. The purchase price for the 70% equity interest was approximately $2.0 million. As part of the transaction, the Company agreed to additional contingent consideration if future operational and financial objectives are met. The maximum amount of additional contingent consideration due under this agreement is $3.6 million. The contingent consideration was valued at $3.6 million on August 31, 2024. On April 30, 2024, the Company acquired 100% of an IIP business through one of its primary IIP businesses, Briotix Health Limited Partnership, for a purchase price of approximately $24.0 million, of which $0.5 million was in the form of a note payable. The note accrues interest at 5.0% per annum and the principal and the interest are payable on May 1, 2025. As part of the transaction, the Company agreed to additional contingent consideration if future operational objectives are met by the business. There is no maximum payout. The contingent consideration was valued at $2.4 million as of September 30, 2024. On March 29, 2024, the Company acquired a 50% equity interest in a nine-clinic physical therapy and hand therapy practice. The original owners of the practice retained the remaining 50%. The purchase price for the 50% equity interest was approximately $16.4 million, of which $0.5 million was in the form of a note payable. The note accrues interest at 4.5% per annum and the principal and the interest are payable on March 29, 2026. As part of the transaction, the Company agreed to additional contingent consideration if future operational and financial objectives are met. There is no maximum payout. The contingent consideration was valued at $0.5 million on September 30, 2024. Besides the multi-clinic acquisition referenced above, the Company purchased the assets and business of six physical therapy clinics, which were tucked into larger partnerships in separate transactions. The following table provides details on the preliminary purchase price allocation for the acquisitions described above.
|  | Physical Therapy |
|  | IIP |  |  | Operations |  |  | Total |
|  | (In thousands) |
Cash paid, net of cash acquired |  | $ | 23,106 |  |  | $ | 18,090 |  |  | $ | 41,196 |
Seller note |  |  | 455 |  |  |  | 500 |  |  |  | 955 |
Deferred payments |  |  | - |  |  |  | - |  |  |  | - |
Contingent payments |  |  | 2,100 |  |  |  | 4,340 |  |  |  | 6,440 |
Total consideration |  | $ | 25,661 |  |  | $ | 22,930 |  |  | $ | 48,591 |
Estimated fair value of net tangible assets acquired: |  |  |  |  |  |  |  |  |  |  |  |
Total current assets |  | $ | 1,211 |  |  | $ | 1,351 |  |  | $ | 2,562 |
Total non-current assets |  |  | 218 |  |  |  | 692 |  |  |  | 910 |
Total liabilities |  |  | (541 | ) |  |  | (622 | ) |  |  | (1,163 | )
Net tangible assets acquired |  |  | 888 |  |  |  | 1,421 |  |  |  | 2,309 |
Customer and referral relationships |  |  | 6,708 |  |  |  | 8,663 |  |  |  | 15,371 |
Non-compete agreement |  |  | 261 |  |  |  | 418 |  |  |  | 679 |
Tradenames |  |  | 1,331 |  |  |  | 2,133 |  |  |  | 3,464 |
Goodwill |  |  | 16,473 |  |  |  | 29,613 |  |  |  | 46,086 |
Fair value of non-controlling interest (classified as redeemable non-controlling interest) |  |  | - |  |  |  | (19,318 | ) |  |  | (19,318 | )
|  | $ | 25,661 |  |  | $ | 22,930 |  |  | $ | 48,591 |
Total current assets primarily represent accounts receivable while total non-current assets consist of fixed assets and equipment used in the practice. For the acquisitions in the first nine months of 2024, the values assigned to the customer and referral relationships and non-compete agreement are being amortized on a straight-line basis over their respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 12.0 years. For the non-compete agreements, the weighted-average amortization period is 5.0 years. The values assigned to tradenames are tested annually for impairment. 2023 Acquisitions
|  |  |  | % Interest |  | Number of |
Acquisition |  | Date |  | Acquired |  | Clinics |
October 2023 Acquisition |  | October 31, 2023 |  |  | *** |  |  | * |
September 2023 Acquisition 1 |  | September 29, 2023 |  |  | 70% |  |  | 4 |
September 2023 Acquisition 2 |  | September 29, 2023 |  |  | 70% |  |  | 1 |
July 2023 Acquisition |  | July 31, 2023 |  |  | 70% |  |  | 7 |
May 2023 Acquisition |  | May 31, 2023 |  |  | 45% |  |  | 4 |
February 2023 Acquisition |  | February 28, 2023 |  |  | 80% |  |  | 1 |
* | IIP business.
*** | On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in an ergonomics software business.
On October 31, 2023, the Company concurrently acquired 100% of an IIP business and a 55% equity interest in an ergonomics software business. The previous owner of the ergonomics software business retained a 45% equity interest. The total purchase price of the combined businesses was approximately $4.0 million and was paid in cash. On September 29, 2023, the Company acquired a 70% equity interest in a four-clinic physical therapy practice. The original owner of the practice retained 30% of the equity interests. The purchase price for the 70% equity interest was approximately $6.0 million, of which $5.4 million was paid in cash, and $0.6 million was in the form of a note payable. The note accrues interest at 5.0% per annum and the principal and interest are payable in two installments. The first payment of principal and interest of $0.3 million was paid in January 2024 and the second installment of $0.3 million is due on September 30, 2025. In a separate transaction, on September 29, 2023, the Company acquired a 70% equity interest in a single clinic physical therapy practice. The owner of the practice retained 30% of the equity interests. The purchase price for the 70% equity interest was approximately $7.8 million, of which $7.4 million was paid in cash and $0.4 million is a deferred payment due on June 30, 2025. On July 31, 2023, the Company acquired a 70% equity interest in a five-clinic practice. The practice’s owners retained a 30% equity interest. The purchase price for the 70% equity interest was approximately $2.1 million, of which $1.8 million was paid in cash and $0.3 million is a deferred payment due on June 30, 2025. On May 31, 2023, the Company and a local partner together acquired a 75% interest in a four-clinic physical therapy practice. After the transaction, the Company’s ownership interest is 45%, the Company’s local partner’s ownership interest is 30%, and the practice’s pre-acquisition owners have a 25% ownership interest. The purchase price for the 75% equity interest was approximately $3.1 million, of which $1.7 million was paid in cash by the Company, $1.1 million was paid in cash by the local partner, and $0.3 million was in the form of a note payable. The note was paid in full on July 1, 2024 ($0.2 million was paid by the Company and $0.1 million was paid by the local partner). On February 28, 2023, the Company acquired an 80% interest in a one-clinic physical therapy practice. The practice’s owners retained 20% of the equity interests. The purchase price for the 80% equity interest was approximately $6.2 million, of which $5.8 million was paid in cash and $0.4 million in the form of a note payable. The note accrues interest at 4.5% per annum and the principal and interest are payable on February 28, 2025. The aggregate purchase price for the 2023 acquisitions has been preliminarily allocated as follows:
|  | Physical Therapy |
|  | IIP |  |  | Operations |  |  | Total |
|  | (In thousands) |
Cash paid, net of cash acquired |  | $ | 3,955 |  |  | $ | 22,627 |  |  | $ | 26,582 |
Seller note |  |  | - |  |  |  | 985 |  |  |  | 985 |
Deferred payments |  |  | - |  |  |  | 830 |  |  |  | 830 |
Contingent payments |  |  | - |  |  |  | 200 |  |  |  | 200 |
Total consideration |  | $ | 3,955 |  |  | $ | 24,642 |  |  | $ | 28,597 |
Estimated fair value of net tangible assets acquired: |  |  |  |  |  |  |  |  |  |  |  |
Total current assets |  | $ | 388 |  |  | $ | 1,052 |  |  | $ | 1,440 |
Total non-current assets |  |  | 335 |  |  |  | 2,806 |  |  |  | 3,141 |
Total liabilities |  |  | (41 | ) |  |  | (3,295 | ) |  |  | (3,336 | )
Net tangible assets acquired |  |  | 682 |  |  |  | 563 |  |  |  | 1,245 |
Customer and referral relationships |  |  | 757 |  |  |  | 8,242 |  |  |  | 8,999 |
Non-compete agreement |  |  | 37 |  |  |  | 526 |  |  |  | 563 |
Tradenames |  |  | 187 |  |  |  | 1,583 |  |  |  | 1,770 |
Goodwill |  |  | 2,566 |  |  |  | 24,562 |  |  |  | 27,128 |
Fair value of non-controlling interest (classified as redeemable non-controlling interest) |  |  | (274 | ) |  |  | (10,834 | ) |  |  | (11,108 | )
|  | $ | 3,955 |  |  | $ | 24,642 |  |  | $ | 28,597 |
Besides the multi-clinic acquisitions referenced in the table above, the Company purchased the assets and business of eight physical therapy clinics in separate transactions. Total current assets primarily represent accounts receivable while total non-current assets consist of fixed assets and equipment used in the practice. For the acquisitions in 2023, the values assigned to the customer and referral relationships and non-compete agreements are being amortized on a straight-line basis over their respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 12.0 years. For the non-compete agreements, the weighted-average amortization period is 5.1 years. The values assigned to tradenames are tested annually for impairment.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration