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Acquisitions of Businesses
 9 Months Ended
Sep. 30, 2025
Acquisitions of Businesses [Abstract]  
Acquisitions of Businesses
3. Acquisitions of Businesses

The Company’s strategy is to continue acquiring multi-clinic outpatient physical therapy practices and home-care physical and speech therapy practices, to develop outpatient physical therapy clinics as satellites in existing partnerships, and to continue acquiring companies that provide industrial injury prevention services. The consideration paid for each acquisition is derived through arm’s length negotiations and funded through working capital or borrowings under the Company’s revolving facility.

The results of operations of the acquisitions below have been included in the Company’s unaudited consolidated financial statements from their respective date of acquisition. Unaudited proforma consolidated financial information for the acquisitions has not been included, as the results, individually and in the aggregate, were not material to current operations.

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

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

The purchase price plus the fair value of the non-controlling interest for the acquisitions after September 30, 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 September 30, 2025, based on additional information obtained and completion of the valuation of the identifiable intangible assets. Changes in the estimated valuation of the tangible assets acquired, the completion of the valuation of identifiable intangible assets and the completion by the Company of the identification of any unrecorded pre-acquisition contingencies, where the liability is probable and the amount can be reasonably estimated, will likely result in adjustments to goodwill. The Company does not expect the adjustments to be material. The Company continues to evaluate the components for the purchase price allocations for acquisitions after September 30, 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 $2.6 million as of September 30, 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 September 30, 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 $0.3 million as of September 30, 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 acquisitions described above.

   
Physical Therapy
  
   
Operations
  
   
(In thousands)
  
Cash paid, net of cash acquired
  
$
15,214
  
Seller note
    
300
  
Deferred payments
    -  
Contingent payments
    
5,731
  
Total consideration
  
$
21,245
  
         
Estimated fair value of net tangible assets acquired:
        
Total current assets
  
$
918
  
Total non-current assets
    
240
  
Total liabilities
    
(495
)
Net tangible assets acquired
    
663
Customer and referral relationships
    
5,981
  
Non-compete agreement
    
310
  
Tradenames
    
1,442
  
Goodwill
    
20,903
  
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
    
(8,054
)
   
$
21,245
  

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

For the acquisitions completed in the nine months ended September 30, 2025, the values assigned to the customer and referral relationships and non-compete agreement are being amortized on a straight-line basis over their respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 12.0 years. 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
            
% Interest
  
Number of
  
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 the Company’s primary IIP businesses, Briotix Health Limited Partnership, acquired 100% of an IIP business.

On November 30, 2024, the Company acquired a 75% equity interest in an eight-clinic physical therapy practice. 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 $2.5 million on September 30, 2025.

On August 31, 2024, the Company acquired a 70% equity interest in an eight-clinic practice physical therapy and the original practice owners retained a 30% equity interest (“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 September 30, 2025.

On April 30, 2024 the Company acquired 100% of an IIP business (“April 2024 Acquisition”), through one of its primary IIP businesses, Briotix Health Limited Partnership, for a purchase price of approximately $24.0 million, of which $0.5 million was in the form of a note payable. The principal and the interest has been paid as of September 30, 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. As of September 30, 2025, no further amounts are payable related to the April 2024 Acquisition.

On March 29, 2024, the Company acquired a 50% equity interest in a nine-clinic physical therapy and hand therapy practice (“March 2024 Acquisition”). The original owners of the practice retained the remaining 50%. The purchase price for the 50% equity interest was approximately $16.4 million, of which $0.5 million was in the form of a note payable. The note accrues interest at 4.5% per annum and the principal and the interest are payable on March 29, 2026. As part of the transaction, the Company agreed to additional contingent consideration if future operational and financial objectives are met. There is no maximum payout. The contingent consideration was valued at $2.5 million on September 30, 2025.

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 March 2024 Acquisition, the April 2024 Acquisition, the August 2024 Acquisition and preliminary purchase price allocations for the other acquisitions described above.

   
Physical Therapy
  
   
IIP
    
Operations
    
Total
  
   
(In thousands)
  
Cash paid, net of cash acquired
  
$
23,106
    
$
109,983
    
$
133,089
  
Seller note
    
455
     
1,220
     
1,675
 
Deferred payments
     -
       1,500
      
1,500
  
Contingent payments
    
2,100
     
15,571
     
17,671
 
Total consideration
  
$
25,661
    
$
128,274
    
$
153,935
  
 
                        
Estimated fair value of net tangible assets acquired:
                        
Total current assets
  
$
1,132
    
$
9,447
    
$
10,579
  
Total non-current assets
    
563
     
30,360
     
30,923
 
Total liabilities
    
(463
)
    
(29,402
)
    
(29,865
)
Net tangible assets acquired
    
1,232
     
10,405
     
11,637
 
Customer and referral relationships
    
6,500
     
52,630
     
59,130
 
Non-compete agreement
    
210
     
3,590
     
3,800
 
Tradenames
    
1,400
     
12,477
     
13,877
 
Goodwill
    
16,319
     
149,315
     
165,634
 
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
    
-
     
(100,143
)
    
(100,143
)
 
$
25,661
    
$
128,274
    
$
153,935
  

Total current assets primarily represent accounts receivable while total non-current assets consist of fixed assets and equipment used in the practice.

For the acquisitions in 2024, the values assigned to the customer and referral relationships and non-compete agreements are being amortized on a straight-line basis over their respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 12.7 years. For the non-compete agreements, the weighted-average amortization period is 5.9 years. The values assigned to tradenames are tested annually for impairment.

Variable Interest Entities

Certain states prohibit the “corporate practice of medicine,” which restricts the Company from owning physical therapy practices which directly employ therapists and from exercising control over medical decisions by therapists. In these states, the Company enters into long-term management agreements with medical practices that are owned by licensed therapists, which, in turn, employ or contract with therapists who provide professional services.

Based on the provisions of the management agreements, the Company determined that these entities are variable interest entities. The Company’s ownership percentages in these entities is 50% as of September 30, 2025. The Company consolidates the VIEs since it controls the management and operating activities that are most significant to the VIEs’ economic performance and its ownership interests expose the Company to the risks and benefits that could potentially be significant to each VIE.

The assets of the VIEs recognized in consolidation may only be used to settle obligations of each respective VIE and may not be used to satisfy claims of the Company, and the creditors of each VIE do not have recourse to the Company’s general credit. As of September 30, 2025, and December 31, 2024, the total assets of the Company’s variable interest entities were $245.3 million and $231.3 million, respectively. As of September 30, 2025, and December 31, 2024, the total liabilities of the Company’s VIEs were $38.5 million and $31.9 million respectively.

The table below presents the operating results of the VIEs.

   
Three Months Ended
     Nine Months Ended
  
   
September 30, 2025
     September 30, 2025
  
   
(In thousands)
  
Net revenue
  
$
22,848
     $ 65,771  
Operating cost:
                
Salaries and related costs
    
13,436
       39,516  
Rent, supplies, contract labor and other
    
5,277
       13,855  
Depreciation and amortization
     1,116       4,030  
Provision for credit losses
    
228
       655  
Total operating cost
    
20,057
       58,056  
                 
Gross profit
    
2,791
       7,715  
                 
Gain on fair value adjustments     (764 )     (764 )
Other expense
    
3
       9  
Provision for income taxes
     11       193  
                 
Net income
  
$
3,541
     $ 8,277