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Acquisitions of Businesses
 12 Months Ended
Dec. 31, 2025
Acquisitions of Businesses [Abstract]  
Acquisitions of Businesses
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:

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.


  
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.

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  

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.

    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.
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.