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Redeemable Non-Controlling Interest | 12 Months Ended
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Dec. 31, 2025
Redeemable Non-Controlling Interest [Abstract] |
Redeemable Non-Controlling Interest | 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.
| 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.
| 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.
| 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.
| 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
| 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.
|  | 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 |

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