Guardian Pharmacy Services, Inc.

Guardian Pharmacy Services, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

(In thousands, except for share and per share amounts)

1. Organization and Background

Organization and Business

Guardian Pharmacy Services, Inc. (the “Company”) is a leading, highly differentiated pharmacy services company that provides an extensive suite of technology-enabled services designed to help residents of long-term health care facilities (“LTCFs”) adhere to their appropriate drug regimen, which in turn helps reduce the cost of care and improve clinical outcomes. We enter into contracts directly with LTCFs to serve as the principal pharmacy provider for their residents. In this capacity, we offer high-touch, individualized clinical, drug dispensing and administration capabilities that are tailored to serve the needs of residents in historically lower acuity LTCFs, such as assisted living facilities, and behavioral health facilities and group homes. Additionally, our robust suite of capabilities enables us to serve residents in all types of LTCFs. We are a trusted partner to residents, LTCFs and health plan payors because we help reduce errors in drug administration, manage and ensure adherence to drug regimens, and lower overall healthcare costs.

In September 2024, the Company completed a series of corporate reorganization transactions (the “Corporate Reorganization”) and consummated its initial public offering (“IPO”). See the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2025, as filed with the SEC on March 11, 2026, for additional information regarding the Corporate Reorganization and IPO.

Conversion of Class B Common Stock to Class A Common Stock

During the three months ended March 31, 2026 and September 30, 2026,13,527,437 shares and 13,521,396 shares, respectively, of the Company’s Class B common stock that were originally issued in connection with the Corporate Reorganization automatically converted, in accordance with the terms of such class and without any further action by their holders or the Company, into an equal number of shares of the Company’s Class A common stock.

During the three months ended September 30, 2026, an additional 6,020 shares of the Company’s Class B common stock that were issued as consideration for an acquisition completed during the third quarter of 2025 automatically converted into an equal number of shares of the Company’s Class A common stock.

Follow-On Offering

In March 2026, the Company completed an underwritten follow-on public offering (the “Q1 2026 Offering”) of 1,020,000 shares of Class A common stock at an offering price of $31.00 per share. We used all of the proceeds, net of underwriting discounts of $1,344, from the Q1 2026 Offering to purchase 1,020,000 shares of outstanding Class A common stock that were issued upon conversion of shares of our Class B common stock that were originally issued in connection with our Corporate Reorganization. The 1,020,000 shares of Class A common stock purchased by the Company were retired, resulting in no change to the total number of Class A common stock outstanding. We did not retain any of the proceeds from the sale of shares in the offering.

As part of the Q1 2026 Offering, certain selling stockholders, consisting of the Company's founders, also sold 5,880,000 shares of Class A common stock. We did not receive any proceeds from the sale of shares by the selling stockholders in this offering.

2. Summary of Significant Accounting Policies

Principles of consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and all controlled subsidiaries (collectively, the “Company”). All intercompany transactions and accounts have been eliminated. Results of operations of the Company’s controlled subsidiaries have been included from the date of acquisition.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in conformity with the generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial reporting. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. Certain footnote disclosures have been omitted that would substantially duplicate the disclosures in the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2025, unless information contained in those disclosures materially changed or is required by U.S. GAAP to be included in interim financial statements. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2025 and 2026 have been recorded. The results of operations for the three and nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2026, or any other period. These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2025, as filed with the SEC on March 11, 2026.

Cash and Cash Equivalents

Cash and cash equivalents consists primarily of demand deposits held with financial institutions, money market funds, and short-term corporate and government debt securities. The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase and an insignificant risk of changes in value to be cash equivalents for financial statement presentation.

As of September 30, 2026, the Company held $57,348 of corporate and government debt securities classified as held to maturity. The securities had contractual maturities of three months or less when purchased and are included within Cash and cash equivalents in the unaudited condensed consolidated financial statements. As of September 30, 2026, the amortized cost basis of the corporate and government debt securities approximated fair value, and the related allowance for credit losses and gross unrecognized holding gains and losses were immaterial.

New Accounting Pronouncements

The following table provides a description of recent accounting pronouncements that are applicable to the Company’s unaudited condensed consolidated financial statements:

3. Acquisitions

The Company’s growth strategy involves periodically acquiring institutional pharmacies servicing LTCFs and their residents as well as residents in other care settings. The Company’s strategy includes the acquisition of freestanding institutional pharmacy businesses as well as other assets, generally less significant in size, which are combined with existing pharmacy operations to augment internal organic growth. The Company completed an immaterial acquisition during the three months ended September 30, 2026.

2025 Acquisitions

In 2025, the Company completed acquisitions of various pharmacy operations (the “2025 Acquisitions”). Total consideration for the 2025 Acquisitions included $13,725 of cash, $125 of deferred inventory payments,24,075 shares of Class B common stock with a fair value of $441, and contingent earnout payments of up to $2,600 if certain revenue and earnings targets are achieved by certain acquired entities during the first full four quarters subsequent to the acquisition date. The fair value of the shares of Class B common stock issued was determined based on the closing share price of the Company’s Class A common stock on the acquisition date, discounted for a lack of registration, as the Class B common stock remains unregistered. The fair value of the contingent consideration arrangements at the acquisition dates as of December 31, 2025, was $2,600, and at September 30, 2026 was $900. The total purchase consideration for the 2025 Acquisitions was $16,891.

The 2025 Acquisitions included non-controlling interests, for which the fair value was estimated to be $3,609. The fair value of the non-controlling interests was estimated by utilizing the implied fair value of the non-controlling interest, determined based on the acquisition purchase price, and considering discounts necessary due to the lack of marketability and lack of control associated with the non-controlling interest. We incurred an immaterial amount of acquisition costs in connection with the 2025 Acquisitions.

The 2025 Acquisitions were treated as purchases in accordance with ASC 805, Business Combinations, which requires recognition of the estimated fair values of assets acquired and liabilities assumed in a transaction. Our recognition of the assets acquired and liabilities assumed was based on management’s judgment after evaluating several factors, including a valuation assessment. There were no material measurement period adjustments recognized in periods subsequent to the 2025 Acquisitions.

The recognition of the assets and liabilities of the 2025 Acquisitions as of December 31, 2025 is as follows:

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable net assets acquired in the 2025 Acquisitions. Goodwill represents future economic benefits expected to arise from the Company’s expanded presence in the long-term care pharmacy industry, the assembled workforce acquired, and expected revenue synergies, as well as operating efficiencies and cost savings. Of the $10,447 of goodwill recorded related to the 2025 Acquisitions, $8,136 is expected to be deductible for tax purposes.

Intangible assets are comprised of customer lists and trademarks. The fair values for the customer lists and trademarks were $6,586 and $290, respectively. The weighted average useful lives for the customer lists and trademarks were 10 years and 5 years, respectively.

Consolidated Results of Operations

The results of operations for the 2025 Acquisitions have been included in the consolidated financial statements since the dates of acquisition.

The comparable prior period results of operations associated with the 2025 Acquisitions are not material to the consolidated financial statements, and as such, supplemental pro forma financial information is not presented.

4. Intangible Assets

During the nine months ended September 30, 2026, the Company acquired customer list intangible assets recognized at an aggregate carrying amount of $5,116. The customer lists have no significant residual value and a weighted average useful life of 10 years.

5. Fair Value Measurements

The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following:

• Level 1 - Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

• Level 2 - Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.

• Level 3 - Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs that market participants could use in pricing the asset or liability at the measurement date, including assumptions about risk.

Financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, line of credit, and notes payable. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the short-term maturity of these instruments.

The following table summarizes the valuation of liabilities measured at fair value on a recurring basis on the Company’s consolidated balance sheets:

The fair value measurement of the contingent consideration obligations arising from acquisitions is based upon Level 3 unobservable inputs including, in part, the estimate of future cash flows based upon the likelihood of achieving the various criteria triggering the payment of the obligations. The fair values of the liabilities associated with contingent consideration obligations were derived using the income approach with unobservable inputs, which included future earnings forecasts for which there is no market data. Fair value measurement using unobservable inputs is inherently uncertain, and a change in significant inputs could result in different fair values. During the nine months ended September 30, 2026, there were no material gains or losses related to liabilities classified as Level 3 as a result of fair value adjustments. Changes in the fair value of the contingent consideration obligations are recorded within Selling, general, and administrative expenses.

The following table provides a reconciliation of the activity for the Level 3 contingent consideration fair value measurements during the nine-month period ended September 30, 2026:

6. Commitments and Contingencies

The Company is subject to legal proceedings and claims that arise in the ordinary course of business. The Company may have exposure to loss contingencies arising from pending or threatened litigation for which assessing and estimating the outcomes of these matters involves substantial uncertainties. The Company evaluates contingencies on an ongoing basis and establishes loss provisions for matters in which losses are probable and the amount of loss can be reasonably estimated.

Legal expenses include attorneys’ fees, litigation expenses and settlements. The Company recorded legal expenses totaling $4,479 and $4,471 for the nine months ended September 30, 2025 and 2026, respectively.

On April 21, 2026, the Company executed a mutual release and settlement agreement related to a payor-reimbursement matter. As part of the settlement, the Company received an $8,500 cash payment. The impact of this settlement has been recorded in Other expense (income) on the Condensed Consolidated Statement of Operations.

7. Basic and Diluted Net Income Per Share

Basic earnings per share of Class A and Class B common stock is computed by dividing net income attributable to Guardian Pharmacy Services, Inc. by the weighted-average number of shares of Class A and Class B common stock outstanding during the period. The Class A and Class B common stock are identical in their rights and privileges, except that shares of Class B common stock are subject to transfer restrictions prior to their conversion into shares of Class A common stock. Therefore, the basic earnings per share for Class A and Class B common stock will be equal. Diluted earnings per share of Class A and Class B common stock is computed by dividing net income attributable to Guardian Pharmacy Services, Inc. by the weighted-average number of shares of Class A and Class B common stock outstanding, adjusted to give effect to potentially dilutive elements.

The following table sets forth the computation of net income attributable to the Company used to compute basic net income per share of Class A and Class B common stock for the three and nine months ended September 30, 2025 and 2026.

The following table sets forth the computation of basic and diluted net income per share of Class A and Class B common stock (in thousands, except per share amounts):

There wereno material anti-dilutive common share equivalents that were excluded in the computation of diluted net income per share during the three and nine months ended September 30, 2025 and 2026.

8. Share-based Compensation

2024 Equity and Incentive Compensation Plan

The Company adopted the Guardian Pharmacy Services, Inc. 2024 Equity and Incentive Compensation Plan (the “2024 Plan”) on September 27, 2024. The initial number of shares of our Class A common stock available for awards under the 2024 Plan (the "Overall Share Limit") was 2,000,000 shares. The Overall Share Limit is automatically increased on the first day of each fiscal year, beginning in 2025 and ending in 2034, by an amount equal to the lesser of (a)1% of the shares of our common stock (including both Class A common stock and Class B common stock) outstanding on the last day of the immediately preceding fiscal year and (b) such smaller number of shares as may be determined by the Company's Board of Directors. In 2026, the Overall Share Limit was increased by 633,206 shares in accordance with such provision. Such shares may be shares of original issuance or treasury shares or a combination of the two.

2026 Long-Term Incentive Program Awards

On February 11, 2026, the Compensation Committee of the Company’s Board of Directors approved the Company’s 2026 long-term incentive program (the “2026 LTIP”), consisting of restricted stock unit awards (“RSUs”) and non-qualified stock options (“Stock Options”), granted under the 2024 Plan.

RSU Awards

During the nine months ended September 30, 2026, and under the 2026 LTIP, the Company granted RSU awards to certain executive and management employees of 438,500 units. These RSU awards cliff vest three years subsequent to the grant date of each award and upon vesting are settled in shares of Class A common stock.

Stock Options

During the nine months ended September 30, 2026, and under the 2026 LTIP, the Company granted 550,000 Stock Options to certain executive and management employees. These Stock Option awards cliff vest three years subsequent to the grant date of each award, have a 10 year term, and, if exercised, are settled in shares of Class A common stock.

Share-based compensation expense

Share-based compensation expense, recorded to Selling, general, and administrative expenses in the consolidated statements of operations, was $4,356 and $2,735 during the three months ended September 30, 2025 and 2026, respectively, and $12,770 and $7,528 during the nine months ended September 30, 2025 and 2026, respectively.

As of September 30, 2026, unamortized share-based compensation costs related to share-based incentive awards is as follows (in thousands, except for the remaining service period):

9. Segments

General Information

The Company has a single operating segment, which was determined based on the chief operating decision maker (“CODM”), which is our Chief Executive Officer, assessing performance and allocating resources on a consolidated basis.

The operating segment derives its revenues primarily through sales of pharmaceutical products. All long-lived assets were held in the United States as of December 31, 2025 and September 30, 2026. All revenues were generated in the United States during the three and nine months ended September 30, 2025 and 2026.

Measure of segment profit or loss and assets

The CODM assesses performance of the operating segment and decides how to allocate resources based on net income, which also is reported on the consolidated statements of operations as net income. In addition to comparing net income against forecasted net income, the CODM uses net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the operating segment or expansion of the operating segment through acquisitions.

The measure of operating segment assets is reported on the consolidated balance sheets as total assets. The accounting policies of the operating segment are the same as those of the Company.

Reportable segment reconciliation

The following reconciliation presents operating segment revenue, net income, and significant segment expenses:

(1) Other segment items included in operating segment net income include product expenses, legal expenses and settlements, rent and auto lease expenses, utilities expenses, maintenance expenses, and other overhead expenses.

10. Income Taxes

The provision for income taxes is attributable to U.S. federal and state income taxes. The Company’s effective tax rate used for interim periods is based on an estimated annual effective tax rate and includes the tax effect of items required to be recorded discretely in the interim periods in which those items occur.

Income tax expense for the three months ended September 30, 2025 and 2026 was $7,038 and $6,857, respectively. This reflects effective tax rates for the three months ended September 30, 2025 and 2026 of 42.3% and 26.4%, respectively. Income tax expense for the nine months ended September 30, 2025 and 2026 was $14,631 and $19,277, respectively. This reflects effective tax rates for the nine months ended September 30, 2025 and 2026 of 34.6% and 26.0%, respectively.

During the nine months ended September 30, 2025, the Company’s effective tax rate was higher than the U.S. statutory rate of 21% primarily due to state income taxes representing approximately 5.0% and certain 2024 tax filing matters relating to the Corporate Reorganization and IPO, including the incremental share-based compensation charge in connection with the Corporate Reorganization and IPO, representing approximately 7.3% in total. These compensation costs are not deductible for federal and state income taxes due to prior Section 83(b) elections.

During the nine months ended September 30, 2026, the Company’s effective tax rate was higher than the U.S. statutory rate of 21% primarily due to state income taxes representing approximately 4.5%.