v3.26.1
Acquisitions of Businesses
 6 Months Ended
Jun. 30, 2026
Acquisitions of Businesses [Abstract]  
Acquisitions of Businesses
3. Acquisitions of Businesses

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

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

The purchase price plus the fair value of the non-controlling interest for the acquisitions after June 30, 2025 was allocated to the fair value of the assets acquired, inclusive of identifiable intangible assets (i.e. tradenames, referral relationships, customer relationships and non-compete agreements) and liabilities assumed based on the estimated fair values at the acquisition date, with the amount in excess of fair values being recorded as goodwill. The Company is in the process of completing its formal valuation analysis of the above-mentioned acquisitions in order to identify and determine the fair value of tangible and identifiable intangible assets acquired and the liabilities assumed. Thus, the final allocation of the purchase price may differ from the preliminary estimates used on June 30, 2026, based on additional information obtained and completion of the valuation of the identifiable intangible assets. Changes in the estimated valuation of the tangible assets acquired, the completion of the valuation of identifiable intangible assets and the completion by the Company of the identification of any unrecorded pre-acquisition contingencies, where the liability is probable and the amount can be reasonably estimated, will likely result in adjustments to goodwill. The Company does not expect the adjustments to be material. The Company continues to evaluate the components for the purchase price allocations for acquisitions after June 30, 2025.

During the six months ended June 30, 2026, the Company acquired a majority interest in the following businesses:

2026 Acquisitions

   
        
  
% Interest
  
Number of
  
Acquisition
  
Date
  
Acquired
  
Clinics
  
January 2026 Acquisition 2
   January 31, 2026
   70%
   *
  
January 2026 Acquisition 1
   January 2, 2026
   50%
   8
  
*      
IIP business


On January 31, 2026, the Company acquired 70% of an IIP business with the previous owners retaining a 30% ownership interest. The purchase price for the 70% equity interest was approximately $15.0 million which was paid in cash.



On January 2, 2026, the Company acquired a 50% equity interest in an eight-clinic practice with the practice owners retaining a 50% ownership interest. The purchase price for the 50% equity interest was approximately $6.2 million, of which $5.7 million was paid in cash and $0.5 million is in the form of a note payable. The note accrues interest at 5.0% per annum and the principal and interest is payable on January 1, 2028.

In addition to the acquisitions referenced above, the Company purchased the assets of a physical therapy homecare provider during the six months ended June 30, 2026, which was tucked into a larger partnership.

The following table provides details on the preliminary purchase price allocation for the acquisitions described above.

   
Physical Therapy
Operations
    

IIP
    

Total
  
   
(In thousands)
  
Cash paid, net of cash acquired
  
$
6,137
    
$
14,949
    
$
21,086
  
Seller notes
    
500
      
-
      
500
  
Working capital
     35       12       47  
Contingent payments
    
86
      
(86
)
    
-
  
Total consideration
  
$
6,758
    
$
14,875
    
$
21,633
  
 
                        
Estimated fair value of net tangible assets acquired:
                        
Total current assets
  
$
431
    
$
974
    
$
1,405
  
Total non-current assets
    
151
      
1,224
      
1,375
  
Total liabilities
    
(408
)
    
(1,622
)
    
(2,030
)
Net tangible assets acquired
    
174
      
576
      
750
  
Customer and referral relationships
    
2,850
      
4,439
      
7,289
  
Non-compete agreements
    
266
      
429
      
695
  
Tradenames
    
695
      
1,094
      
1,789
  
Goodwill
    
8,915
      
14,775
      
23,690
  
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
    
(6,142
)
    
(6,438
)
    
(12,580
)
 
$
6,758
    
$
14,875
    
$
21,633
  

For the acquisitions in 2026, the values assigned to the customer and referral relationships and non-compete agreement are being amortized on a straight-lined basis over their respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 13.9 years. For the non-compete agreements, the weighted-average amortization period is 6.7 years. The values assigned to tradenames are tested annually for impairment.

2025 Acquisitions
            
% Interest
  
Number of
  
Acquisition
  
Date
  
Acquired
  
Clinics
  
July 2025 Acquisition
   July 31, 2025
   60%
   3  
April 2025 Acquisition
   April 30, 2025
   40%*
   **  
February 2025 Acquisition
   February 28, 2025   65%
   3  
*        
Home-care business
**      
On April 30, 2025, the Company acquired an outpatient home care practice that provides speech and occupational therapy through its 50% owned subsidiary Metro. After the transaction, the Company’s ownership interest is 40%, the local partners have an ownership interest of 40% and the practice’s preacquisition owners have a 20% ownership interest.

On July 31, 2025, the Company acquired a 60% equity interest in a three-clinic practice with the practice owners retaining a 40% equity interest (the “July 2025 Acquisition”). The purchase price for the 60% equity interest was approximately $7.9 million, of which $7.6 million was paid in cash and $0.3 million is in the form of a note payable. The note accrues interest at 5.0% per annum and the principal and interest is payable on July 31, 2027. As part of this transaction, the Company agreed to additional consideration if future operational objectives are met. The contingent consideration was valued at $1.4 million as of June 30, 2026.

On April 30, 2025, the Company acquired an outpatient home-care physical and speech therapy practice through its 50%-owned subsidiary, Metro (the “April 2025 Acquisition”) After the transaction, the Company’s ownership interest is 40%, the local partners have an ownership interest of 40% and the practice’s preacquisition owners have a 20% ownership interest. The purchase price for the 80% equity interest was approximately $2.3 million which was paid in cash.  As part of this transaction, the Company agreed to additional consideration if future operational objectives are met. The maximum amount of additional contingent consideration due under this agreement was $1.8 million. In June 2026, the Company paid $1.7 million in full settlement of the contingent consideration. As of June 30, 2026, no further amounts are payable related to the acquisition.

On February 28, 2025, the Company acquired a 65% interest in a physical therapy practice with three clinic locations (the “February 2025 Acquisition”). The prior owner retained a 35% ownership interest. The purchase price for the 65% interest was approximately $3.8 million, which was paid in cash. As part of this transaction, the Company agreed to additional consideration if future operational objectives are met by the business. The maximum additional contingent consideration payable under the agreement was $1.3 million. In March 2026, the contingent consideration was settled at $1.0 million. $0.8 million was paid in cash and the remaining $0.2 million is financed through a note payable. The note accrues interest at 5% per annum and the principal and interest is payable on March 31, 2027.

The following table provides details on the purchase price allocations for the February 2025 Acquisition and April 2025 Acquisition and preliminary purchase price allocations for the July 2025 Acquisition.

   
Physical Therapy
  
   
Operations
  
   
 
Cash paid, net of cash acquired
  
$
15,442
  
Contingent payments
    
5,730
  
Payable
     300  
Total consideration
  
$
21,472
  
         
Estimated fair value of net tangible assets acquired:
        
Total current assets
  
$
650
  
Total non-current assets
    
352
  
Total liabilities
    
(668
)
Net tangible assets acquired
    
334
  
Customer and referral relationships
    
5,570
  
Non-compete agreement
    
361
  
Tradenames
    
1,638
  
Goodwill
    
21,624
  
Fair value of non-controlling interest (classified as redeemable non-controlling interest)
    
(8,055
)
   
$
21,472
  

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

For the acquisitions completed in 2025, the values assigned to the customer and referral relationships and non-compete agreements are being amortized on a straight-line basis over their respective estimated lives. For customer and referral relationships, the weighted-average amortization period is 13.2 years. For the non-compete agreements, the weighted-average amortization period is 6.0 years. The values assigned to tradenames are tested annually for impairment.

Variable Interest Entities

The Company consolidates VIEs for which it is the primary beneficiary. The Company’s methodology for determining whether it is the primary beneficiary includes evaluating contractual arrangements, governance rights, decision making authority, and economic interests. Significant judgments include identifying the activities that most significantly affect the VIE’s performance and determining which party has power over those activities.

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

Based on the provisions of the management agreements, the Company determined that these entities are variable interest entities. The Company’s ownership percentages in these entities is 50% as of June 30, 2026. The Company consolidates the VIEs since it controls the management and operating activities that are most significant to the VIEs’ economic performance and its ownership interests expose the Company to the risks and benefits that could potentially be significant to each VIE.

The assets of the VIEs recognized in consolidation may only be used to settle obligations of each respective VIE and may not be used to satisfy claims of the Company, and the creditors of each VIE do not have recourse to the Company’s general credit. As of June 30, 2026, and December 31, 2025, the total assets of the Company’s variable interest entities were $281.5 million and $255.3 million, respectively. As of June 30, 2026, and December 31, 2025, the total liabilities of the Company’s VIEs were $52.3 million and $49.5 million respectively.

The table below presents the operating results of the VIEs.


 
Three Months Ended
    
Three Months Ended
    
Six Months Ended
     Six Months Ended  
   
June 30, 2026
    
June 30, 2025
    
June 30, 2026
    
June 30, 2025
  
   
(In thousands)
    
(In thousands)
  
Net revenue
  
$
 30,818    
$
 23,117    
$
57,632
     $ 42,923  
Operating cost:
                                
Salaries and related costs
     18,465       13,175      
34,881
       26,080  
Rent, supplies, contract labor and other
     6,986       4,461      
13,531
       8,578  
Depreciation and amortization
     1,384       1,727       2,751       2,914  
Provision for credit losses
     173       230      
356
       427  
Total operating cost
     27,008       19,593      
51,519
       37,999  
Gross profit
     3,810       3,524      
6,113
       4,924  
Loss on fair value adjustments     536       -       622       -  
Other expense
     20       3      
34
       6  
Provision for income taxes
     44       182       88       182  
Income before taxes
   $ 3,210     $
3,339    
$
5,369
     $ 4,736