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What changed in U S PHYSICAL THERAPY INC /NV's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of U S PHYSICAL THERAPY INC /NV's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+333 added−301 removedSource: 10-K (2026-02-27) vs 10-K (2025-03-03)

Top changes in U S PHYSICAL THERAPY INC /NV's 2025 10-K

333 paragraphs added · 301 removed · 231 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

61 edited+29 added−25 removed80 unchanged
Biggest changeAcquisitions of Businesses and Interests During the last three years, we completed the acquisitions of the following clinic practices and IIP businesses detailed below: Acquisition Date % Interest Acquired Number of 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 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 November 2022 Acquisition November 30, 2022 80% 13 October 2022 Acquisition October 31, 2022 60% 14 September 2022 Acquisition September 30, 2022 80% 2 August 2022 Acquisition August 31, 2022 70% 6 March 2022 Acquisition March 31, 2022 70% 6 * IIP business ** On April 30, 2024, one of our primary IIP businesses, Briotix Health Limited Partnership, acquired 100% of an 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”).
Biggest changeAcquisitions of Businesses and Interests During the last three years, we 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.
On October 31, 2023, we made an acquisition and purchased 100% of an additional IIP business and contributed its assets to Briotix Health. As part of the October 2023 Acquisition, we also acquired a 55% interest in an ergonomics software business. In April 2024, the Company acquired 100% of an IIP business and contributed its assets to Briotix Health.
On October 31, 2023, we made an acquisition and purchased 100% of an additional IIP business and contributed its assets to Briotix Health. As part of the October 2023 Acquisition, we also acquired a 55% interest in an ergonomics software business. In April 2024, we acquired 100% of an IIP business and contributed its assets to Briotix Health.
Under the MIPS requirements, a provider’s performance is assessed according to established performance standards each year and then is used to determine an adjustment factor that is applied to the professional’s payment for the corresponding payment year. For those therapist providers who participated in MIPS during 2020 through 2023, the resulting average payment adjustment was an increase of 1%.
Under the MIPS requirements, a provider’s performance is assessed according to established performance standards each year and then is used to determine an adjustment factor that is applied to the professional’s payment for the corresponding payment year. For those therapist providers who participated in MIPS during 2020 through 2025, the resulting average payment adjustment was an increase of 1%.
We believe that we are in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on our financial statements as of December 31, 2024.
We believe that we are in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on our financial statements as of December 31, 2025.
Therapists eligible to participate in MIPS include only those therapists who are enrolled with Medicare as private practice providers and does not include therapists in facility-based providers, such as our clinics enrolled as certified rehabilitation agencies. Less than 3% of our therapist providers currently participate in MIPS.
Therapists eligible to participate in MIPS include only those therapists who are enrolled with Medicare as private practice providers and does not include therapists in facility-based providers, such as our clinics enrolled as certified rehabilitation agencies. Less than 2% of our therapist providers currently participate in MIPS.
The purchase price of the partner’s limited partnership interest upon exercise of the Put Right or the Call Right is calculated at a predetermined multiple of earnings performance as detailed in the respective agreements. 6 Table of Contents Sources of Revenue Payor sources for physical therapy operations are primarily managed care programs, commercial health insurance, Medicare/Medicaid and workers’ compensation insurance.
The purchase price of the partner’s limited partnership interest upon exercise of the Put Right or the Call Right is calculated at a predetermined multiple of earnings performance as detailed in the respective agreements. Sources of Revenue Payor sources for physical therapy operations are primarily managed care programs, commercial health insurance, Medicare/Medicaid and workers’ compensation insurance.
We may also enter into management and/or administrative services agreements with these physician-owned and/or therapist-owned professional corporations pursuant to which we may provide them with staffing, billing, scheduling and a wide range of other services, and they pay us for those services out of the fees they collect from patients and third-party payors.
We may also enter into management and/or administrative services agreements with these physician-owned and/or therapist-owned professional corporations, and hospital-affiliated organizations, pursuant to which we may provide them with staffing, billing, scheduling and a wide range of other services, and they pay us for those services out of the fees they collect from patients and third-party payors.
In addition to HIPAA, a number of states have adopted laws and/or regulations applicable in the use and disclosure of individually identifiable health information that can be more stringent than comparable provisions under HIPAA. We believe that our operations comply with applicable standards for privacy and security of protected healthcare information.
In addition to HIPAA, a number of states have adopted laws and/or regulations applicable in the use and disclosure of individually identifiable health information that can be more stringent than comparable provisions under HIPAA. 13 Table of Contents We believe that our operations comply with applicable standards for privacy and security of protected healthcare information.
Resources include a multitude of training and development programs delivered internally and externally, online and instructor-led, and on-the-job learning formats. 15 Table of Contents We expect to continue adding personnel in the future as we focus on potential acquisition targets and organic growth opportunities.
Resources include a multitude of training and development programs delivered internally and externally, online and instructor-led, and on-the-job learning formats. We expect to continue adding personnel in the future as we focus on potential acquisition targets and organic growth opportunities.
Subsequent to the abovementioned acquisitions and the purchases and sales of the redeemable non-controlling interests of the limited partners, our ownership in Briotix Health is approximately 92%. On November 30, 2021, we acquired an approximate 70% interest in another leading provider of IIP services.
Subsequent to the abovementioned acquisitions and the purchases and sales of the redeemable non-controlling interests of the limited partners, our ownership in Briotix Health is approximately 92%. On November 30, 2021, we acquired an approximate 70% interest in another leading provider of IIP services. The founders and owners retained the remaining interest.
In addition, therapist-owned outpatient physical therapy practices for which we provide management and/or administrative services employ another 755 employees of which 382 are full-time employees. It is crucial that we continue to attract and retain top talent.
In addition, therapist-owned outpatient physical therapy practices for which we provide management and/or administrative services employ another 801 employees of which 453 are full-time employees. It is crucial that we continue to attract and retain top talent.
The Compliance Committee, compliance staff, human resources staff and management investigate violations of our compliance program and impose disciplinary action as considered appropriate. EMPLOYEES As of December 31, 2024, we employed approximately 7,028 people nationwide, of which approximately 4,034 were full-time employees.
The Compliance Committee, compliance staff, human resources staff and management investigate violations of our compliance program and impose disciplinary action as considered appropriate. EMPLOYEES As of December 31, 2025, we employed approximately 7,294 people nationwide, of which approximately 4,200 were full-time employees.
The founders and owners retained the remaining interest. 9 Table of Contents FACTORS INFLUENCING DEMAND FOR PHYSICAL THERAPY SERVICES We believe that the following factors, among others, influence the growth of outpatient physical therapy services: • Economic Benefits of Therapy Services – Purchasers and providers of healthcare services, such as insurance companies, health maintenance organizations, businesses, and industries, continuously seek cost savings for traditional healthcare services.
FACTORS INFLUENCING DEMAND FOR PHYSICAL THERAPY SERVICES We believe that the following factors, among others, influence the growth of outpatient physical therapy services: • Economic Benefits of Therapy Services – Purchasers and providers of healthcare services, such as insurance companies, health maintenance organizations, businesses, and industries, continuously seek cost savings for traditional healthcare services.
OUR OPERATING SEGMENTS Physical Therapy Operations Our physical therapy operations segment primarily operates through subsidiary clinic partnerships (“Clinic Partnerships”), in which we generally serve as the general partner or managing member of the Clinic Partnerships. Our equity interests generally range from 65% to 75% (a range of 10%-99%) in the Clinic Partnerships.
Physical Therapy Operations Our physical therapy operations segment primarily operates through subsidiary clinic partnerships (“Clinic Partnerships”), in which we generally serve as the general partner or managing member of the Clinic Partnerships. Our equity interests generally range from 65% to 75% (with an overall range of 30%-99%) in the Clinic Partnerships.
Stark Law Provisions of the Omnibus Budget Reconciliation Act of 1993 (42 U.S.C. § 1395nn) (the “Stark Law”) prohibit referrals by a physician of “designated health services” which are payable, in whole or in part, by Medicare or Medicaid, to an entity in which the physician or the physician’s immediate family member has an investment interest or other financial relationship, subject to several exceptions.
There is similar risk associated with violating the Antitrust Laws. 12 Table of Contents Stark Law Provisions of the Omnibus Budget Reconciliation Act of 1993 (42 U.S.C. § 1395nn) (the “Stark Law”) prohibit referrals by a physician of “designated health services” which are payable, in whole or in part, by Medicare or Medicaid, to an entity in which the physician or the physician’s immediate family member has an investment interest or other financial relationship, subject to several exceptions.
Our highest concentration of clinics is in the following states: Texas, Tennessee, Michigan, New York, Virginia, Oregon, Florida, Pennsylvania, Georgia, Maryland, Idaho, Missouri, Arizona, Alabama, Connecticut, South Carolina, and Wyoming. In addition to these clinics, we also managed 39 hospital and/or physician owned physical therapy practices as of December 31, 2024, through management contracts.
Our highest concentration of clinics is in the following states: Texas, Tennessee, Michigan, New York, Virginia, Oregon, Florida, Pennsylvania, Georgia, Maryland, Idaho, Missouri, Arizona, Alabama, Connecticut, South Carolina, and Wyoming. Included in these clinics, are 34 hospital and/or physician owned physical therapy practices as of December 31, 2025, that we manage through management contracts.
Further, the Stark Law has application to our management contracts with individual physicians and physician groups, as well as any other financial relationship between us and referring physicians, including medical advisor arrangements and any financial transaction resulting from a clinic acquisition. The Stark Law also prohibits billing for services rendered pursuant to a prohibited referral.
Further, the Stark Law has application to our management contracts with individual physicians and physician groups, as well as any other financial relationship between us and referring physicians, including medical advisor arrangements and clinic lease arrangements. The Stark Law also prohibits billing for services rendered pursuant to a prohibited referral. Several states have enacted laws similar to the Stark Law.
Formal audit reports are prepared and reviewed with corporate management and the Compliance Committee. Each clinic director/administrator receives a letter instructing them of any corrective measures required. Each clinic director/administrator then works with the compliance team and operations to ensure such corrective measures are achieved.
Formal audit reports are prepared and reviewed with corporate management and the Compliance Committee. Each clinic director/administrator receives a letter instructing them of any corrective measures required.
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”). Our Clinics We operated and/or managed 729 clinics in 43 states on December 31, 2024.
These Clinic Partnerships similarly are owned collectively by us 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”).
Medicare During the year ended December 31, 2024, approximately 40.6% of our visits and 36.0% of our net patient revenue was from patients with Medicare or Medicaid program coverage.
Medicare During the year ended December 31, 2025, approximately 40.1% of our visits and 35.8% of our net patient revenue was from patients with Medicare or Medicaid program coverage.
Under a management agreement, we provide a variety of support services to each clinic, including supervision of site selection, construction, clinic design and equipment selection, establishment of accounting systems and billing procedures and training of office support personnel, processing of accounts payable, non-clinical operational direction, auditing of regulatory compliance, payroll, benefits administration, accounting services, legal services, quality assurance and marketing support. 5 Table of Contents We provide services at our clinics on an outpatient basis and generally charge for treatment on a per procedure basis.
Under a management agreement, we provide a variety of support services to each clinic, including supervision of site selection, construction, clinic design and equipment selection, establishment of accounting systems and billing procedures and training of office support personnel, processing of accounts payable, non-clinical operational direction, auditing of regulatory compliance, payroll, benefits administration, accounting services, legal services, quality assurance and marketing support.
For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Net Patient Revenue Percentage Net Patient Revenue Percentage Net Patient Revenue Percentage Payor Managed Care Programs/ (In thousands, except percentages) Commercial Health Insurance $ 264,704 47.2 % $ 244,470 47.5 % $ 215,822 46.5 % Medicare/Medicaid 202,040 36.0 % 188,329 36.6 % 174,401 37.5 % Workers’ Compensation Insurance 56,524 10.1 % 48,834 9.5 % 45,010 9.7 % Other 37,285 6.7 % 32,923 6.4 % 29,357 6.3 % Total $ 560,553 100.0 % $ 514,556 100.0 % $ 464,590 100.0 % Our physical therapy business depends to a significant extent on our relationships with commercial health insurers, health maintenance organizations, preferred provider organizations and workers’ compensation insurers.
For the Year Ended December 31, 2025 December 31, 2024 December 31, 2023 Payor Net Patient Revenue Percentage Net Patient Revenue Percentage Net Patient Revenue Percentage (In thousands, except percentages) Managed Care Programs/Commercial Health Insurance $ 315,275 48.5 % $ 264,704 47.2 % $ 244,470 47.5 % Medicare/Medicaid 232,714 35.8 % 202,040 36.0 % 188,329 36.6 % Workers’ Compensation Insurance 66,024 10.2 % 56,524 10.1 % 48,834 9.5 % Other 36,416 5.5 % 37,285 6.7 % 32,923 6.4 % Total $ 650,429 100.0 % $ 560,553 100.0 % $ 514,556 100.0 % 8 Table of Contents Our physical therapy business depends to a significant extent on our relationships with commercial health insurers, health maintenance organizations, preferred provider organizations and workers’ compensation insurers.
In addition, management has appointed a team to address our Company’s compliance with HIPAA. The HIPAA team consists of a security officer and employees from our legal, information systems, finance, operations, compliance, business services and human resources departments. The team prepares assessments and makes recommendations regarding operational changes and/or new systems, if needed, to comply with HIPAA.
In addition, management has appointed a team to address our Company’s compliance with HIPAA. The HIPAA team consists of a security officer and employees from our legal, information systems, finance, operations, compliance, business services and human resources departments.
In addition, we have 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.
In addition, we have 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. Our Clinics We owned and/or managed 780 clinics in 44 states on December 31, 2025.
Services provided in this business include onsite injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations and ergonomic assessments. The majority of the IIP 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.
Services provided by the industrial injury prevention services (“IIP”) segment include onsite services for clients’ employees including injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations and ergonomic assessments. The majority of IIP is contracted with and paid for directly by employers, including a number of Fortune 500 companies.
Under the Middle-Class Tax Relief and Job Creation Act of 2012 (“MCTRA”), since October 1, 2012, patients who met or exceeded $3,700 in therapy expenditures during a calendar year have been subject to a manual medical review to determine whether applicable payment criteria are satisfied.
The 2026 adjustment for those therapist providers who participated in MIPS during 2024 is expected to remain at an average increase of approximately 1%. 9 Table of Contents Under the Middle-Class Tax Relief and Job Creation Act of 2012 (“MCTRA”), since October 1, 2012, patients who met or exceeded $3,700 in therapy expenditures during a calendar year have been subject to a manual medical review to determine whether applicable payment criteria are satisfied.
These services are performed through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers. We were re-incorporated in April 1992 under the laws of the State of Nevada and have operating subsidiaries organized in various states in the form of limited partnerships, limited liability companies and wholly-owned corporations.
IIP is performed through industrial sports medicine professionals with specialized training related to the musculoskeletal system. We were re-incorporated in April 1992 under the laws of the State of Nevada and have operating subsidiaries organized in various states in the form of limited partnerships, limited liability companies and wholly-owned corporations.
Our typical clinic occupies 1,000 to 7,000 square feet of leased space in an office building or shopping center. There are 20 clinics occupying space in the range of over 7,000 square feet to 16,500 square feet. We attempt to lease ground level space for our patients’ ease of access to clinics.
There are 21 clinics occupying space in the range of over 7,000 square feet to 16,500 square feet. We attempt to lease ground level space for our patients’ ease of access to clinics.
The Bipartisan Budget Act of 2018 extended the 2% reductions to Medicare payments through fiscal year 2027.
Payments to Medicare providers are subject to these automatic spending reductions, subject to a 2% cap. The Bipartisan Budget Act of 2018 extended the 2% reductions to Medicare payments through fiscal year 2027.
Handling Enforcement and Discipline It is our policy that any employee who fails to comply with compliance program requirements or who negligently or deliberately fails to comply with known laws or regulations specifically addressed in our compliance program should be subject to disciplinary action up to and including discharge from employment.
Each clinic director/administrator then works with the compliance team and operations to ensure such corrective measures are achieved. 16 Table of Contents Handling Enforcement and Discipline It is our policy that any employee who fails to comply with compliance program requirements or who negligently or deliberately fails to comply with known laws or regulations specifically addressed in our compliance program should be subject to disciplinary action up to and including discharge from employment.
Since we also develop satellite clinic facilities of existing clinics, most Clinic Partnerships consist of more than one clinic location. 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 we do not have an ownership interest.
Some of the Clinic Partnerships serve as management services organizations which manage and provide staffing and a variety of administrative services to hospitals, hospital systems and physical therapy provider entities in which we do not have an ownership interest.
An adverse inspection, review, audit or investigation could result in refunding the amounts we have been paid; fines penalties and/or revocation of billing privileges for the affected clinics; the imposition of a corporate integrity agreement; exclusion from participation in the Medicare or Medicaid programs or one or more managed care payor networks; or damage to our reputation.
An adverse inspection, review, audit or investigation could result in refunding the amounts we have been paid; fines penalties and/or revocation of billing privileges for the affected clinics; the imposition of a corporate integrity agreement; exclusion from participation in the Medicare or Medicaid programs or one or more managed care payor networks; or damage to our reputation. 14 Table of Contents We and our clinics are subject to federal and state laws prohibiting entities and individuals from knowingly and willfully making claims to Medicare, Medicaid and other governmental programs and third-party payors that contain false or fraudulent information.
ITEM 1. BUSINESS GENERAL U.S. Physical Therapy, Inc. and subsidiaries (collectively, “we”, “us”, “our” or the “Company”), operates its business through two reportable business segments. Our reportable segments consist of the physical therapy operations segment and the industrial injury prevention services (“IIP”) segment.
ITEM 1. BUSINESS GENERAL U.S. Physical Therapy, Inc. through its subsidiaries (“we”, “us”, “our”, or the “Company”), operates its business through two reportable business segments.
The MPFS proposed by CMS for 2025, if enacted, is expected to decrease Medicare reimbursement for therapy services by approximately 2.9% as compared to the reimbursement rates in effect for most of 2024. 7 Table of Contents In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy alongside the physical therapist, an identification of the PTA’s participation (as denoted by a “CQ modifier”) is not required.
In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy alongside the physical therapist, an identification of the PTA’s participation (as denoted by a “CQ modifier”) is not required.
We also have established systems for reporting potential violations, educating our employees, monitoring and auditing compliance and handling enforcement and discipline. 13 Table of Contents Committees Our Compliance Committee, appointed by the Board, consists of three independent directors.
We also have established systems for reporting potential violations, educating our employees, monitoring and auditing compliance and handling enforcement and discipline. Committees Our Compliance Committee, appointed by the Board, consists of three independent directors. The Compliance Committee has general oversight of our Company’s compliance with the legal and regulatory requirements regarding healthcare operations, as well as cybersecurity.
All new office managers receive training (including Medicare, regulatory and corporate compliance, insurance billing, charge entry and transaction posting and coding, daily, weekly and monthly accounting reports) from the training staff at the corporate office.
Compliance staff will remain in contact with the director/administrator while the clinic is implementing compliance standards and will provide any assistance required. All new office managers receive training (including Medicare, regulatory and corporate compliance, insurance billing, charge entry and transaction posting and coding, daily, weekly and monthly accounting reports) from the training staff at the corporate office.
In 2013, the practice expense component for the second and subsequent therapy service furnished during the same day for the same patient was reduced by 50%. 8 Table of Contents Given the history of frequent revisions to the Medicare program and its reimbursement rates and rules, we may not continue to receive reimbursement rates from Medicare that sufficiently compensate us for our services or, in some instances, cover our operating costs.
Given the history of frequent revisions to the Medicare program and its reimbursement rates and rules, we may not continue to receive reimbursement rates from Medicare that sufficiently compensate us for our services or, in some instances, cover our operating costs.
Besides the multi-clinic acquisitions referenced in the table above, during 2024 and 2023, we purchased the assets and businesses of eight and nine physical therapy clinics, respectively, in separate transactions. 4 Table of Contents Our strategy is to continue acquiring outpatient physical therapy practices, develop outpatient physical therapy clinics as satellites in existing partnerships, manage outpatient physical therapy clinics owned by third parties, and continue acquiring companies that provide or serve the Company’s industrial injury prevention services sector.
Our strategy is to continue acquiring outpatient physical therapy practices, develop outpatient physical therapy clinics as satellites in existing partnerships, manage outpatient physical therapy clinics owned by third parties, and continue acquiring companies that provide or serve the Company’s industrial injury prevention services sector.
Bad debt reserves relating to all receivable types are regularly reviewed and adjusted as appropriate. The following table shows our payor mix for the periods presented.
Bad debt reserves relating to all receivable types are regularly reviewed and adjusted as appropriate.
Penalties for violations include denial of payment for the services, significant civil monetary penalties, and exclusion from the Medicare and Medicaid programs. Corporate Practice of Medicine; Fee-Splitting We also contract with physician-owned professional corporations and physical therapists owned professional corporations to deliver our services to them on behalf of their patients.
Corporate Practice of Medicine; Fee-Splitting We also contract with physician-owned professional corporations, physical therapists owned professional corporations, and hospital and hospital-affiliated organizations to deliver our services to them on behalf of their patients.
Our clinics are partly owned by therapists who have developed exceptional reputations in their local communities and these therapist-owners oversee their respective clinic operations helping to ensure the success of the clinics.
We may face more intense competition if consolidation of the therapy industry continues. We believe that our partnership strategy provides us with a competitive advantage. Our clinics are partly owned by therapists who have developed exceptional reputations in their local communities and these therapist-owners oversee their respective clinic operations helping to ensure the success of the clinics.
Typically, each therapist partner or director, including those employed by Clinic Partnerships in which we acquired a majority interest, enters into a multi-year employment agreement for a term of up to five years with their Clinic Partnership.
For multi-site clinic practices in which a controlling interest is acquired by us, the prior owners typically continue as employees to manage the clinic operations, retaining a non-controlling ownership interest in the clinics and receiving a competitive salary for managing the clinic operations. 7 Table of Contents Typically, each therapist partner or director, including those employed by Clinic Partnerships in which we acquired a majority interest, enters into a multi-year employment agreement for a term of up to five years with their Clinic Partnership.
The Compliance Committee has general oversight of our Company’s compliance with the legal and regulatory requirements regarding healthcare operations, as well as cybersecurity. The Compliance Committee relies on the expertise and knowledge of management, the CCO and other compliance and legal personnel. The CCO regularly communicates with the Chairman of the Compliance Committee.
The Compliance Committee relies on the expertise and knowledge of management, the CCO and other compliance and legal personnel. The CCO regularly communicates with the Chairman of the Compliance Committee.
Therapists at our clinics initially perform a comprehensive evaluation of each patient, which is then followed by a treatment plan specific to the injury as prescribed by the patient’s physician.
We continually assess the potential for developing new services and expanding the methods of providing existing services in the most efficient manner while providing high quality patient care. Therapists at our clinics initially perform a comprehensive evaluation of each patient, which is then followed by a treatment plan specific to the injury as prescribed by the patient’s physician.
As with the Fraud and Abuse Law, we consider the Stark Law in planning our clinics, establishing contractual and other arrangements with physicians, marketing and other activities, and believe that our operations are in compliance with the Stark Law. If we violate the Stark Law or any similar state laws, our financial results and operations could be adversely affected.
These state laws may cover all (not just Medicare and Medicaid) patients. As with the Fraud and Abuse Law, we consider the Stark Law in planning our clinics, establishing contractual and other arrangements with physicians and hospitals, as well as marketing and other activities, and believe that our operations are in compliance with the Stark Law.
For the vast majority of the Clinic Partnerships, the managing healthcare practitioner is a physical therapist who owns the remaining limited partnership interest in the Clinic Partnership. Generally, the therapist partners have no interest in the net losses of Clinic Partnerships, except to the extent of their capital accounts.
For the vast majority of the Clinic Partnerships, the managing healthcare practitioner is a physical therapist who owns, directly or indirectly, the remaining limited partnership interest in most of the clinics.
Our Company performs these services through Industrial Sports Medicine Professionals, consisting of both physical therapists and ATCs. In 2017, we acquired a 55% interest in an initial IIP business. In 2018, we acquired a 65% interest in another business in the IIP sector and then combined the two businesses.
IIP is performed through industrial sports medicine professionals with specialized training related to the musculoskeletal system. 10 Table of Contents In 2017, we acquired a 55% interest in an initial IIP business. In 2018, we acquired a 65% interest in another business in the IIP sector and then combined the two businesses.
The Budget Control Act of 2011 increased the federal debt ceiling in connection with deficit reductions over the next ten years and requires automatic reductions in federal spending by approximately $1.2 trillion. Payments to Medicare providers are subject to these automatic spending reductions, subject to a 2% cap.
This occurs when the physical therapist or occupational therapist provides more minutes than the 15-minute midpoint. The Budget Control Act of 2011 increased the federal debt ceiling in connection with deficit reductions over the next ten years and requires automatic reductions in federal spending by approximately $1.2 trillion.
Medicare patients are charged based on prescribed time increments and Medicare billing standards. In addition, our clinics will develop, when appropriate, individual maintenance and self-management exercise programs to be continued after treatment. We continually assess the potential for developing new services and expanding the methods of providing existing services in the most efficient manner while providing high quality patient care.
We provide services at our clinics on an outpatient basis and generally charge for treatment on a per procedure basis. Medicare patients are charged based on prescribed time increments and Medicare billing standards. In addition, our clinics will develop, when appropriate, individual maintenance and self-management exercise programs to be continued after treatment.
While we believe our arrangements with physician-owned and physical therapist-owned professional corporations are not in conflict with applicable state corporate practice of medicine restrictions, a state or a court could in the future determine that our arrangements implicate the restrictions on the corporate practice of medicine. 11 Table of Contents HIPAA In an effort to further combat healthcare fraud and protect patient confidentially, Congress included several anti-fraud measures in the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).
While we believe our arrangements with physician-owned and physical therapist-owned professional corporations, and with hospital-affiliated organizations, are not in conflict with applicable state corporate practice of medicine restrictions, a state or a court could in the future determine that our arrangements implicate the restrictions on the corporate practice of medicine.
C. § 1320a-7b[b]) (the “Fraud and Abuse Law”), under which civil and criminal penalties can be imposed upon persons who, among other things, offer, solicit, pay or receive remuneration in return for (i) the referral of patients for the rendering of any item or service for which payment may be made, in whole or in part, by a Federal health care program (including Medicare and Medicaid); or (ii) purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, ordering any good, facility, service, or item for which payment may be made, in whole or in part, by a Federal health care program (including Medicare and Medicaid).
These laws include the federal Anti-Kickback Statute, Section 1128B(b) of the Social Security Act (42 U.S.C. § 1320a-7b(b)) (the “Fraud and Abuse Law”), which prohibits the knowing and willful offer, payment, solicitation or receipt of remuneration, directly or indirectly, in return for (i) the referral of individuals for the furnishing of any item or service for which payment may be made, in whole or in part, under a Federal health care program, including Medicare and Medicaid, or (ii) the purchasing, leasing, ordering, or arranging for, or recommending the purchasing, leasing, or ordering of, any good, facility, service or item for which payment may be made, in whole or in part, under a Federal health care program.
This committee reviews and monitors all employee and patient incident reports and provides clinic personnel with actions to be taken in response to the reports.
We have in place a Risk Management Committee consisting of, among others, the CCO, the Vice President of Human Resources, and other legal, compliance and operations personnel. This committee reviews and monitors all employee and patient incident reports and provides clinic personnel with actions to be taken in response to the reports.
The majority of our clinicians are enrolled as individual physical or occupational therapists in private practice while the remaining balance of providers are reimbursed through enrolled rehab agencies.
The majority of our clinicians are enrolled as individual physical or occupational therapists in private practice while the remaining balance of providers are reimbursed through enrolled rehab agencies. For calendar years 2021, 2022, 2023 and 2024, the MPFS had decreases in Medicare reimbursement of approximately 3.5%, 0.75%, 2.0% and 1.8%, respectively.
Regulations Controlling Fraud and Abuse Various federal and state laws regulate financial relationships involving providers of healthcare services. These laws include Section 1128B(b) of the Social Security Act (42 U.S.
Fraud and Abuse and Competition Regulations Various federal and state laws regulate financial relationships among providers of healthcare services.
The directors/administrators also provide periodic “refresher” training for existing employees and one-on-one comprehensive training with new hires.
The directors/administrators also provide periodic “refresher” training for existing employees and one-on-one comprehensive training with new hires. The corporate compliance group responds to questions from clinic personnel and conducts frequent teleconference meetings, webinars and training sessions on a variety of compliance related topics.
We believe that our business procedures and business arrangements are in compliance with these provisions. However, the provisions are broadly written and the full extent of their specific application to specific facts and arrangements to which we are a party is uncertain and difficult to predict.
However, the Fraud and Abuse Law and Antitrust Laws are broadly interpreted and the full extent of their specific application to specific facts and arrangements to which we are a party is uncertain and difficult to predict. 11 Table of Contents The Office of Inspector General (“OIG”) of the U.S.
Through our subsidiaries, we operate and/or manage outpatient physical therapy clinics that provide pre-and post-operative care for a variety of orthopedic-related disorders and sports-related injuries, treatment for neurological-related injuries and rehabilitation of injured workers. We also have a majority interest in businesses which are leading providers of industrial injury prevention services.
Our physical therapy operations segment consists of physical therapy, speech therapy and occupational therapy clinics and home-care physical and speech therapy practices that provide pre- and post-operative care and treatment for a variety of orthopedic-related disorders, sports-related injuries, and rehabilitation of injured workers.
During follow up training with the director/administrator of the clinic, compliance department staff explain various details regarding requirements and compliance standards. Compliance staff will remain in contact with the director/administrator while the clinic is implementing compliance standards and will provide any assistance required.
When a clinic opens, we provide a package of compliance materials containing manuals and detailed instructions for meeting Medicare Conditions of Participation Standards and other compliance requirements. During follow up training with the director/administrator of the clinic, compliance department staff explain various details regarding requirements and compliance standards.
Each clinic certified as a Medicare Rehabilitation Agency has a formally appointed governing body composed of a member of our management and the director/administrator of the clinic. The governing body retains legal responsibility for the overall conduct of the clinic. The members confer regularly and discuss, among other issues, clinic compliance with applicable laws and regulations.
The governing body retains legal responsibility for the overall conduct of the clinic. The members confer regularly and discuss, among other issues, clinic compliance with applicable laws and regulations. In addition, there are Professional Advisory Committees which serve as Infection Control Committees. These committees meet in the facilities and function as advisors.
We and our clinics are subject to federal and state laws prohibiting entities and individuals from knowingly and willfully making claims to Medicare, Medicaid and other governmental programs and third-party payors that contain false or fraudulent information. The federal False Claims Act encourages private individuals to file suits on behalf of the government against healthcare providers such as us.
The federal False Claims Act encourages private individuals to file suits on behalf of the government against healthcare providers such as us.
Failure to fall within a Safe Harbor does not mean that the Fraud and Abuse Law has been violated; however, the OIG has indicated that failure to fall within a Safe Harbor may subject an arrangement to increased scrutiny under a “facts and circumstances” test.
Failure to qualify for a safe harbor does not necessarily mean an arrangement is unlawful; however, arrangements that do not fully satisfy an applicable safe harbor may be subject to increased scrutiny by enforcement authorities under a facts and circumstances analysis. In addition, several states have enacted laws similar to the Fraud and Abuse Law, which may be more restrictive.
Removed
On May 30, 2023, we 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, we 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.
Added
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”). 5 Table of Contents B esides 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.
Removed
A portion of the net proceeds was used to repay the $35.0 million then outstanding under our credit facility while the remainder was used primarily for additional acquisitions.
Added
We repurchased 81,322 of our own shares of common stock for total consideration of $5.6 million on the open market in the three months ended December 31, 2025. We are in the process of implementing a new enterprise resource planning (“ERP”) system designed to support certain human resources and accounting functions.
Removed
The table below indicates historical information regarding our clinic counts.
Added
The implementation is intended to enhance system integration, standardize processes, and improve operational efficiency and reporting capabilities. We expect to continue the phased implementation of the ERP system over time while maintaining existing systems and controls during the transition. OUR OPERATING SEGMENTS Our reportable segments include the physical therapy operations segment and the IIP segment.
Removed
Clinic Count Roll Forward (1) For the Year Ended December 31, 2024 December 31, 2023 Number of clinics owned or managed, beginning of period 671 640 Additions (2) 103 46 Closed or sold (45 ) (15 ) Number of clinics owned or managed, end of period 729 671 (1) The Company also manages clinics owned by third parties through management contracts.
Added
Also included in the physical therapy operations segment are revenues from management contract services and other services, which include services we provide on-site, such as athletic trainers for schools.
Removed
In addition to the clinic count shown above, as of December 31, 2024, the Company managed 39 clinics bringing the total owned/managed clinics to 768. As of December 31, 2023, the Company managed 43 clinics bringing the total owned/managed clinics to 714. (2) Includes clinics added through acquisitions.
Added
We continue to grow this aspect of our business, as our Clinic Partnerships pursue strategic affiliations with hospitals and hospital systems in their respective local markets. Pursuant to these contractual arrangements, the Clinic Partnerships provide the hospital providers with a variety of administrative, staffing and management-related services, and in some cases the use of clinic premises and equipment.
Removed
For multi-site clinic practices in which a controlling interest is acquired by us, the prior owners typically continue as employees to manage the clinic operations, retaining a non-controlling ownership interest in the clinics and receiving a competitive salary for managing the clinic operations.
Added
These arrangements involve one or more fees paid by the hospital provider to the particular Clinic Partnership in return for the performance of such services under those arrangements. 6 Table of Contents The table that follows presents historical information regarding the number of clinics operated by the Company during the periods indicated.
Removed
For calendar years 2021, 2022 and 2023, Centers for Medicare and Medicaid Services (“CMS”) expected decreases in Medicare reimbursement were partially offset by one-time increases in payments as a result of other legislation passed by Congress, resulting in decreases of approximately 3.5%, 0.75% and 2.0% in each of these years, respectively.
Added
Clinic Count Roll Forward (1) 2025 2024 Owned Managed Total Owned Managed Total Number of clinics, beginning of period 722 39 761 671 43 714 Q1 additions 14 - 14 14 - 14 Q1 closed or sold (7 ) (2 ) (9 ) (6 ) (2 ) (8 ) Number of clinics, end of period 729 37 766 679 41 720 Q2 additions 6 - 6 7 - 7 Q2 closed or sold (3 ) (1 ) (4 ) (5 ) - (5 ) Number of clinics, end of period 732 36 768 681 41 722 Q3 additions 16 2 18 12 - 12 Q3 closed or sold (3 ) (4 ) (7 ) (32 ) (2 ) (34 ) Number of clinics, end of period 745 34 779 661 39 700 Q4 additions 11 - 11 63 - 63 Q4 closed or sold (10 ) - (10 ) (2 ) - (2 ) Number of clinics, end of period 746 34 780 722 39 761 Year-to-date 2025 and full-year 2024 additions 47 2 49 96 - 96 Year-to-date 2025 and full-year 2024 closed or sold (23 ) (7 ) (30 ) (45 ) (4 ) (49 ) (1) Excludes the home care business Our typical clinic occupies 1,000 to 7,000 square feet of leased space in an office building or shopping center.
Removed
For January 1 through March 8 of 2024, CMS’s final rule resulted in an approximate 3.5% decrease in Medicare payments for the therapy specialty.
Added
With respect to our management and administrative services agreements with hospitals, hospital systems, physicians and physical therapy providers, our revenue comes from the fees that are paid to us by those provider entities, as those entities are responsible for billing and collecting their respective third party payors for those patient care services.
Removed
However, effective as of March 9, 2024, pursuant to the Consolidated Appropriations Act, 2024, Congress minimized the reduction in Medicare payments for therapy services for the balance of 2024, resulting in an approximate 1.8% reduction in Medicare payments for therapy services (rather than the 3.5% decrease).
Added
The following table shows our payor mix for the periods presented.
Removed
This occurs when the physical therapist or occupational therapist provides more minutes than the 15-minute midpoint. The proposed 2025 MPFS final rule does not contain any policy changes concerning the modifiers for services provided by physical therapy and occupational therapist assistants.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

38 edited+13 added−5 removed89 unchanged
Biggest changeAs described in Note 6 to our financial statements included in Item 8, the redeemable non-controlling interests in our partnerships are held by our partners. Upon the occurrence of certain events, such as retirement or other termination of employment, partners from acquired partnerships may have the right to exercise a “put” to cause us to purchase their redeemable non-controlling interests.
Biggest changeUpon the occurrence of certain events, such as retirement or other termination of employment, partners from acquired partnerships may have the right to exercise a “put” to cause us to purchase their redeemable non-controlling interests. Depending on the amount and timing of the exercise of any “put” rights, the funds required could have an adverse impact on our capital structure.
An adverse inspection, review, audit or investigation could result in: • refunding amounts we have been paid pursuant to the Medicare or Medicaid programs or from managed care payors; • state or federal agencies imposing fines, penalties and other sanctions on us; • temporary suspension of payment for new patients to the facility or agency; • decertification or exclusion from participation in the Medicare or Medicaid programs or one or more managed care payor networks; • the imposition of a new Corporate Integrity Agreement; • damage to our reputation; • the revocation of a facility’s or agency’s license; and • loss of certain rights under, or termination of, our contracts with managed care payors.
An adverse inspection, review, audit or investigation could result in: • refunding amounts we have been paid pursuant to the Medicare or Medicaid programs or from managed care payors; • state or federal agencies imposing fines, penalties and other sanctions on us; • temporary suspension of payment for new patients to the facility or agency; • decertification or exclusion from participation in the Medicare or Medicaid programs or one or more managed care payor networks; • the imposition of a new Corporate Integrity Agreement; 23 Table of Contents • damage to our reputation; • the revocation of a facility’s or agency’s license; and • loss of certain rights under, or termination of, our contracts with managed care payors.
Furthermore, becoming subject to these governmental investigations, audits and reviews can also require us to incur significant legal and document production expenses as we cooperate with the government authorities, regardless of whether the particular investigation, audit or review leads to the identification of underlying issues. We depend upon reimbursement by third-party payors.
Furthermore, becoming subject to these governmental investigations, audits and reviews can also require us to incur significant legal and document production expenses as we cooperate with the government authorities, regardless of whether the particular investigation, audit or review leads to the identification of underlying issues. 18 Table of Contents We depend upon reimbursement by third-party payors.
If our counterparties to such transactions or sponsors fail to honor their obligations due to financial distress, we would be exposed to potential losses or the inability to recover anticipated gains from these transactions. 19 Table of Contents In conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.
If our counterparties to such transactions or sponsors fail to honor their obligations due to financial distress, we would be exposed to potential losses or the inability to recover anticipated gains from these transactions. In conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.
Intense competition may adversely affect our business, financial condition or results of operations. For a more complete description of this competitive environment, see “Business—Competition” in Item 1. An adverse effect on our business, financial condition or results of operations may require us to write down goodwill. We may incur closure costs and losses.
Intense competition may adversely affect our business, financial condition or results of operations. For a more complete description of this competitive environment, see “Business—Competition” in Item 1. An adverse effect on our business, financial condition or results of operations may require us to write down goodwill. 25 Table of Contents We may incur closure costs and losses.
This section does not describe all risks applicable to our Company, our industry or our business, and it is intended only as a summary of material factors affecting our business. RISKS RELATED TO OUR BUSINESS AND OPERATIONS Decreases in Medicare reimbursement rate may adversely affect our financial results.
This section does not describe all risks applicable to our Company, our industry or our business, and it is intended only as a summary of material factors affecting our business. 17 Table of Contents RISKS RELATED TO OUR BUSINESS AND OPERATIONS Decreases in Medicare reimbursement rate may adversely affect our financial results.
Any of the foregoing could also cause investors to lose confidence in our reported financial information and in us and would likely result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future. 23 Table of Contents Our revenues may fluctuate due to weather.
Any of the foregoing could also cause investors to lose confidence in our reported financial information and in us and would likely result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future. Our revenues may fluctuate due to weather.
Accordingly, we may be vulnerable to losses associated with the improper functioning, security breach, or unavailability of our information systems as well as any systems used in acquired operations. 22 Table of Contents We depend upon the cultivation and maintenance of relationships with the physicians in our markets.
Accordingly, we may be vulnerable to losses associated with the improper functioning, security breach, or unavailability of our information systems as well as any systems used in acquired operations. We depend upon the cultivation and maintenance of relationships with the physicians in our markets.
These matters can involve significant costs, monetary damages and penalties. We have been subject to these proceedings in the past, and future proceedings could result in an adverse impact on our business and financial results. 21 Table of Contents We face inspections, reviews, audits and investigations under federal and state government programs and contracts.
These matters can involve significant costs, monetary damages and penalties. We have been subject to these proceedings in the past, and future proceedings could result in an adverse impact on our business and financial results. We face inspections, reviews, audits and investigations under federal and state government programs and contracts.
If we are unable to hire, properly train and retain qualified employees, we could experience higher employment costs and reduced revenues, which could adversely affect our earnings. We depend upon our ability to recruit and retain experienced physical therapists.
If we are unable to hire, properly train and retain qualified employees, we could experience higher employment costs and reduced revenues, which could adversely affect our earnings. 24 Table of Contents We depend upon our ability to recruit and retain experienced physical therapists.
Our operations expose us to risks associated with public health crises and epidemics/pandemics, such as COVID-19 that has spread globally. A public health crisis may lead to disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty.
Our operations expose us to risks associated with public health crises and epidemics/pandemics, that spread globally. A public health crisis may lead to disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty.
Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare program. For the year ended December 31, 2024, and 2023, respectively, net patient revenues from Medicare were approximately $183.4 million and $170.7 million, respectively.
Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare program. For the year ended December 31, 2025, and 2024, respectively, net patient revenues from Medicare were approximately $213.5 million and $183.4 million, respectively.
HITECH, which was signed into law in 2009, enhanced the privacy, security and enforcement provisions of HIPAA by, among other things establishing security breach notification requirements, allowing enforcement of HIPAA by state attorneys general, and increasing penalties for HIPAA violations.
HITECH, which was signed into law in 2009, enhanced the privacy, security and enforcement provisions of HIPAA by, among other things establishing security breach notification requirements, allowing enforcement of HIPAA by state attorneys general, and increasing penalties for HIPAA violations. Violations of HIPAA or HITECH could result in civil or criminal penalties.
Substantially all of our revenues are derived from private and governmental third-party payors. In 2024, approximately 64.0% of our revenues were derived collectively from managed care plans, commercial health insurers, workers’ compensation payors, and other private pay revenue sources while approximately 36.0% of our revenues were derived from Medicare and Medicaid.
Substantially all of our revenues are derived from private and governmental third-party payors. In 2025, approximately 64.2% of our revenues were derived collectively from managed care plans, commercial health insurers, workers’ compensation payors, and other private pay revenue sources while approximately 35.8% of our revenues were derived from Medicare and Medicaid.
The Company believes that the Company is in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on the Company’s financial statements as of December 31, 2024.
We believe that we are in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on our financial statements as of December 31, 2025.
However, if there is a breach, we may be subject to various penalties and damages and may be required to incur costs to mitigate the impact of the breach on affected individuals. We are subject to risks associated with public health crises and epidemics/pandemics, such as the novel strain of coronavirus (“COVID-19”).
However, if there is a breach, we may be subject to various penalties and damages and may be required to incur costs to mitigate the impact of the breach on affected individuals. 19 Table of Contents We are subject to risks associated with public health crises and epidemics/pandemics.
The privacy regulations extensively regulate the use and disclosure of individually identifiable health-related information. The regulations also provide patients with significant rights related to understanding and controlling how their health information is used or disclosed.
The department released final regulations containing privacy standards in 2000 and published revisions to the final regulations in 2002. The privacy regulations extensively regulate the use and disclosure of individually identifiable health-related information. The regulations also provide patients with significant rights related to understanding and controlling how their health information is used or disclosed.
In addition, if we raise additional funds by issuing additional common stock, or securities convertible into or exchangeable or exercisable for common stock, further dilution to our existing stockholders will result, and new investors could have rights superior to existing stockholders.
In addition, if we raise additional funds by issuing additional common stock, or securities convertible into or exchangeable or exercisable for common stock, further dilution to our existing stockholders will result, and new investors could have rights superior to existing stockholders. 26 Table of Contents The number of shares of our common stock eligible for future sale could adversely affect the market price of our stock.
Similarly, in our rehabilitation business, we have management and other services agreements with hospitals, physician groups and other ancillary providers; either a breach or termination of those contractual arrangements by such clients could cause operating results to be less than expected. 24 Table of Contents RISKS RELATED TO OUR COMMON STOCK Issuance of shares in connection with financing transactions or under stock incentive plans will dilute current stockholders.
Similarly, in our rehabilitation business, we have management and other services agreements with hospitals, physician groups and other ancillary providers; either a breach or termination of those contractual arrangements by such clients could cause operating results to be less than expected.
The resulting purchase price may be greater than the fair value of such equity interests at the time, and we may or may not have the capital necessary to satisfy such contractual purchase obligation, in which case we could be in breach.
The resulting purchase price may be greater than the fair value of such equity interests at the time, and we may or may not have the capital necessary to satisfy such contractual purchase obligation, in which case we could be in breach. 20 Table of Contents Our debt and financial obligations could adversely affect our financial condition, our ability to obtain future financing, and our ability to operate our business.
We may issue additional restricted securities or register additional shares of common stock under the Securities Act of 1933, as amended (the “Securities Act”), in the future.
On December 31, 2025, we had reserved approximately 315,221 shares for future equity grants. We may issue additional restricted securities or register additional shares of common stock under the Securities Act of 1933, as amended (the “Securities Act”), in the future.
If we are unable to enforce the contractual arrangements, we may not be able to exert effective control over the variable interest entities, and our ability to conduct our business, as well as our financial condition and results of operations, may be materially and adversely affected. 20 Table of Contents Impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interests (minority interests).
If we are unable to enforce the contractual arrangements, we may not be able to exert effective control over the variable interest entities, and our ability to conduct our business, as well as our financial condition and results of operations, may be materially and adversely affected.
In addition, an economic downturn, coupled with sustained unemployment, may also impact the number of enrollees in managed care programs as well as the profitability of managed care companies, which could result in reduced reimbursement rates. 18 Table of Contents The existing federal deficit, as well as deficit spending by federal and state governments as the result of adverse developments in the economy or other reasons, can lead to continuing pressure to reduce governmental expenditures for other purposes, including government-funded programs in which we participate, such as Medicare and Medicaid.
The existing federal deficit, as well as deficit spending by federal and state governments as the result of adverse developments in the economy or other reasons, can lead to continuing pressure to reduce governmental expenditures for other purposes, including government-funded programs in which we participate, such as Medicare and Medicaid.
See “Business—Our Operating Segments – Physical Therapy Operations-Sources of Revenue” in Item 1 for more information. The ultimate content, timing or effect of any healthcare reform legislation and the impact of potential legislation on us is uncertain and difficult, if not impossible, to predict. That impact may be material to our business, financial condition or results of operations.
The ultimate content, timing or effect of any healthcare reform legislation and the impact of potential legislation on us is uncertain and difficult, if not impossible, to predict. That impact may be material to our business, financial condition or results of operations. 22 Table of Contents Our operations are subject to extensive regulation.
Given that Medicaid outlays are a significant component of state budgets, we can expect continuing cost containment pressures on Medicaid outlays for our services in the states in which we operate.
An economic downturn, including the consequences of a pandemic, could have a detrimental effect on our revenues. Historically, state budget pressures have translated into reductions in state spending. Given that Medicaid outlays are a significant component of state budgets, we can expect continuing cost containment pressures on Medicaid outlays for our services in the states in which we operate.
In recent years, many legislative proposals have been introduced or proposed in Congress and in some state legislatures that would affect major changes in the healthcare system, either nationally or at the state level. At the federal level, Congress has continued to propose or consider healthcare budgets that substantially reduce payments under the Medicare programs.
Healthcare reform legislation may affect our business. In recent years, many legislative proposals have been introduced or proposed in Congress and in some state legislatures that would affect major changes in the healthcare system, either nationally or at the state level.
Significant adjustments, recoupments or repayments of our Medicare or Medicaid revenue, and the costs associated with complying with investigative audits by regulatory and governmental authorities, could adversely affect our financial condition and results of operations. 16 Table of Contents Additionally, from time to time we become aware, either based on information provided by third parties and/or the results of internal audits, of payments from payor sources that were either wholly or partially in excess of the amount that we should have been paid for the service provided.
Additionally, from time to time we become aware, either based on information provided by third parties and/or the results of internal audits, of payments from payor sources that were either wholly or partially in excess of the amount that we should have been paid for the service provided.
Our debt and financial obligations could adversely affect our financial condition, our ability to obtain future financing, and our ability to operate our business. We have outstanding debt obligations that could adversely affect our financial condition and limit our ability to successfully implement our business strategy.
We have outstanding debt obligations that could adversely affect our financial condition and limit our ability to successfully implement our business strategy. Furthermore, from time to time, we may need additional financing to support our business and pursue our business strategy, including strategic acquisitions.
Generally, these laws restrict business arrangements that involve a physician or therapist sharing medical fees with a referral source, but in some states, these laws have been interpreted to extend to management agreements between physicians or therapists and business entities under some circumstances.
Generally, these laws restrict business arrangements that involve a physician or therapist sharing medical fees with a referral source, but in some states, these laws have been interpreted to extend to management agreements between physicians or therapists and business entities under some circumstances. 21 Table of Contents We believe that our current and planned activities do not constitute fee-splitting or the unlawful corporate practice of medicine as contemplated by these state laws.
See “Business—Sources of Revenue – Physical Therapy Services” in Item 1 for more information including changes to Medicare reimbursement. Additional reforms or other changes to these payment systems may be proposed or adopted, either by the U.S. Congress or by CMS, including bundled payments, outcomes-based payment methodologies and a shift away from traditional fee-for-service reimbursement.
Additional reforms or other changes to these payment systems may be proposed or adopted, either by the U.S. Congress or by CMS, including bundled payments, outcomes-based payment methodologies and a shift away from traditional fee-for-service reimbursement. If revised regulations are adopted, the availability, methods and rates of Medicare reimbursements for services of the type furnished at our facilities could change.
Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable patient information. HIPAA required the HHS to adopt standards to protect the privacy and security of individually identifiable health-related information. The department released final regulations containing privacy standards in 2000 and published revisions to the final regulations in 2002.
Some of these changes and proposed changes could adversely affect our business strategy, operations and financial results. Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable patient information. HIPAA required the HHS to adopt standards to protect the privacy and security of individually identifiable health-related information.
We believe that our current and planned activities do not constitute fee-splitting or the unlawful corporate practice of medicine as contemplated by these state laws. However, there can be no assurance that future interpretations of such laws will not require structural and organizational modification of our existing relationships with the practices.
However, there can be no assurance that future interpretations of such laws will not require structural and organizational modification of our existing relationships with the practices.
We cannot provide assurances that additional financing will be available to us on favorable terms when required, or at all.
Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets, and other factors. We cannot provide assurances that additional financing will be available to us on favorable terms when required, or at all.
In addition, in certain geographical areas, our clinics must be approved as providers by key health maintenance organizations and preferred provider plans. Failure to obtain or maintain these approvals would adversely affect our financial results. In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program.
Failure to obtain or maintain these approvals would adversely affect our financial results. In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program. See “Business—Sources of Revenue” in Item 1 for more information including changes to Medicare reimbursement.
Pursuant to our stock incentive plans, our Compensation Committee of the Board, consisting solely of independent directors, is authorized to grant stock awards to our employees, directors and consultants. Shareholders will incur dilution upon the exercise of any outstanding stock awards or the grant of any restricted stock.
RISKS RELATED TO OUR COMMON STOCK Issuance of shares in connection with financing transactions or under stock incentive plans will dilute current stockholders. Pursuant to our stock incentive plans, our Compensation Committee of the Board, consisting solely of independent directors, is authorized to grant stock awards to our employees, directors and consultants.
The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). For services provided in 2025, we expect our reimbursement rates under the MPFS to be approximately 2.9% less than the applicable reimbursement rates during 2024. Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation.
The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). For services provided in 2026, we expect our reimbursement rates under the MPFS to increase by approximately 1.75% as compared to the applicable reimbursement rates during 2025.
Violations of HIPAA or HITECH could result in civil or criminal penalties. 17 Table of Contents In addition to HIPAA, there are numerous federal and state laws and regulations addressing patient and consumer privacy concerns, including unauthorized access or theft of personal information. State statutes and regulations vary from state to state.
In addition to HIPAA, there are numerous federal and state laws and regulations addressing patient and consumer privacy concerns, including unauthorized access or theft of personal information. State statutes and regulations vary from state to state. Lawsuits, including class actions and action by state attorneys general, directed at companies that have experienced a privacy or security breach also can occur.
Lawsuits, including class actions and action by state attorneys general, directed at companies that have experienced a privacy or security breach also can occur. We have established policies and procedures in an effort to ensure compliance with these privacy related requirements.
We have established policies and procedures in an effort to ensure compliance with these privacy related requirements.
Removed
If revised regulations are adopted, the availability, methods and rates of Medicare reimbursements for services of the type furnished at our facilities could change. Some of these changes and proposed changes could adversely affect our business strategy, operations and financial results.
Added
Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation.
Removed
An economic downturn, including the consequences of a pandemic, such as COVID-19, could have a detrimental effect on our revenues. Historically, state budget pressures have translated into reductions in state spending.
Added
Significant adjustments, recoupments or repayments of our Medicare or Medicaid revenue, and the costs associated with complying with investigative audits by regulatory and governmental authorities, could adversely affect our financial condition and results of operations.
Removed
Furthermore, from time to time, we may need additional financing to support our business and pursue our business strategy, including strategic acquisitions. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets, and other factors.
Added
In addition, for our Subsidiary Partnerships that are affiliated with hospitals and hospital systems, if insurers or managed care companies from whom the hospitals and hospital systems receive payments were to reduce the amounts they pay to these hospitals and hospital systems for services we perform on their behalf, our profit margins will decline or the hospital affiliation arrangement may be terminated, which could have an adverse impact on revenue and the results of operations Also, in certain geographical areas, our clinics must be approved as providers by key health maintenance organizations and preferred provider plans.
Removed
Depending on the amount and timing of the exercise of any “put” rights, the funds required could have an adverse impact on our capital structure. Healthcare reform legislation may affect our business.
Added
In addition, an economic downturn, coupled with sustained unemployment, may also impact the number of enrollees in managed care programs as well as the profitability of managed care companies, which could result in reduced reimbursement rates.
Removed
The number of shares of our common stock eligible for future sale could adversely affect the market price of our stock. On December 31, 2024, we had reserved approximately 424,722 shares for future equity grants.
Added
Impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interests (minority interests). As described in Note 6 to our financial statements included in Item 8, the redeemable non-controlling interests in our partnerships are held by our partners.
Added
At the federal level, Congress has continued to propose or consider healthcare budgets that substantially reduce payments under the Medicare programs. See “Business - Our Operating Segments - Physical Therapy Operations - Sources of Revenue” in Item 1 for more information.
Added
Our use of emerging technologies, including artificial intelligence, involves inherent risks We use and may increasingly rely on artificial intelligence (“AI”) and other emerging technologies in support of our operations and business processes. These technologies may not perform as expected, may produce inaccurate or unintended results, and may be subject to cybersecurity, data privacy, compliance, ethical, and regulatory risks.
Added
In addition, laws and regulations governing the use of AI and related technologies are uncertain and evolving, which could increase compliance costs or restrict the manner in which we operate. Any of the foregoing could adversely impact our business, financial condition, results of operations, and reputation.
Added
Shareholders will incur dilution upon the exercise of any outstanding stock awards or the grant of any restricted stock.
Added
There can be no assurance that we will continue to increase our dividend or to repurchase shares of our common stock.
Added
Cash dividend payments and share repurchases are subject to limitations under applicable laws and the discretion of our Board of Directors and are determined after considering then-existing conditions, including earnings, other operating results and capital requirements and cash deployment alternatives. Our payment of dividends and share repurchases could vary from historical practices or our stated expectations.
Added
Decreases in asset values or increases in liabilities, including liabilities associated with employee benefit plans and assets and liabilities associated with taxes, can reduce net earnings and stockholders’ equity. Under certain circumstances, a deficit in stockholders’ equity could limit our ability to pay dividends and make share repurchases under Texas state law in the future.
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In addition, the timing and amount of share repurchases under Board approved share repurchase plans may differ from stated expectations and is within the discretion of management and will depend on many factors, including our ability to generate sufficient cash flows from operations in the future or to borrow money from available financing sources, our results of operations, capital requirements and applicable law.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company provides annual cybersecurity awareness training to its employees to mitigate risks by educating employees regarding best practices to avoid cybersecurity related breaches. 25 Table of Contents Engage Third-parties on Risk Management Understanding the ever-changing and complex nature of cybersecurity threats, our organization values collaboration with external experts, including cybersecurity consultants, for advisory purposes.
Biggest changeEngage Third-parties on Risk Management Understanding the ever-changing and complex nature of cybersecurity threats, our organization values collaboration with external experts, including cybersecurity consultants, for advisory purposes. These collaborations are aimed at enhancing our understanding and management of cybersecurity risks.
The Board has established oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats. Board of Directors Oversight The Compliance Committee is central to the Board’s oversight of cybersecurity risks and bears the primary responsibility for this domain.
The Board has established oversight mechanisms to ensure effective governance in managing risks associated with cybersecurity threats. 28 Table of Contents Board of Directors Oversight The Compliance Committee is central to the Board’s oversight of cybersecurity risks and bears the primary responsibility for this domain.
Furthermore, significant cybersecurity matters, and strategic risk management decisions are escalated to the Compliance Committee and the full Board of Directors, ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity issues.
Furthermore, significant cybersecurity matters, and strategic risk management decisions are escalated to the Compliance Committee and the full Board of Directors, ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity issues. 29 Table of Contents
Pence brings a wealth of expertise to his role. His background includes experience as an enterprise CISO and his knowledge and experience are instrumental in developing and executing our cybersecurity strategies. Our CISO oversees our cybersecurity efforts and governance programs, tests our compliance with standards, remediates known risks, and provides regular guidance to management and the Board on these areas.
His background includes experience as an enterprise CISO and his knowledge and experience are instrumental in developing and executing our cybersecurity strategies. Our CISO oversees our cybersecurity efforts and governance programs, tests our compliance with standards, remediates known risks, and provides regular guidance to management and the Board on these areas.
These collaborations are aimed at enhancing our understanding and management of cybersecurity risks. Through such engagements, we seek to gain insights and recommendations on improving our risk management frameworks and responses to potential cybersecurity incidents. This approach allows us to benefit from specialized expertise, helping ensure that our cybersecurity strategies and processes are informed by current industry insights.
Through such engagements, we seek to gain insights and recommendations on improving our risk management frameworks and responses to potential cybersecurity incidents. This approach allows us to benefit from specialized expertise, helping ensure that our cybersecurity strategies and processes are informed by current industry insights.
Our Chief Information Systems Officer, (“CISO”) and IT teams play an important role in assessing the cybersecurity infrastructure employed within our acquired practices to ensure that necessary security enhancements are employed in a timely manner.
Our Chief Information Systems Officer, (“CISO”) and IT teams play an important role in assessing the cybersecurity infrastructure employed within our acquired practices to ensure that necessary security enhancements are employed in a timely manner. The Company provides annual cybersecurity awareness training to its employees to mitigate risks by educating employees regarding best practices to avoid cybersecurity related breaches.
These briefings encompass a broad range of topics, including: ● Current cybersecurity landscape and emerging threats; ● Status of ongoing cybersecurity initiatives and strategies; ● Incident reports and learnings from any cybersecurity events; and ● Compliance with regulatory requirements and industry standards. 26 Table of Contents In addition to our scheduled meetings, the Compliance Committee and management maintain an ongoing dialogue regarding emerging or potential cybersecurity risks.
These briefings encompass a broad range of topics, including: ● Current cybersecurity landscape and emerging threats; ● Status of ongoing cybersecurity initiatives and strategies; ● Incident reports and learnings from any cybersecurity events; and ● Compliance with regulatory requirements and industry standards.
The Compliance Committee actively participates in strategic decisions related to cybersecurity. This involvement ensures that cybersecurity considerations are integrated into the Company’s broader strategic objectives. Risk Management Personnel Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the CISO, Mr. Chadd Pence. With over 25 years of experience in the field of IT and cybersecurity, Mr.
Risk Management Personnel Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the CISO, Mr. Chadd Pence. With over 25 years of experience in the field of IT and cybersecurity, Mr. Pence brings a wealth of expertise to his role.
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In addition to our scheduled meetings, the Compliance Committee and management maintain an ongoing dialogue regarding emerging or potential cybersecurity risks. The Compliance Committee actively participates in strategic decisions related to cybersecurity. This involvement ensures that cybersecurity considerations are integrated into the Company’s broader strategic objectives.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES We lease the properties used for our clinics under non-cancellable operating leases, commonly with terms ranging from five to ten years (a range of one year to 15.0 years), with the exception of the property for one clinic which we own.
Biggest changeITEM 2. PROPERTIES We lease the properties used for our clinics under non-cancellable operating leases, commonly with terms ranging from five to ten years (with an overall range of one year to 15.0 years), with the exception of the property for one clinic which we own.
We intend to lease the premises for any new clinic location except in rare instances where leasing is not a cost-effective alternative. Our typical clinic occupies 1,000 to 7,000 square feet of leased space in an office building or shopping center. There are 20 clinics occupying space in the range of over 7,000 square feet to 16,500 square feet.
We intend to lease the premises for any new clinic location except in rare instances where leasing is not a cost-effective alternative. Our typical clinic occupies 1,000 to 7,000 square feet of leased space in an office building or shopping center. There are 21 clinics occupying space in the range of over 7,000 square feet to 16,500 square feet.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeQui tam lawsuits typically remain under seal for some time while the government decides whether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation. These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits.
Biggest changeHealthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act. Qui tam lawsuits typically remain under seal for some time while the government decides whether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation.
The Department of Justice, CMS, or other federal and state enforcement and regulatory agencies may conduct additional investigations related to our businesses in the future that may, either individually or in the aggregate, have a material adverse effect on our business, financial position, results of operations, and liquidity. 27 Table of Contents Healthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act.
The Department of Justice, CMS, or other federal and state enforcement and regulatory agencies may conduct additional investigations related to our businesses in the future that may, either individually or in the aggregate, have a material adverse effect on our business, financial position, results of operations, and liquidity.
We have been a defendant in these cases in the past and may be named as a defendant in similar cases from time to time in the future. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. PART II
These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. We have been a defendant in these cases in the past and may be named as a defendant in similar cases from time to time in the future.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDIVIDENDS Our Board of Directors declared the following dividends during the year ended December 31, 2024: Declaration Date Record Date Payment Date Dividend Per Share Aggregate Amount (In thousands) 2/27/2024 3/12/2024 4/5/2024 $ 0.44 $ 6,630 5/7/2024 5/23/2024 6/14/2024 $ 0.44 6,634 8/12/2024 8/23/2024 9/13/2024 $ 0.44 6,634 11/4/2024 11/15/2024 12/6/2024 $ 0.44 6,642 There is no assurance that future dividends will be declared.
Biggest changeDIVIDENDS Our Board of Directors declared the following dividends during the year ended December 31, 2025: Declaration Date Record Date Payment Date Dividend Per Share Aggregate Amount (In thousands) 2/25/2025 3/14/2025 4/11/2025 $ 0.45 $ 6,836 5/6/2025 5/23/2025 6/13/2025 $ 0.45 $ 6,842 8/5/2025 8/22/2025 9/12/2025 $ 0.45 $ 6,842 11/4/2025 11/17/2025 12/12/2025 $ 0.45 $ 6,842 There is no assurance that future dividends will be declared.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”). We are currently restricted from paying dividends on our common stock in excess of $50,000,000 in any fiscal year on our common stock under the Credit Agreement.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”). We are currently restricted from paying dividends on our common stock in excess of $50.0 million in any fiscal year under the Credit Agreement.
FIVE YEAR PERFORMANCE GRAPH The following performance graph compares the cumulative total stockholder return of our common stock to The NYSE Composite Index and the NYSE Health Care Index for the period from December 31, 2019 through December 31, 2024.
FIVE YEAR PERFORMANCE GRAPH The following performance graph compares the cumulative total stockholder return of our common stock to The NYSE Composite Index and the NYSE Health Care Index for the period from December 31, 2020 through December 31, 2025.
The graph assumes that $100 was invested in our common stock and the common stock of each of the companies listed on The NYSE Composite Index and The NYSE Health Care Index on December 31, 2019 and that any dividends were reinvested. 28 Table of Contents Comparison of Five Years Cumulative Total Return for the Year Ended December 31, 2024 12/19 12/20 12/21 12/22 12/23 12/24 U.
The graph assumes that $100 was invested in our common stock and the common stock of each of the companies listed on The NYSE Composite Index and the NYSE Health Care Index on December 31, 2020 and that any dividends were reinvested. 31 Table of Contents Comparison of Five Years Cumulative Total Return for the Year Ended December 31, 2025 12/20 12/21 12/22 12/23 12/24 12/25 U.
S. Physical Therapy, Inc. 100 105 84 71 81 78 NYSE Healthcare Index 100 111 135 130 134 135 The foregoing performance graph and related description shall not be deemed incorporated by reference into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference.
S. Physical Therapy, Inc. 100 79 67 77 74 65 NYSE Healthcare Index 100 121 117 121 121 134 The foregoing performance graph and related description shall not be deemed incorporated by reference into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock has traded on the New York Stock Exchange (“NYSE”) since August 14, 2012, under the symbol “USPH”. As of March 3, 2025, there were 85 holders of record of our outstanding common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock has traded on the New York Stock Exchange (“NYSE”) since August 14, 2012, under the symbol “USPH”. Effective May 28, 2025, our common stock now also trades on the New York Stock Exchange Texas (“NYSE TX”) under the symbol “USPH”.
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As of February 27, 2026, there were 90 holders of record of our outstanding common stock.
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PURCHASES OF EQUITY SECURITIES The following table provides information about our repurchases of our common stock, that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, during the three months ended December 31, 2025.
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There were no additional repurchases in the year ended December 31, 2025, and no repurchases were made in the years ended December 31 2024, and December 31, 2023.
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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 $ - As of December 31, 2025, the Company had $19.4 million remaining available under its authorized share repurchase program. 32 Table of Contents ITEM 6.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeClinics are outpatient physical therapy clinics that are either owned or managed by the Company or one of its subsidiaries. 2024 Year period covering the twelve months ended December 31, 2024. 2023 Year period covering the twelve months ended December 31, 2023. 32 Table of Contents Full Year 2024 versus Full Year 2023 For the Year Ended Variance December 31, 2024 December 31, 2023 $ % (In thousands, except percentages) Net patient revenue $ 560,553 83.5 % $ 514,556 85.1 % $ 45,997 8.9 % Other revenue 110,792 16.5 % 90,246 14.9 % 20,546 22.8 % Net revenue 671,345 100.0 % 604,802 100.0 % 66,543 11.0 % Operating Cost: Salaries and related costs 399,394 59.5 % 353,390 58.4 % 46,004 13.0 % Rent, supplies, contract labor and other 118,910 17.7 % 108,596 18.0 % 10,314 9.5 % Depreciation and amortization 17,853 2.7 % 14,960 2.5 % 2,893 19.3 % Provision for credit losses 6,912 1.0 % 6,172 1.0 % 740 12.0 % Clinic closure costs - lease and other 4,355 0.6 % 175 0.0 % 4,180 * Total operating cost 547,424 81.5 % 483,293 79.9 % 64,131 13.3 % Gross Profit 123,921 18.5 % 121,509 20.1 % 2,412 2.0 % Corporate office costs 58,290 8.7 % 51,953 8.6 % 6,337 12.2 % Impairment of goodwill and other intangible assets - 0.0 % 17,495 2.9 % (17,495 ) * Impairment of assets held for sale 2,418 0.4 % - * 2,418 * Operating Income 63,213 9.4 % 52,061 8.6 % 11,152 21.4 % Other (expense) income: Interest expense, debt and other (8,015 ) -1.2 % (9,303 ) -1.5 % 1,288 -13.8 % Interest income from investments 3,941 0.6 % 3,774 0.6 % 167 4.4 % Change in fair value of contingent earn-out consideration (219 ) 0.0 % (1,550 ) -0.3 % 1,331 -86 % Change in revaluation of put-right liability (82 ) 0.0 % 2,582 0.4 % (2,664 ) -103.2 % Equity in earnings of unconsolidated affiliate 1,014 0.2 % 955 0.2 % 59 6.2 % Relief Funds - 0.0 % 467 0.1 % (467 ) * Other 357 0.1 % 390 0.1 % (33 ) -8.5 % Total other expense (3,004 ) -0.4 % (2,685 ) -0.4 % (319 ) 11.9 % Income before taxes 60,209 9.0 % 49,376 8.2 % 10,833 21.9 % Provision for income taxes 14,609 2.2 % 12,156 2.0 % 2,453 20.2 % Net income 45,600 6.8 % 37,220 6.2 % 8,380 22.5 % Less: Net income attributable to non-controlling interest: Redeemable non-controlling interest - temporary equity (10,044 ) -1.5 % (4,426 ) -0.7 % (5,618 ) 126.9 % Non-controlling interest - permanent equity (4,132 ) -0.6 % (4,555 ) -0.8 % 423 -9.3 % (14,176 ) -2.1 % (8,981 ) -1.5 % (5,195 ) 57.8 % Net income attributable to USPH shareholders $ 31,424 4.7 % $ 28,239 4.7 % $ 3,185 11.3 % * Not meaningful Total net revenue 2024 Year increased $66.5 million, or 11.0%, to $671.3 million from $604.8 million for the 2023 Year while operating costs increased $64.1 million, or 13.3%, to $547.4 million from $483.3 million over the same periods, respectively.
Biggest changeClinics are outpatient physical therapy clinics that are either owned or managed by the Company or one of its subsidiaries. 2025 Year period covering the twelve months ended December 31, 2025. 2024 Year period covering the twelve months ended December 31, 2024. 36 Table of Contents Full Year 2025 versus Full Year 2024 For the Year Ended Variance December 31, 2025 December 31, 2024 $ % (In thousands, except percentages) Net patient revenue $ 650,429 83.3 % $ 560,553 83.5 % $ 89,876 16.0 % Other revenue 130,561 16.7 % 110,792 16.5 % 19,769 17.8 % Net revenue 780,990 100.0 % 671,345 100.0 % 109,645 16.3 % Operating Cost: Salaries and related costs 461,890 59.1 % 399,394 59.5 % 62,496 15.6 % Rent, supplies, contract labor and other 140,431 18.0 % 118,910 17.7 % 21,521 18.1 % Depreciation and amortization 21,059 2.7 % 17,853 2.7 % 3,206 18.0 % Provision for credit losses 7,647 1.0 % 6,912 1.0 % 735 10.6 % Clinic closure costs - lease and other 270 0.0 % 4,355 0.6 % (4,085 ) * Total operating cost 631,297 80.8 % 547,424 81.5 % 83,873 15.3 % Gross Profit 149,693 19.2 % 123,921 18.5 % 25,772 20.8 % Corporate office costs 69,260 8.9 % 58,290 8.7 % 10,970 18.8 % (Gain) loss on change in fair value of contingent earn-out consideration (6,244 ) -0.8 % 219 * (6,463 ) * Impairment of assets held for sale - 0.0 % 2,418 * (2,418 ) * Operating Income 86,677 11.1 % 62,994 9.4 % 23,683 37.6 % Other (expense) income: Interest expense, debt and other (9,459 ) -1.2 % (8,015 ) -1.2 % (1,444 ) 18.0 % Interest income from investments 105 0.0 % 3,941 0.6 % (3,836 ) -97.3 % Change in revaluation of put-right liability (1,322 ) -0.2 % (82 ) 0.0 % (1,240 ) 1512.2 % Equity in earnings of unconsolidated affiliate 1,477 0.2 % 1,014 0.2 % 463 45.7 % Loss on sale of partnership (123 ) 0.0 % - 0.0 % (123 ) * Other 458 0.1 % 357 0.1 % 101 28.3 % Total other expense (8,864 ) -1.1 % (2,785 ) -0.4 % (6,079 ) 218.3 % Income before taxes 77,813 10.0 % 60,209 9.0 % 17,604 29.2 % Provision for income taxes 19,808 2.5 % 14,609 2.2 % 5,199 35.6 % Net income 58,005 7.4 % 45,600 6.8 % 12,405 27.2 % Less: Net income attributable to non-controlling interest: Redeemable non-controlling interest - temporary equity (13,849 ) -1.8 % (10,044 ) -1.5 % (3,805 ) 37.9 % Non-controlling interest - permanent equity (4,573 ) -0.6 % (4,132 ) -0.6 % (441 ) 10.7 % (18,422 ) -2.4 % (14,176 ) -2.1 % (4,246 ) 30.0 % Net income attributable to USPH shareholders $ 39,583 5.1 % $ 31,424 4.7 % $ 8,159 26.0 % * Not meaningful Total net revenue for the 2025 Year increased $109.6 million, or 16.3%, to $781.0 million from $671.3 million for the 2024 Year while operating costs increased $83.9 million, or 15.3%, to $631.3 million from $547.4 million over the same periods, respectively.
These uses were partially offset by new borrowings of $19.0 million on our Senior Credit Facilities. Senior Credit Facilities On December 5, 2013, we entered into an Amended and Restated Credit Agreement with a commitment for a $125.0 million revolving credit facility.
These uses were partially offset by new borrowings of approximately $19.5 million on our Senior Credit Facilities. Senior Credit Facilities On December 5, 2013, we entered into an Amended and Restated Credit Agreement with a commitment for a $125.0 million revolving credit facility.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of U.S. Physical Therapy, Incl and its subsidiaries (herein referred to as “we”, “us”, “our” or the “Company”) should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of U.S. Physical Therapy, Inc. and its subsidiaries (herein referred to as “we”, “us”, “our” or the “Company”) should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included elsewhere in this Annual Report on Form 10-K.
Net patient revenue (patient revenues less estimated contractual adjustments – described below) is 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.
Net patient revenue (patient revenues less estimated contractual allowances – described below) is 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.
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.
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. 51 Table of Contents Goodwill and other indefinite-lived intangible assets are not amortized but are instead subject to periodic impairment evaluations.
Generally, any acquisition or purchase of non-controlling interests is expected to be accomplished using our cash, financing, or a combination of the two. We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts. Claims are submitted to payors daily, weekly or monthly in accordance with our policy or payor’s requirements.
Generally, any acquisition or purchase of non-controlling interests is expected to be accomplished using our cash, financing, or a combination of the two. 44 Table of Contents We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts. Claims are submitted to payors daily, weekly or monthly in accordance with our policy or payor’s requirements.
(4) Includes variable non-lease components, including but not limited to common area maintenance. 44 Table of Contents CRITICAL ACCOUNTING POLICIES Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States.
(4) Includes variable non-lease components, including but not limited to common area maintenance. CRITICAL ACCOUNTING POLICIES Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States.
Our provision for credit losses was 1.0% of total net revenue for each years ended December 31, 2024, 2023 and 2022, respectively. Management believes that this is reasonable because the majority of our payors consist of highly solvent, highly regulated, commercial insurance companies as well as government programs, including Medicare.
Our provision for credit losses was 1.0% of total net revenue for each years ended December 31, 2025 and 2024, respectively. Management believes that this is reasonable because the majority of our payors consist of highly solvent, highly regulated, commercial insurance companies as well as government programs, including Medicare.
With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs after the balance has been outstanding for 120 days or longer. As of December 31, 2024, we have accrued $6.4 million related to credit balances (including in accrued expenses), a portion of which is due to patients and payors.
With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs after the balance has been outstanding for 120 days or longer. As of December 31, 2025, we have accrued $6.5 million related to credit balances (including in accrued expenses), a portion of which is due to patients and payors.
This section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
This section of this Annual Report on Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
Average daily visits per clinic is patient visits divided by the number of days in which normal business operations were conducted during the periods presented and further divided by the average number of clinics in operation during the periods presented.
Average daily visits per clinic is patient visits (excluding home-care visits) divided by the number of days in which normal business operations were conducted during the periods presented and further divided by the average number of clinics in operation during the periods presented.
Adjusted EBITDA, Operating Results and other non-GAAP measures should not be considered in isolation or as an alternative to, or substitute for, net income attributable to our shareholders presented in the consolidated financial statements. 34 Table of Contents The tables below define and reconcile non-GAAP Adjusted EBITDA and non-GAAP Operating Results to the most directly comparable GAAP measure.
Adjusted EBITDA, Operating Results and other non-GAAP measures should not be considered in isolation or as an alternative to, or substitute for, net income attributable to our shareholders presented in the consolidated financial statements. 38 Table of Contents The tables that follow define and reconcile non-GAAP Adjusted EBITDA and non-GAAP Operating Results to the most directly comparable GAAP measure.
Net income attributable to non-controlling interest (permanent equity) was $4.1 million for the 2024 Year and $4.6 million for the 2023 Year. 39 Table of Contents Other Comprehensive Income We entered into an interest rate swap agreement in May 2022, which became effective on June 30, 2022. The maturity date of the swap agreement is June 30, 2027.
Net income attributable to non-controlling interest (permanent equity) was $4.6 million for the 2025 Year and $4.1 million for the 2024 Year. Other Comprehensive Income We entered into an interest rate swap agreement in May 2022, which became effective on June 30, 2022. The maturity date of the swap agreement is June 30, 2027.
Based on our historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow us to provide the necessary detail and accuracy with our collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from our estimates.
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, provided and related reimbursement are subject to interpretation that could result in payments that differ from the Company’s estimates.
Management uses Adjusted EBITDA, Operating Results and other non-GAAP measures, which eliminate certain items described above that can be subject to volatility and unusual costs, as the principal measures to evaluate and monitor financial performance period over period.
We use Adjusted EBITDA, Operating Results and other non-GAAP measures, which eliminate certain items described above that can be subject to volatility and unusual costs, as the principal measures to evaluate and monitor financial performance period over period.
The value of the contingent consideration at December 31, 2024 was $11.3 million. On August 31, 2024, we 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.
The value of the contingent consideration at December 31, 2025 was $7.4 million. On August 31, 2024, we 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.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission on March 3, 2025.
As part of the transaction, we 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 $3.2 million on December 31, 2024.
As part of the transaction, we 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.
The interest rate for the 2024 Year on our Senior Credit Facilities, net of savings from the interest rate swap described below, was 4.7%, with an all-in interest rate, including all associated costs, of 5.5%. Interest is payable at the end of the selected interest period but no less frequently than quarterly and on the date of maturity.
The interest rate for the 2025 Year on our Senior Credit Facilities, net of savings from the interest rate swap described below, was 5.0%, with an all-in interest rate, including all associated costs, of 5.6%. Interest is payable at the end of the selected interest period but no less frequently than quarterly and on the date of maturity.
The purchase price for 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 were paid on February 28, 2025.
The purchase price for 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 accrued interest at 4.5% per annum. The note was paid in full on February 28, 2025.
The purchase price of the underlying equity interest upon the exercise of either the put right or the call right is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets. The fair value of the redeemable non-controlling interest at December 31, 2024 was $269.0 million.
The purchase price of the underlying equity interest upon the exercise of either the put right or the call right is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets. The fair value of the redeemable non-controlling interest at December 31, 2025 was $293.3 million.
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.
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.
The fair value of the interest rate swap was $3.8 million, and $3.7 million at December 31, 2024 and December 31, 2023 respectively, which has been included within other assets (current and long term) in the Consolidated Balance Sheet.
The fair value of the interest rate swap was $0.9 million, and $3.8 million at December 31, 2025 and December 31, 2024 respectively, which has been included within other assets (current and long term) in the Consolidated Balance Sheet.
The fair value of the interest rate swap is included in other assets (current and long term) in our consolidated balance sheet while the increase in fair value is presented as unrealized loss in our consolidated statements of comprehensive income. The interest rate swap arrangement generated $3.4 million in interest savings for the 2024 Year.
The fair value of the interest rate swap is included in other assets (current and long term) in our consolidated balance sheet while the increase in fair value is presented as unrealized loss in our consolidated statements of comprehensive income. The interest rate swap arrangement generated $2.0 million in interest savings for the 2025 Year.
The credit balances are expected to be resolved or paid in the next twelve months. 40 Table of Contents The average accounts receivable days outstanding was 31 days on December 31, 2024, and 29 days on December 31, 2023. Net patient receivables in the amounts of $6.1 million and $6.3 million were written off in 2024 and 2023, respectively.
The credit balances are expected to be resolved or paid in the next twelve months. The average accounts receivable days outstanding was 31 days on December 31, 2025, and December 31, 2024. Net patient receivables in the amounts of $7.3 million and $6.1 million were written off in 2025 and 2024, respectively.
Our obligations under the Credit Agreement are guaranteed by our wholly owned material domestic subsidiaries (each, a “Guarantor”), and our obligations and any Guarantors are secured by a perfected first priority security interest in substantially all of our existing and future personal property and each Guarantor, subject to certain exceptions.
The Credit Agreement also contains customary events of default. 46 Table of Contents Our obligations under the Credit Agreement are guaranteed by our wholly owned material domestic subsidiaries (each, a “Guarantor”), and our obligations and any Guarantors are secured by a perfected first priority security interest in substantially all of our existing and future personal property and each Guarantor, subject to certain exceptions.
Management believes providing Adjusted EBITDA, Operating Results, and other non-GAAP measures to investors is useful information for comparing the Company’s period-to-period results as well as for comparing with other similar businesses since most do not have redeemable instruments and therefore have different equity structures.
We believe providing Adjusted EBITDA, Operating Results, and other non-GAAP measures to investors is useful information for comparing our period-to-period results as well as for comparing with other similar businesses since most do not have redeemable instruments and therefore have different equity structures.
The MPFS proposed by CMS for 2025 will decrease Medicare reimbursement for therapy services by approximately 2.9% as compared to the reimbursement rates in effect for most of 2024.
The MPFS for 2025 decreased Medicare reimbursement for therapy services by approximately 2.9% as compared to the reimbursement rates in effect for most of 2024.
The impact of the interest rate swap on the accompanying Consolidated Statements of Comprehensive Income was an unrealized gain of less than $0.1 million, net of tax, for the 2024 Year and an unrealized loss of $1.2 million, net of tax, for the 2023 Year. (1) These are Non-GAAP Measures.
The impact of the interest rate swap on the accompanying Consolidated Statements of Comprehensive Income was an unrealized loss of less than $2.1 million, net of tax, for the 2025 Year and an unrealized gain of less than $0.1 million, net of tax, for the 2024 Year.
Payor terms are periodically revised necessitating continual review and assessment of the estimates made by management. Our billing systems may not capture the exact change in our contractual allowance reserve estimate from period to period.
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.
Net rate per patient visit is net patient revenue related to our physical therapy operations divided by total number of patient visits (defined below) during the periods presented. Patient visits is the number of unique patient visits during the periods presented.
Net rate per patient visit is net patient revenue related to our physical therapy operations divided by total number of patient visits (defined below) during the periods presented. Patient visits is the number of unique patient visits during the periods presented for both physical clinic locations and home-care.
RESULTS OF OPERATIONS The defined terms with their respective description used in the following discussion are listed below: Mature clinics are clinics opened or acquired prior to January 1, 2023, and are still operating as of the balance sheet date.
RESULTS OF OPERATIONS The defined terms with their respective description used in the following discussion are listed below: Mature clinics are clinics (physical clinic locations and home-care business units) opened or acquired prior to January 1, 2024, and are still operating as of the balance sheet date.
On April 30, 2024, we 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.
On April 30, 2024, we 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 principal and the interest has been paid as of December 31, 2025.
(2) Amounts due related to certain acquisitions discussed above. (3) Interest on our Senior Credit Facilities was estimated using the average outstanding balance for the respective periods and our effective interest rate on our Term Facility and Revolving Facility at December 31, 2024. Interest on our other debt was estimated using the stated rate in the debt agreement.
(2) Amounts due related to certain acquisitions discussed above. (3) Interest on our Senior Credit Facility was estimated using the average outstanding balance for the respective periods and our effective interest rate on our Term Facility for the 2025 Year of 4.7%. Interest on our other debt was estimated using the stated rate in the debt agreement.
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 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.
As part of the transaction, we agreed to additional contingent consideration if future operational and financial objectives are met. There is no maximum payout. The contingent consideration was valued at $0.2 million on December 31, 2024. On September 29, 2023, we acquired a 70% equity interest in a four-clinic physical therapy practice.
As part of the transaction, we agreed to additional contingent consideration if future operational and financial objectives are met. There is no maximum payout. In November 2025, we paid $2.5 million in full settlement of the contingent consideration. On September 29, 2023, we acquired a 70% equity interest in a four-clinic physical therapy practice.
Additionally, we had $151.6 million of outstanding borrowings and $164.0 million in available credit under our credit facilities as of December 31, 2024, compared to $144.4 million of outstanding borrowings and $175.0 million in available credit under our credit facilities as of December 31, 2023.
Additionally, we had $161.8 million of outstanding borrowings and $144.5 million in available credit under our Senior Credit Facilities as of December 31, 2025, compared to $151.6 million of outstanding borrowings and $164.0 million in available credit under our Senior Credit Facilities as of December 31, 2024.
If goodwill is more likely than not impaired, we are then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount.
As part of the impairment analysis, we are first required to assess qualitatively if we can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, we are then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount.
On February 25, 2025, our Board of Directors raised our quarterly dividend rate from $0.44 per share to $0.45 per share and declared a quarterly dividend for the first quarter of 2025 at the higher rate. The dividend will be payable on April 11, 2025, to shareholders of record on March 14, 2025.
On February 24, 2026, our Board of Directors raised our 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.
We plan to continue developing new clinics and making additional acquisitions. We have, from time to time, purchased from or sold to non-controlling interests of limited partners in our existing partnerships. We may purchase or sell additional non-controlling interests in the future.
We have, from time to time, purchased from or sold to our limited partners non-controlling interests in our existing partnerships. We may purchase or sell additional non-controlling interests in the future.
Rent, supplies, contract labor and other costs, related to clinics (excluding management contracts) increased to $104.6 million in the 2024 Year from $97.2 million in the 2023 Year, an increase of $7.4 million, or 7.6% mostly due to clinic additions.
Rent, supplies, contract labor and other costs, related to clinics (excluding management contracts) increased to $123.5 million in the 2025 Year from $104.6 million in the 2024 Year, an increase of $19.0 million, or 18.1% mostly due to clinic additions.
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 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 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, we acquired a 70% equity interest in a five-clinic practice.
In a separate transaction, on September 29, 2023, we 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 a deferred payment.
When we purchase a non-controlling interest and the purchase differs from the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.
Operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner. When we purchase a non-controlling interest and the purchase differs from the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.
The remaining outstanding principal balance of all term loans is due on the maturity date. 41 Table of Contents The proceeds of the Revolving Facility have been and shall continue to be used by us for working capital and other general corporate purposes of our Company and its subsidiaries, including to fund future acquisitions and invest in growth opportunities.
The proceeds of the Revolving Facility have been and shall continue to be used by us for working capital and other general corporate purposes of our Company and its subsidiaries, including to fund future acquisitions and invest in growth opportunities.
Services provided in this business include onsite injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations and ergonomic assessments. The majority of the IIP 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.
Services provided by the industrial injury prevention services (“IIP”) segment include onsite services for clients’ employees including injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations and ergonomic assessments. The majority of IIP is contracted with and paid for directly by employers, including a number of Fortune 500 companies.
In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy alongside the physical therapist, an identification of the PTA’s participation (as denoted by a “CQ modifier”) is not required.
For 2026, the proposed MPFS is expected to increase Medicare reimbursement for therapy services by approximately 1.75% as compared to the reimbursement rates for 2025. 35 Table of Contents In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy alongside the physical therapist, an identification of the PTA’s participation (as denoted by a “CQ modifier”) is not required.
In the 2024 Year, our interest rate including the applicable margin was 4.7%. 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.
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.
As of December 31, 2024, $140.6 million was outstanding on the Term Facility while $11.0 million was outstanding under the Revolving Facility, resulting in $164.0 million of credit availability. As of December 31, 2024, we were in compliance with all of the covenants contained in the Credit Agreement.
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, we were in compliance with all of the covenants contained in the Credit Agreement.
Outpatient rehabilitation providers may enroll in Medicare as institutional outpatient rehabilitation facilities (i.e., rehab agencies) or individual physical or occupational therapists in private practice.
Medicare Reimbursement The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). Outpatient rehabilitation providers may enroll in Medicare as institutional outpatient rehabilitation facilities (i.e., rehab agencies) or individual physical or occupational therapists in private practice.
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 in one installment which is due on December 1, 2026.
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 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.
On the date we acquire a controlling interest in a Subsidiary and the limited partnership agreement or operating agreement, as applicable, for such Subsidiary contains redemption rights not under our control, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption— Redeemable non-controlling interest .
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. 52 Table of Contents On the date we acquire a controlling interest in a Subsidiary and the limited partnership agreement or operating agreement, as applicable, for such Subsidiary contains redemption rights not under our control, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption— Redeemable non-controlling interest .
We estimate contractual allowances based on our interpretation of the applicable regulations, payor contracts and historical calculations. Each month we estimate our contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and apply an appropriate contractual allowance reserve percentage to the gross accounts receivable balances for each payor of the clinic.
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.
Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Net cash provided by operating activities $ 74,940 $ 81,978 $ 58,537 Net cash used in financing activities (149,450 ) (45,015 ) (81,269 ) Net cash (used in) provided by financing activities (36,953 ) 84,268 25,759 Operating Activities Cash provided by operating activities decreased $7.0 million to $74.9 million for the year ended December 31, 2024, as compared to $82.0 million for the year ended December 31, 2023.
Year Ended December 31, 2025 December 31, 2024 December 31, 2023 Net cash provided by operating activities $ 75,058 $ 74,940 $ 81,978 Net cash used in investing activities (36,713 ) (149,450 ) (45,015 ) Net cash (used in) provided by financing activities (44,137 ) (36,953 ) 84,268 Operating Activities Cash provided by operating activities increased $0.2 million to $75.1 million for the year ended December 31, 2025, as compared to $74.9 million for the year ended December 31, 2024.
The majority of our clinicians are enrolled as individual physical or occupational therapists in private practice while the remaining balance of providers are reimbursed through enrolled rehab agencies. 31 Table of Contents For calendar years 2021, 2022 and 2023, Centers for Medicare and Medicaid Services (“CMS”) expected decreases in Medicare reimbursement were partially offset by one-time increases in payments as a result of other legislation passed by Congress, resulting in decreases of approximately 3.5%, 0.75% and 2.0% in each of these years, respectively.
For calendar years 2021, 2022 and 2023, Centers for Medicare and Medicaid Services (“CMS”) expected decreases in Medicare reimbursement were partially offset by one-time increases in payments as a result of other legislation passed by Congress, resulting in decreases of approximately 3.5%, 0.75% and 2.0% in each of these years, respectively.
The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statement of income.
The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statement of income. We believe the redemption value (i.e. the carrying amount) and fair value are the same.
For the Year Ended December 31, 2024 December 31, 2023 (In thousands, except per share data) Adjusted EBITDA (a non-GAAP measure) Net income attributable to USPH shareholders $ 31,424 $ 28,239 Adjustments: Provision for income taxes 14,609 12,156 Depreciation and amortization 18,681 15,695 Interest expense, debt and other, net 8,015 9,303 Interest income from investments (3,941 ) (3,774 ) Impairment of goodwill and other intangible assets - 17,495 Impairment of assets held for sale 2,418 - Equity-based awards compensation expense 7,823 7,236 Change in revaluation of put-right liability 82 (2,582 ) Change in fair value of contingent earn-out consideration 219 1,550 Clinic closure costs (1) 4,355 175 Business acquisition related costs (2) 819 - Relief Funds - (467 ) Other income (357 ) (390 ) Allocation to non-controlling interests (2,379 ) (6,724 ) $ 81,768 $ 77,912 Operating Results (a non-GAAP measure) Net income attributable to USPH shareholders $ 31,424 $ 28,239 Adjustments: Impairment of goodwill and other intangible assets - 17,495 Impairment of assets held for sale 2,418 - Change in fair value of contingent earn-out consideration 219 1,550 Change in revaluation of put-right liability 82 (2,582 ) Clinic closure costs (1) 4,355 175 Business acquisition related costs (2) 819 - Relief Funds - (467 ) Allocation to non-controlling interest (521 ) (5,196 ) Tax effect at statutory rate (federal and state) (1,884 ) (2,804 ) $ 36,912 $ 36,410 Operating Results per share (a non-GAAP measure) $ 2.45 $ 2.57 (1) Costs associated with the closure of 45 clinics during the 2024 Year.
For the Year Ended December 31, 2025 December 31, 2024 Adjusted EBITDA (a non-GAAP measure) Net income attributable to USPH shareholders $ 39,583 $ 31,424 Adjustments: Provision for income taxes 19,808 14,609 Depreciation and amortization 22,391 18,681 Interest expense, debt and other, net 9,459 8,015 Interest income from investments (105 ) (3,941 ) Impairment of assets held for sale - 2,418 Equity-based awards compensation expense 8,270 7,823 Change in revaluation of put-right liability 1,322 82 (Gain) loss on change in fair value of contingent earn-out consideration (6,244 ) 219 Clinic closure costs (1) 270 4,355 Business acquisition related costs (2) 1,239 819 ERP implementation costs (3) 1,490 - Loss on sale of partnership 123 - Other income (235 ) (357 ) Allocation to non-controlling interests (2,361 ) (2,379 ) $ 95,010 $ 81,768 Operating Results (a non-GAAP measure) Net income attributable to USPH shareholders $ 39,583 $ 31,424 Adjustments: (Gain) loss on change in fair value of contingent earn-out consideration (6,244 ) 219 Impairment of assets held for sale - 2,418 Change in revaluation of put-right liability 1,322 82 Clinic closure costs (1) 270 4,355 Business acquisition related costs (2) 1,239 819 ERP implementation costs (3) 1,490 - Loss on sale of partnership 123 - Income tax adjustment (4) 1,499 - Allocation to non-controlling interest 277 (521 ) Tax effect at statutory rate (federal and state) 404 (1,884 ) $ 39,963 $ 36,912 Operating Results per share (a non-GAAP measure) $ 2.63 $ 2.45 (1) Costs associated with the closure of 23 owned clinics during the year ended December 31, 2025 and 45 owned clinics during the year ended December 31, 2024.
Adjusted EBITDA, a non-GAAP measure, is defined as net income attributable to our shareholders before interest income, interest expense, taxes, depreciation, amortization, change in fair value of contingent earn-out consideration, payments received from the federal government under the Corona virus Aid, Relief and Economic Security Act (“Relief Funds”), non-cash impairment charges, changes in revaluation of put-right liability, equity-based awards compensation expense, clinic closure costs, business acquisition related costs and other income and related portions for non-controlling interests.
Adjusted EBITDA, a non-GAAP measure, is defined as net income attributable to our shareholders before interest income, interest expense, taxes, depreciation, amortization, change in fair value of contingent earn-out consideration, changes in revaluation of put-right liability, equity-based awards compensation expense, clinic closure costs, impairment on assets held for sale, business acquisition related costs, costs related to a one-time financial and human resources systems upgrade, loss on sale of a partnership and other income and related portions for non-controlling interests.
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, we and a local partner together acquired a 75% interest in a four-clinic physical therapy practice.
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 that was due on June 30, 2025.
Equity in earnings of unconsolidated affiliate We recognized income of $1.0 million for both the 2024 Year and the 2023 Year from a joint venture which provides physical therapy services for patients at hospitals. Since we are deemed to not have a controlling interest in the joint venture, our investment is accounted for using the equity method of accounting.
Equity in earnings of unconsolidated affiliate We recognized income of $1.5 million for the 2025 Year and $1.0 million for the 2024 Year from a joint venture which provides physical therapy services for patients at hospitals.
See below for the definition and reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 33 Table of Contents The table below shows the calculation of earnings per share for the periods presented.
See below for the definition and reconciliation of non-GAAP measures to the most directly comparable GAAP measure. 39 Table of Contents The tables below reconcile other non-GAAP measures to the most directly comparable GAAP measures.
Investing Activities Cash used in investing activities during the year ended December 31, 2024, totaled $149.5 million and consisted of $142.1 million used in the purchase of majority interests in businesses and non-controlling interest, temporary and permanent equity, and $9.2 million of fixed assets purchases. These were partially offset by $1.0 million in distributions from an unconsolidated affiliate.
Investing Activities Cash used in investing activities during the year ended December 31, 2025, totaled $36.7 million and consisted of $25.9 million used in the purchase of majority interests in businesses and non-controlling interest, temporary and permanent equity, and $14.1 million of fixed assets purchases.
Revenues are recognized at an amount equal to the consideration we expect to receive in exchange for providing injury prevention services to our clients. The revenue is determined and recognized based on the number of hours and respective rate for services provided in a given period.
Revenues are recognized at an amount equal to the consideration we expect to receive in exchange for providing injury prevention services to our clients.
Operating Results, a non-GAAP measure, equals net income attributable to our shareholders less, changes in revaluation of a put-right liability, Relief Funds, non-cash impairment charges, clinic closure costs, changes in fair value of contingent earn-out consideration, business acquisition related costs and any allocations to non-controlling interests, all net of taxes.
Operating Results, a non-GAAP measure, equals net income attributable to our shareholders less, changes in revaluation of a put-right liability, clinic closure costs, loss on sale of a partnership, changes in fair value of contingent earn-out consideration, business acquisition related costs, costs related to a one-time financial and human resources systems upgrade, an income tax adjustment to revalue our deferred tax assets and liabilities to the most current statutory tax rate, and any allocations to non-controlling interests, all net of taxes.
During the last three years, we completed the following acquisitions of outpatient physical therapy practices, companies that manage and/or provide administrative services to outpatient physical therapy practices, and IIP businesses detailed below: Acquisition Date % Interest Acquired Number of 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 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 November 2022 Acquisition November 30, 2022 80% 13 October 2022 Acquisition October 31, 2022 60% 14 September 2022 Acquisition September 30, 2022 80% 2 August 2022 Acquisition August 31, 2022 70% 6 March 2022 Acquisition March 31, 2022 70% 6 * IIP business ** On April 30, 2024, one of our primary IIP businesses, Briotix Health Limited Partnership, acquired 100% of an 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”). 30 Table of Contents The following table provides a roll forward of our clinic count for the periods presented.
During the last three years, we completed the following acquisitions of outpatient physical therapy practices, companies that manage and/or provide administrative services to outpatient physical therapy practices, and IIP businesses detailed below: 33 Table of Contents Acquisition Date % Interest Acquired Number of 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.
The interest rate on the Company’s term loan was 4.7% for the 2024 Year and 4.9% for the 2023 Year, with an all-in effective interest rate on the credit facility including all associated costs, of 5.5% and 5.3% over the same periods, respectively. 38 Table of Contents Interest income from investment Interest income from investment amounted to $3.9 million for the 2024 Year and $3.8 million for 2023 Year.
The interest rate on the Company’s credit facilities was 5.0% for the 2025 Year and 4.7% for the 2024 Year, with an all-in effective interest rate on the credit facilities (including all associated costs), of 5.6% and 5.5% over the same periods, respectively.
We believe the redemption value (i.e. the carrying amount) and fair value are the same. 47 Table of Contents Non-Controlling Interest We recognize non-controlling interests, in which we have no obligation but the right to purchase the non-controlling interests, as equity in the consolidated financial statements separate from the parent entity’s equity.
Non-Controlling Interest We recognize non-controlling interests, in which we have no obligation but the right to purchase the non-controlling interests, as 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 consolidated statements of net income.
For the Year Ended 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 $ 31,424 $ 28,239 Charges to retained earnings: Revaluation of redeemable non-controlling interest (4,964 ) (13,565 ) Tax effect at statutory rate (federal and state) 1,268 3,466 $ 27,728 $ 18,140 Earnings per share (basic and diluted) $ 1.84 $ 1.28 Shares used in computation: Basic and diluted earnings per share - weighted-average shares 15,064 14,188 Non-GAAP Measures The following tables provide details of the basic and diluted earnings per share computation and reconcile net income attributable to USPH shareholders calculated in accordance with GAAP to Adjusted EBITDA, Operating Results and other non-GAAP measures.
For the Year Ended December 31, 2025 December 31, 2024 (In thousands, except per share data) Computation of earnings per share - USPH shareholders: Net income attributable to USPH shareholders $ 39,583 $ 31,424 Charges to retained earnings: Revaluation of redeemable non-controlling interest (24,521 ) (4,964 ) Tax effect at statutory rate (federal and state) 6,510 1,268 $ 21,572 $ 27,728 Earnings per share (basic and diluted) $ 1.42 $ 1.84 Shares used in computation: Basic and diluted earnings per share - weighted-average shares 15,175 15,064 We reported net earnings of $39.6 million ($1.42 per share) in 2025 and $31.4 million ($1.84 per share) in 2024.
For the Year Ended December 31, 2024 December 31, 2023 (In thousands, except percentages) Income before taxes $ 60,209 $ 49,376 Less: Net income attributable to non-controlling interest: Redeemable non-controlling interest - temporary equity (10,044 ) (4,426 ) Non-controlling interest - permanent equity (4,132 ) (4,555 ) $ (14,176 ) $ (8,981 ) Income before taxes less net income attributable to non-controlling interest $ 46,033 $ 40,395 Provision for income taxes $ 14,609 $ 12,156 Effective income tax rate 31.7 % 30.1 % Net Income Attributable to Non-controlling Interest Net income attributable to redeemable non-controlling interest (temporary equity) was $10.0 million for the 2024 Year and $4.4 million for the 2023 Year.
The following table shows the calculation of our effective tax rate for the periods presented. 43 Table of Contents For the Year Ended December 31, 2025 December 31, 2024 (In thousands, except percentages) Income before taxes $ 77,813 $ 60,209 Less: Net income attributable to non-controlling interest: Redeemable non-controlling interest - temporary equity (13,849 ) (10,044 ) Non-controlling interest - permanent equity (4,573 ) (4,132 ) $ (18,422 ) $ (14,176 ) Income before taxes less net income attributable to non-controlling interest $ 59,391 $ 46,033 Provision for income taxes $ 19,808 $ 14,609 Effective income tax rate 33.4 % 31.7 % Net Income Attributable to Non-controlling Interest Net income attributable to redeemable non-controlling interest (temporary equity) was $13.8 million for the 2025 Year and $10.0 million for the 2024 Year.
Additionally, we review 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.
Additionally, we review 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. During the year-ended December 31, 2024, we recorded a non-cash impairment charge of $2.4 million related to assets held for sale. There was no non-cash impairment charge in 2025.
Actual results may differ from these estimates under different assumptions or conditions. We believe that the following critical accounting policies involve a higher degree of judgment and complexity. See Note 2, Significant Accounting Policies, to our audited consolidated financial statements which are included elsewhere in this Annual Report on Form 10-K for a complete discussion of our significant accounting policies.
See Item 8, Note 2, Significant Accounting Policies, to our audited consolidated financial statements which are included elsewhere in this Annual Report on Form 10-K for a complete discussion of our significant accounting policies. The following reflect the significant estimates and judgments used in the preparation of our consolidated financial statements.
As a percentage of net revenues, the provision for credit losses were 1.0% for both 2024 and 2023.
The provision for credit losses was $7.6 million for the 2025 Year and $6.9 million for the 2024 Year. As a percentage of net patient revenues, the provision for credit losses was 1.2% for both the 2025 Year and the 2024 Year.
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, we 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.
The purchase price for the 65% interest was approximately $3.8 million which was paid in cash. As part of this transaction, we agreed to additional consideration if future operational objectives are met. 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.
Therefore, in order to assess the accuracy of our revenues and hence our contractual allowance reserves, our management regularly compares our cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis.
In order to assess the accuracy of its revenues, 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.
Additionally, other revenue includes services we provide 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 us and the third parties. Services are typically performed over the contract period and revenue is recorded at the point of service.
Contract terms and rates are agreed to in advance between us and the third parties. Services are typically performed over the contract period and revenue is recorded at the point of service.
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. 43 Table of Contents In a separate transaction, on September 29, 2023, we acquired a 70% equity interest in a single clinic physical therapy practice.
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 final payment of principal and interest of $0.3 million was paid in August 2025.
This interest income is a result of investing excess cash associated with proceeds from our secondary offering completed in May 2023. Change in fair value of contingent earn-out consideration and put-right liabilities We revalued contingent earn-out consideration related to certain acquisitions resulting in an expense of $0.2 million for the 2024 Year compared to $1.6 million for the 2023 Year.
Change in fair value of contingent earn-out consideration and put-right liabilities We revalued contingent earn-out consideration related to certain acquisitions and recognized a net gain (a decrease in the related liabilities) of $6.2 million for the 2025 Year compared to a net loss of $0.2 million for the 2024 Year (an increase in the related liabilities).
We evaluate indefinite-lived tradenames in conjunction with our annual goodwill impairment test. 46 Table of Contents Impairment of Goodwill, Other Indefinite-Lived Intangible Assets and Long-Lived Assets We operate our business through two segments consisting of our physical therapy clinics and our IIP business. For purposes of goodwill impairment analysis, each of our segments is further broken down into reporting units.
The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. We evaluate indefinite-lived tradenames in conjunction with our annual goodwill impairment test. Impairment of Goodwill, Other Indefinite-Lived Intangible Assets and Long-Lived Assets We operate our business through two segments consisting of our physical therapy clinics and our IIP business.
Reporting units within our physical therapy business comprise of regions primarily based on each clinic’s location. In addition to the six regions, in 2024 and 2023, the IIP business consisted of two reporting units. As part of the impairment analysis, we are first required to assess qualitatively if we can conclude whether goodwill is more likely than not impaired.
For purposes of goodwill impairment analysis, each of our segments is further broken down into reporting units. Reporting units within our physical therapy business comprise of regions primarily based on each clinic’s location. In addition to the seven regions, in 2025 and 2024, the IIP business consisted of two reporting units.
We designated our interest rate swap as a cash flow hedge and structured it to be highly effective.
We designated our 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 accumulate other comprehensive income (loss), net of tax.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 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, 2024, was the outstanding balance of seller notes from our acquisitions of $2.9 million, and an outstanding balance on our Credit Facilities of $151.6 million.
Biggest changeITEM 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 Credit Facilities has a balance of $11.0 million as of December 31, 2024, and is subject to fluctuating interest rates. A 1% change in the interest rate would yield an additional $0.1 million of interest expense. See Note 11 to our consolidated financial statements included in Item 8.
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

Other USPH 10-K year-over-year comparisons