PACS Group, Inc.

Previous wording

For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2023, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” found in our final prospectus for our initial public offering filed pursuant to Rule 424(b)(4) on April 12, 2024.

Current wording

For a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2024, refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” found in our Annual Report on Form 10-K for the year ended December 31, 2024, that was filed with the Securities and Exchange Commission on November 19, 2025.

Previous wording

We are a leading post-acute healthcare company primarily focused on delivering high-quality skilled nursing care through a portfolio of independently operated facilities. Founded in 2013, we are one of the largest skilled nursing providers in the United States based on number of facilities. We also provide senior care, assisted living, and independent living options in some of our communities. As of December 31, 2024, our portfolio consisted of 314 post-acute care, assisted living, and independent living facilities across 17 states serving over 30,100 patients daily. We believe our significant historical growth has been primarily driven by our expertise in acquiring underperforming long-term custodial care skilled nursing facilities and transforming them into higher acuity, high value-add short-term transitional care skilled nursing facilities. We believe our success is driven in significant part by our decentralized, local operating model, through which we empower local leaders at each facility to operate their facility autonomously and deliver excellence in clinical quality and a superior experience for our patients. We provide our independently operated facilities with a comprehensive suite of technology, support, and back-office services that enable local leadership teams to focus more of their time and effort on providing quality care to patients. We believe our operating model delivers value to all of our healthcare stakeholders, including patients and families, referring providers, payors, and administrators and clinicians.

Current wording

We are a leading post-acute healthcare company primarily focused on delivering high-quality skilled nursing care through a portfolio of independently operated facilities. Founded in 2013, we are one of the largest skilled nursing providers in the United States based on number of facilities. We also provide senior care, assisted living, and independent living options in some of our communities. As of December 31, 2025, our portfolio consisted of 321 post-acute care, assisted living, and independent living facilities across 17 states serving over 31,700 patients daily. We believe our significant historical growth has been primarily driven by our expertise in acquiring underperforming long-term custodial care skilled nursing facilities and transforming them into higher acuity, high value-add short-term transitional care skilled nursing facilities. We believe our success is driven in significant part by our locally led, centrally supported operating model, through which we empower local leaders at each facility to operate their facility autonomously and deliver excellence in clinical quality and a superior experience for our patients. We provide our independently operated facilities with a comprehensive suite of technology, support, and back-office services that enable local leadership teams to focus more of their time and effort on providing quality care to patients. We believe our operating model delivers value to all of our healthcare stakeholders, including patients and families, referring providers, payors, and administrators and clinicians.

Previous wording

We aim to create value by identifying and acquiring underperforming custodial care facilities and converting them into higher-value short-term transitional care facilities by investing in clinical teams and processes and upgrading technology, equipment, training, staffing, aesthetics, and other aspects of the business. We believe the resources and guidance offered by PACS Services are key to rapid integration of new facilities and provides our local leadership teams with an effective technology infrastructure, support tools, and regional support teams that enable local leadership to focus on operational improvements. Our facilities generally undergo an up to three-year post-acquisition transition period. During this period, we seek to implement best practices designed to realize and sustain the facility’s full potential. These practices often result in significant improvements to clinical quality and other operational metrics, including skilled mix, occupancy rates and payor contracting. We believe the results of our acquisition strategy are demonstrated by our high average QM Star rating and occupancy rate for Mature facilities of 4.3 and 94%, respectively, as of December 31, 2024. As of December 31, 2024, the average QM Star rating and occupancy rate for New facilities was 3.3 and 83%, respectively.

Current wording

We aim to create value by identifying and acquiring underperforming custodial care facilities and converting them into higher-value short-term transitional care facilities by investing in clinical teams and processes and upgrading technology, equipment, training, staffing, aesthetics, and other aspects of the business. We believe the resources and guidance offered by PACS Services are key to rapid integration of new facilities and provides our local leadership teams with an effective technology infrastructure, support tools, and regional support teams that enable local leadership to focus on operational improvements. Our facilities generally undergo an up to three-year post-acquisition transition period. During this period, we seek to implement best practices designed to realize and sustain the facility’s full potential. These practices often result in significant improvements to clinical quality and other operational metrics, including skilled mix, occupancy rates and payor contracting. We believe the results of our acquisition strategy are demonstrated by our high average QM Star rating and occupancy rate for Mature facilities of 4.4 and 95%, respectively, as of December 31, 2025. As of December 31, 2025, the average QM Star rating and occupancy rate for New facilities was 3.5 and 81%, respectively.

Previous wording

In connection with the preparation of our combined/consolidated financial statements for the year ended December 31, 2024, together with facts learned during the course of the Audit Committee’s independent investigation, our management identified control deficiencies that, individually or in the aggregate, constitute material weaknesses in our internal control over financial reporting. The material weaknesses identified by management were that we did not design and maintain an effective internal control environment commensurate with the financial reporting requirements of a public company. Specifically, we did not design and maintain sufficient processes to identify, assess, and communicate relevant risks to appropriate levels of the organization, including potential compliance issues received through the hotline process. In addition, we did not design and maintain adequate controls within the revenue process to appropriately recognize revenue for new services in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 606, Revenue from Contracts With Customers. These material weaknesses resulted in the restatement of our previously issued interim condensed combined/consolidated financial statements for the Impacted Periods. In addition, our Chief Executive Officer and our Interim Chief Financial Officer have concluded that, due to the material weaknesses, our disclosure controls and procedures were not effective, as such term is defined under Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act, as of December 31, 2024. Management is committed to maintaining a strong internal control environment. In response to the identified material weaknesses above, management, with the oversight of the Audit Committee, is taking comprehensive actions to remediate the above material weaknesses. For additional information regarding the material weaknesses and our steps for remediation, please see “Part II, Item 9A, Controls and Procedures.”

Current wording

As previously disclosed on our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC on November 19, 2025, we identified material weaknesses in our internal control over financial reporting where we did not design and maintain sufficient processes to identify, assess, and communicate relevant risks to appropriate levels of the organization, including potential compliance issues received through the hotline process and we did not design and maintain adequate controls within the revenue process to appropriately recognize revenue for new services in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 606, Revenue from Contracts With Customers.

Previous wording

•Number of facilities — The total number of skilled nursing facilities that we operate. Excludes 27 and five assisted living and independent living facilities for the years ended December 31, 2024 and 2023, respectively.

Current wording

•Number of facilities — The total number of skilled nursing facilities that we operate. Excludes 30 and 27 assisted living and independent living facilities for the years ended December 31, 2025 and 2024, respectively.

Previous wording

Financial Measures). EBITDA and Adjusted EBITDA are performance measures. Adjusted EBITDAR is a valuation measure. These Non-GAAP Financial Measures have no standardized meaning defined by GAAP, and therefore have limitations as analytical tools, and they should not be considered in isolation, or as a substitute for analysis of our results as reported in accordance with GAAP. You should review the reconciliation of net income to the Non-GAAP Financial Measures in the table below, together with our audited combined/consolidated financial statements and the related notes in their entirety, and should not rely on any single financial measure. Additionally, other companies may define these or similar Non-GAAP Financial Measures with the same or similar names differently, and because these Non-GAAP Financial Measures are not standardized, it may not be possible to compare these financial measures to those of other companies.

Current wording

In addition to our results provided throughout that are determined in accordance with GAAP, we also present the following non-GAAP financial measures: EBITDA, Adjusted EBITDA and Adjusted EBITDAR (collectively, Non-GAAP Financial Measures). EBITDA and Adjusted EBITDA are performance measures. Adjusted EBITDAR is a valuation measure. These Non-GAAP Financial Measures have no standardized meaning defined by GAAP, and therefore have limitations as analytical tools, and they should not be considered in isolation, or as a substitute for analysis of our results as reported in accordance with GAAP. You should review the reconciliation of net income to the Non-GAAP Financial Measures in the table below, together with our audited combined/consolidated financial statements and the related notes in their entirety, and should not rely on any single financial measure. Additionally, other companies may define these or similar Non-GAAP Financial Measures with the same or similar names differently, and because these Non-GAAP

Previous wording

EBITDA – We calculate EBITDA as net income, adjusted for net losses attributable to noncontrolling interest, before: interest expense, net; provision for income taxes; and depreciation and amortization.

Current wording

EBITDA – We calculate EBITDA as net income, adjusted for net losses attributable to noncontrolling interest, before: interest expense; provision for income taxes; and depreciation and amortization.

Previous wording

Adjusted EBITDA – We calculate Adjusted EBITDA as EBITDA further adjusted for non-core business items, which for the reported periods includes, to the extent applicable, costs incurred to acquire operations that are not capitalizable, lease termination fees, losses incurred from debt restructuring, gains on lease termination, stock-based compensation expense, loss from equity method investment, forfeiture of a seller’s note, recognition of a bargain purchase gain, legal and other costs, recognition of Employee Retention Tax Credit (ERTC), disaster relief payment, and certain one-time expenses that are not representative of our underlying operating performance. Costs related to acquisitions include costs related to our acquisition of SNF facilities and providers, including related costs such as legal fees, financial and tax due diligence, consulting and escrow fees. The loss related to our equity method investment is a loss allocated to us from a discrete disposal recognized by one of our equity method investments. The bargain purchase gain was recognized as part of our acquisition from the former operator Prestige. Legal and other costs include legal and professional fees incurred associated with the Audit Committee’s independent investigation and with other ongoing investigations. The adjustment related to the ERTC represents the recognition of the tax credit against labor as the statute of limitations surrounding the uncertainty of the qualifications, for a portion of the funds received, expired. The disaster relief payment was made to support facilities impacted by Hurricane Helene.

Current wording

Adjusted EBITDA – We calculate Adjusted EBITDA as EBITDA further adjusted for non-core business items, which for the reported periods includes, to the extent applicable, costs incurred to acquire operations that are not capitalizable, losses incurred from debt restructuring, gains on lease termination, stock-based compensation expense, loss from equity method investment, forfeiture of a seller’s note, recognition of a bargain purchase gain, legal and other costs, recognition of Employee Retention Tax Credit (ERTC), disaster relief payment, and certain one-time expenses that are not representative of our underlying operating performance. Costs related to acquisitions include costs related to our acquisition of SNF facilities and providers, including related costs such as legal fees, financial and tax due diligence, consulting and escrow fees. The loss related to our equity method investment is a loss allocated to us from a discrete disposal recognized by one of our equity method investments. The bargain purchase gain was recognized as part of our acquisition from the former operator Prestige. Legal and other costs include legal and professional fees incurred associated with the Audit Committee’s independent investigation and with other ongoing investigations. The adjustment related to the ERTC represents the recognition of the tax credit against labor as the statute of limitations surrounding the uncertainty of the qualifications, for a portion of the funds received, expired. The disaster relief payment was made to support facilities impacted by Hurricane Helene.

Previous wording

Adjusted EBITDAR – We calculate Adjusted EBITDAR as Adjusted EBITDA less rent-cost of services.

Current wording

Adjusted EBITDAR – We calculate Adjusted EBITDAR as Adjusted EBITDA plus rent-cost of services.

Previous wording

Rent - cost of services consists solely of base rent amounts payable under lease agreements to third-party real estate owners. Our operating subsidiaries lease and operate, but do not own the underlying real estate of, 270 facilities and these amounts do not include taxes, insurance, impounds, capital reserves or other charges payable under the applicable lease agreements. As we continue to execute on our acquisitions strategy and expand our network of facilities, we expect that our rent - cost of services will continue to increase.

Current wording

Rent - cost of services consists solely of base rent amounts payable under lease agreements to third-party real estate owners. Our operating subsidiaries lease and operate, but do not own the underlying real estate of, 268 facilities and these amounts do not include taxes, insurance, impounds, capital reserves or other charges payable under the applicable lease agreements. As we continue to execute on our acquisitions strategy and expand our network of facilities, we expect that our rent - cost of services will continue to increase.

Previous wording

Patient and resident service revenue - Patient and resident service revenue increased by $976.5 million or 31.4% to $4.1 billion, for the year ended December 31, 2024, compared to the year ended December 31, 2023. For each of the years ended December 31, 2024 and 2023, skilled nursing services revenue represented more than 98.0% of patient and resident service revenue.

Current wording

Patient and resident service revenue - Patient and resident service revenue increased by $1,201.2 million or 29.4% to $5.3 billion, for the year ended December 31, 2025, compared to the year ended December 31, 2024. For each of the years ended December 31, 2025 and 2024, skilled nursing services revenue represented more than 97.0% of patient and resident service revenue.

Previous wording

Skilled nursing services revenue increased by $921.8 million, or 29.8%, to $4.0 billion for the year ended December 31, 2024, compared to the year ended December 31, 2023. This change was driven by an increase in patient days of 1,810,591 or 26.7% primarily due to an increase in operational beds of 9,066, or 39.5%, from December 31, 2023 to December 31, 2024. Additionally we experienced a higher occupancy rate across Mature and Ramping facility cohorts of 94.4% and 93.9%, respectively, for the year ended December 31, 2024, compared to 93.4% occupancy for both Mature and Ramping facilities for the year ended December 31, 2023, due to increased demand as a result of continued execution on our business model. Total facility occupancy decreased slightly year-over-year from 90.9% for the year ended December 31, 2023 compared to 90.4% for the year ended December 31, 2024 due to a decrease in the New facility cohort occupancy as a result of the significant number of acquisitions during 2024.

Current wording

Skilled nursing services revenue increased by $1,164.0 million, or 29.0%, to $5.2 billion for the year ended December 31, 2025, compared to the year ended December 31, 2024. This change was driven by an increase in patient days of 1,955,803, or 22.8%. The increase in patient days for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to large acquisitions in the second half of the year ended December 31, 2024, primarily driven by the Prestige acquisition, plus an additional increase during the year ended December 31, 2025, leading to a combined increase of 8,371 or 34%. Additionally we experienced a higher occupancy rate within the Mature facility cohorts of 94.9% for the year ended December 31, 2025, compared to 94.4% occupancy for Mature facilities for the year ended December 31, 2024, due to increased demand as a result of continued execution on our business model. Total facility occupancy decreased slightly year-over-year from 90.4% for the year ended December 31, 2024 compared to 89.1% for the year ended December 31, 2025 due to a decrease in the New and Ramping facility cohort occupancy as a result of the significant number of acquisitions during the last quarter of the year ended December 31, 2024 and into the year ended December 31, 2025.

Previous wording

Our skilled nursing services revenue was impacted by developments in our average daily rates and fluctuations in our payor sources. Our Medicare daily rates at Mature and Ramping facilities increased by 7.7% and 8.1%, respectively, for the year ended December 31, 2024.

Current wording

Our skilled nursing services revenue was impacted by developments in our average daily rates and fluctuations in our payor sources. Our Medicare daily rates at Mature and Ramping facilities increased by 3.6% and 0.4%, respectively, for the year ended December 31, 2025.

Previous wording

Other revenue - Other revenue increased to $3.1 million for the year ended December 31, 2024, compared to $1.0 million for the year ended December 31, 2023 due to an increase in lease income during the extended execution of our acquisition from the former operator Prestige. See Note 16 “Operation Expansions”, to our audited combined/consolidated financial statements for more information related to the acquisition.

Current wording

Other revenue - Other revenue decreased to $1.0 million for the year ended December 31, 2025, compared to $3.1 million for the year ended December 31, 2024 due to a decrease in lease income compared to the prior year in which we had the extended execution of our acquisition from the former operator Prestige. See Note 16, “Operation Expansions”, to our audited combined/consolidated financial statements for more information related to the 2024 acquisition.

Previous wording

Cost of services increased by $849.4 million, or 34.7% to $3.3 billion, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase was primarily driven by an increase of $504.4 million in salaries and wages. Of the salaries and wages increase, facilities acquired within the past year accounted for $241.7 million or 47.9% of the increase. Our total number of post-acute care facilities, inclusive of skilled nursing facilities and assisted living facilities, increased from 208 as of December 31, 2023 to 314 as of December 31, 2024, an increase of 51.0%. This increase in operations and employees led to the increase in labor cost for new facilities as they were acquired throughout the year. The increase in salaries and wages was primarily driven by an increase in nursing salaries and wages driven by market needs, increases in administration wages and payroll taxes. Aside from labor costs, the increase in cost of services was primarily due to increases of $257.1 million in administrative and ancillary expenses for facility increases, driven by a $93.5 million increase in contracted services, a $80.3 million increase in liability insurance, a $35.2 million increase in quality assurance fees, an $8.6 million increase in professional fees, an $8.2 million increase in licenses with the remaining $31.3 million of the administrative and ancillary expense increase spread out across various expense types. Of the non-labor administrative and ancillary costs, $98.4 million, or 38.3%, is attributable to facilities acquired during 2024, the remaining costs were spread across Mature and Ramping cohorts. Nursing and dietary expenses drove an additional $53.4 million of the increase, of which $28.1 million or 52.6% was due to facilities acquired within the past year. The remaining $34.5 million increase is spread over various expense categories.

Current wording

Cost of services increased by $832.6 million, or 25.3% to $4.1 billion, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily driven by an increase of $536.0 million in salaries and wages. Of the salaries and wages increase, facilities classified within the New facilities cohort accounted for $204.8 million or 38.2% of the increase. Our total number of post-acute care facilities, inclusive of skilled nursing facilities and assisted living facilities, increased throughout the second half of 2024 and through 2025, from 220 as of June 30, 2024, to 314 as of December 31, 2024, to 321 as of December 31, 2025, an increase of 45.9% and 2.2%, respectively. This increase in operations and employees led to the increase in labor cost for new facilities as they were acquired throughout the year ended December 31, 2024 and into the year ended December 31, 2025. The increase in salaries and wages was primarily driven by an increase in nursing salaries and wages driven by market needs, increases in administration wages and payroll taxes. Aside from labor costs, the increase in cost of services was primarily due to increases of $167.6 million in administrative and ancillary expenses for facility increases, driven by a $111.0 million increase in contracted services, a $56.3 million increase in quality assurance fees, a $5.2 million increase in software support and upgrades, and a $4.8 million increase in professional fees, offset by a decrease in liability insurance of $38.4 million. The remaining $28.6 million change in administrative and ancillary expenses were spread out across various expense types. Of the increase in non-labor administrative and ancillary costs, $82.2 million, or 49.1%, is attributable to the New facilities cohort, the remaining costs were spread across Mature and Ramping cohorts. Nursing and dietary expenses drove an additional $59.1 million of the increase, of which $23.5 million or 39.8% was due to facilities acquired within the past 18 months. The remaining $69.9 million increase is spread over various expense categories.

Previous wording

Rent - cost of services increased by $68.2 million, or 31.5% to $285.0 million, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase was primarily attributable to the addition of new facilities with operating leases throughout the year, as well as to annual escalators on existing facilities’ rent.

Current wording

Rent - cost of services increased by $94.0 million, or 33.0% to $378.9 million, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily attributable to the addition of new facilities with operating leases throughout the year, as well as to annual escalators on existing facilities’ rent.

Previous wording

General and administrative expense increased by $130.1 million, or 60.9% to $343.8 million, for the year ended December 31, 2024, compared to the year ended December 31, 2023. This increase was primarily due to the increase in stock compensation expense recognized during the year, associated with restricted stock units that were granted at the time of our IPO, which accounts for an increase of $115.5 million. The change was also impacted by an increase in salaries and wages of $39.3 million, or 33.3%, attributable to an increase in personnel to help integrate and facilitate the operational growth from acquisitions in the current year, and an increase in legal and professional fees incurred associated with the Audit Committee’s independent investigation and with ongoing government investigations of $9.7 million. These increases were offset by a decrease in costs associated with professional and general liability insurance within general and administrative expense of $36.0 million.

Current wording

General and administrative expense increased by $71.3 million, or 20.7% to $415.1 million, for the year ended December 31, 2025, compared to the year ended December 31, 2024. This increase was primarily due to an increase in legal and professional fees incurred associated with the Audit Committee’s independent investigation and with ongoing government investigations of $87.3 million, over the previous year. The change was also impacted by an increase in salaries and wages of $28.7 million, or 18.3%, attributable to an increase in personnel to help integrate and facilitate the operational growth. These increases were offset by a decrease in stock compensation expense recognized during the year of $61.5 million, as the prior year had significant stock compensation expense associated with restricted stock units that were granted at the time of our IPO. The remaining change was spread over various expense categories.

Previous wording

Depreciation and amortization increased by $15.2 million, or 59.2% to $40.8 million, for the year ended December 31, 2024, compared to $25.6 million for the year ended December 31, 2023. This increase is directly attributable to new real estate obtained through acquisitions as well as growth of our finance lease portfolio.

Current wording

Depreciation and amortization increased by $14.9 million, or 36.4% to $55.7 million, for the year ended December 31, 2025, compared to $40.8 million for the year ended December 31, 2024. This increase is directly attributable to new real estate obtained through acquisitions as well as growth of our finance lease portfolio.

Previous wording

Other expense, net decreased by $28.9 million, or 57.4% to $21.5 million, for the year ended December 31, 2024, compared to the year ended December 31, 2023. Other expense, net primarily consists of interest expense which decreased by $5.6 million, to $44.3 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, due to a decrease in amounts drawn on lines of credit and long-term debt of $324.7 million during the year. During the year ended December 31, 2024, other expense, net also included a gain of $8.0 million recognized upon the termination of a lease. Additionally, during the year ended December 31, 2024, other expense, net included other income of $14.8 million, an increase of $15.3 million from the year ended December 31, 2023. This increase was driven by the recognition of a $17.2 million bargain purchase gain following our acquisition from the former operator Prestige during the year ended December 31, 2024 offset by a $2.7 million loss allocated to us from a discrete disposal recognized by one of our equity method investments and a $0.5 million forfeiture of a seller’s note during the same period.

Current wording

Other expense, net increased by $3.6 million, or 16.9% to $25.1 million, for the year ended December 31, 2025, compared to the year ended December 31, 2024. Other expense, net primarily consists of interest expense which decreased by $16.0 million, to $28.4 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, due to a decrease in amounts drawn on lines of credit and long-term debt of $58.6 million during the year. During the year ended December 31, 2024, other expense, net also included a gain of $8.0 million recognized upon the termination of a lease. Additionally, during the year ended December 31, 2025, other expense, net included other income of $3.2 million, a decrease of $11.6 million from the year ended December 31, 2024. This decrease was driven by the recognition of a $17.2 million bargain purchase gain following our acquisition from the former operator Prestige during the year ended December 31, 2024 offset by a $2.7 million loss allocated to us from a discrete disposal recognized by one of our equity method investments and a $0.5 million forfeiture of a seller’s note during the same period compared to the activity during the year ended December 31, 2025 which primarily consisted of gains from our investments.

Previous wording

Provision for income taxes totaled $46.2 million for the year ended December 31, 2024, representing an effective tax rate of 45.5%, compared to a provision for income taxes of $44.4 million and an effective tax rate of 28.1% for the year ended December 31, 2023. The difference in the effective tax rate from the statutory rate is mainly due to state taxes, permanent book-tax differences, and other adjustments. The change in effective tax rate for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to an increase in non-deductible expenses, including non-deductible compensation in 2024. See Note 12 “Income Taxes”, to our audited combined/consolidated financial statements for more information.

Current wording

Provision for income taxes totaled $93.0 million for the year ended December 31, 2025, representing an effective tax rate of 32.6%, compared to a provision for income taxes of $46.2 million and an effective tax rate of 45.5% for the year ended December 31, 2024. The difference in the effective tax rate from the statutory rate is mainly due to state taxes, permanent book-tax differences, and other adjustments. The change in effective tax rate for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to an increase in pre-tax book income, which reduced the overall impact on non-deductible expenses, including non-deductible compensation. See Note 12, “Income Taxes”, to our audited combined/consolidated financial statements for more information.

Previous wording

On April 15, 2024, we completed an IPO receiving initial net proceeds of $423.0 million. We used $370.0 million of the net proceeds from the IPO to repay amounts outstanding under our Amended and Restated 2023 Credit Facility (as defined below) and used the remaining amount for general corporate purposes to support the growth of the business. On September 9, 2024, we completed an underwritten follow-on offering receiving initial net proceeds of $96.4 million, of which we used $95.3 million to repay amounts outstanding under our Amended and Restated 2023 Credit Facility.

Current wording

On April 15, 2024, we completed an IPO receiving initial net proceeds of $423.0 million. We used $370.0 million of the net proceeds from the IPO to repay amounts outstanding under our Amended and Restated Credit Facility (as defined below) and used the remaining amount for general corporate purposes to support the growth of the business. On September 9, 2024, we completed an underwritten follow-on offering receiving initial net proceeds of $96.4 million, of which we used $95.3 million to repay amounts outstanding under our Amended and Restated Credit Facility.

Previous wording

As of December 31, 2024 and September 30, 2025, we had cash and cash equivalents (which include short-term investments with original maturities of three months or less at the time of purchase) of $157.7 million, and $355.7 million, respectively. The total principal amount outstanding under our Amended and Restated 2023 Credit Facility as of December 31, 2024 and September 30, 2025, was $142.0 million and $100.0 million, respectively. In addition, we had outstanding letters of credit of $13.9 million as of both December 31, 2024 and September 30, 2025, respectively.

Current wording

As of December 31, 2025, we had cash and cash equivalents (which include short-term investments with original maturities of three months or less at the time of purchase) of $197.0 million. The total principal amount outstanding under our Amended and Restated Credit Facility as of December 31, 2025 was $100.0 million. In addition, we had outstanding letters of credit of $7.9 million as of December 31, 2025.

Previous wording

The terms of our Amended and Restated 2023 Credit Facility permit optional prepayments from time to time without premium or penalty. We expect to continue to use the Amended and Restated 2023 Credit Facility, subject to entrance into the agreement described above, as our single line of credit and to fund the potential acquisition of additional property and operations, as well as for working capital and for general corporate purposes. Cash paid to fund acquisitions was $283.3 million and $127.0 million for the years ended December 31, 2024 and 2023, respectively. Total capital expenditures for property and equipment were $66.5 million and $45.8 million for the years ended December 31, 2024 and 2023, respectively.

Current wording

The terms of our Amended and Restated Credit Facility permit optional prepayments from time to time without premium or penalty. We expect to continue to use the Amended and Restated Credit Facility as our single line of credit and to fund the potential acquisition of additional property and operations, as well as for working capital and for general corporate purposes. Cash paid to fund acquisitions was $143.8 million and $283.3 million for the years ended December 31, 2025 and 2024, respectively. Total capital expenditures for property and equipment were $105.4 million and $66.5 million for the years ended December 31, 2025 and 2024, respectively.

Previous wording

Net cash provided by operating activities for the year ended December 31, 2024 of $367.3 million increased by $303.6 million as compared with the same period in 2023. The increase was primarily driven by improved operational performance across our existing portfolio as well as the incremental operational performance across our 106 facilities acquired since December 31, 2023. This increase was further driven by an increase in cash flows from the change in operating assets and liabilities of $252.9 million due to the timing of payables and other accrued liabilities.

Current wording

Net cash provided by operating activities for the year ended December 31, 2025 of $404.2 million increased by $36.9 million as compared with the same period in 2024. The increase was primarily driven by improved operational performance across our existing portfolio as well as the incremental operational performance across our 101 facilities acquired in the latter half of 2024 and throughout 2025. This increase was offset by a decrease in cash flows from the change in operating assets and liabilities of $85.5 million due to the timing of payables and other accrued liabilities.

Previous wording

Net cash used in investing activities for the year ended December 31, 2024 of $442.7 million increased by $269.9 million as compared with the same period in 2023. The increase in cash used was primarily attributable to an increase of $156.3 million in cash used to acquire real estate facilities and an increase of $20.7 million in cash used to purchase property and equipment, in excess of cash used for these purposes in 2023. Further, in 2024 we also purchased investments, consisting of holdings in investment grade bond mutual funds, of $90.9 million through our captive insurance subsidiary with long-term restricted cash previously held in other assets on our combined/consolidated balance sheets included in Part II, Item 8 of this Annual Report on Form 10-K (see Note 8, “Fair Value Measurement”) offset by a sale of investments of $25.9 million. We also made an additional $30.3 million investment in partnerships compared to $2.6 million used for this purpose in 2023.

Current wording

Net cash used in investing activities for the year ended December 31, 2025 of $264.0 million decreased by $178.7 million as compared with the same period in 2024. The decrease in cash used was primarily attributable to a decrease of $139.6 million in cash used to acquire real estate facilities offset by an increase of $38.9 million in cash used to purchase property and equipment, in excess of cash used for these purposes in 2024. Further, in 2025 investments purchased through our captive insurance subsidiary, consisting of holdings in investment grade bond mutual funds, decreased by $69.7 million, and cash used to purchase investments in partnerships decreased by $32.9 million, as compared to the same period in 2024. These changes were offset by a decrease in sales of investments of $25.9 million as compared to 2024.

Previous wording

On June 30, 2023, PACS Group, Inc., as holdings, PACS Holdings, LLC, as borrower, and certain of their subsidiaries entered into a credit agreement with Truist Bank, as administrative agent (the “Administrative Agent”), and a syndicate of lenders (the “Original Credit Facility”). The Original Credit Facility provided PACS Holdings, LLC with a $275.0 million term loan and $150.0 million of revolving credit commitments (including a $30.0 million letter of credit sub-facility and a $20.0 million swingline sub-facility).

Current wording

We maintain a revolving credit facility between PACS Group, Inc., as holdings, PACS Holdings, LLC, as borrower, and certain of our subsidiaries with Truist Bank, as administrative agent (the “Administrative Agent”), and a syndicate of lenders (the “Amended and Restated Credit Facility”). The Amended and Restated Credit Facility provides for a Revolving Commitment (as defined in the Amended and Restated Credit Facility) of up to $600.0 million (including a $50.0 million letter of credit sub-facility and a $20.0 million swingline sub-facility).

Previous wording

On December 7, 2023, we amended and restated the Original Credit Facility (the “Amended and Restated 2023 Credit Facility”), pursuant to an amended and restated credit agreement (the “Amended and Restated Credit Agreement”), repaying the term loans and eliminating the term loan facility and increasing the aggregate amount of Revolving Commitments (as defined in the Amended and Restated 2023 Credit Facility) to $600.0 million (including a $50.0 million letter of credit sub-facility and a $20.0 million swingline sub-facility). Borrowings under the Amended and Restated 2023 Credit Facility bear interest, at our option, at either (a) SOFR (subject to a 0.10% credit spread adjustment), plus a margin ranging from 2.25% to 3.25% per annum; or (b) the Base Rate (as defined in the Amended and Restated Credit Agreement), plus a margin ranging from 1.25% to 2.25% per annum, with such margins, in each case, determined by reference to our Total Leverage Ratio (as defined in the Amended and Restated Credit Agreement). We are required to pay a commitment fee ranging from 0.25% to 0.45% per annum on the unused portion of the Revolving Commitments, based upon our Total Leverage Ratio and other customary fees. Upon the closing of the Amended and Restated 2023 Credit Facility, we borrowed $460.0 million of revolving loans to repay and refinance all then-outstanding loans (including the term loans) under the Original Credit Facility, repay certain other outstanding indebtedness, and pay transaction costs.

Current wording

Outstanding borrowings under the Amended and Restated Credit Facility bear interest, at our option, at either (a) SOFR (subject to a 0.10% credit spread adjustment), plus a margin ranging from 2.25% to 3.25% per annum; or (b) the Base Rate (as defined in the Amended and Restated Credit Agreement), plus a margin ranging from 1.25% to 2.25% per annum, with such margins, in each case, determined by reference to our Total Leverage Ratio (as defined in the Amended and Restated Credit Agreement). We are required to pay a commitment fee ranging from 0.25% to 0.45% per annum on the unused portion of the Revolving Commitments, based upon our Total Leverage Ratio and other customary fees.

Previous wording

The Amended and Restated 2023 Credit Facility includes customary affirmative and negative covenants and two financial covenants: a requirement that our Total Leverage Ratio not exceed 3.00:1.00 as of the end of each fiscal quarter, and a requirement that our Fixed Charge Coverage Ratio (as defined in the Amended and Restated Credit Agreement) not fall below 1.10:1.00, in each case, tested quarterly for the trailing four fiscal quarters. The Amended and Restated Credit Agreement matures on December 7, 2028.

Current wording

The Amended and Restated Credit Facility includes customary affirmative and negative covenants and two financial covenants: a requirement that our Total Leverage Ratio not exceed 3.00:1.00 as of the end of each fiscal quarter, and a requirement that our Fixed Charge Coverage Ratio (as defined in the Amended and Restated Credit Agreement) not fall below 1.10:1.00, in each case, tested quarterly for the trailing four fiscal quarters. The Amended and Restated Credit Agreement matures on December 7, 2028. Additionally, the Amended and Restated Credit Facility, as amended by the Sixth Amendment and Waiver, contains a Liquidity Requirement, as described in further detail below, which will apply until the Liquidity Requirement Termination Date.

Previous wording

On May 16, 2024, we entered into an amendment to the Amended and Restated 2023 Credit Facility that, among other things, waived an event of default that had occurred and was then continuing under the Amended and Restated 2023 Credit Facility and modified the affirmative covenants thereunder requiring the joinder of certain subsidiaries of PACS Group, Inc. to the Amended and Restated 2023 Credit Facility, as further set forth therein. On November 14, 2024, we entered into another amendment to the Amended and Restated 2023 Credit Facility that, among other things, extended the deadline for our delivery of unaudited quarterly financial statements for the fiscal quarter ended September 30, 2024. On March 27, 2025, and May 29, 2025, we entered into further amendments to the Amended and Restated 2023 Credit Facility that, among other things, extended the deadline for delivery of audited annual financial statements for the fiscal year ended December 31, 2024. The May 29, 2025 amendment also supplemented the Amended and Restated Credit Agreement’s financial covenants requiring us to maintain unrestricted cash and certain permitted investments of at least $100 million until we deliver audited financial statements for the fiscal year ended December 31, 2024 (the “Liquidity Requirement”).

Current wording

On May 16, 2024, we entered into an amendment to the Amended and Restated Credit Facility that, among other things, waived an event of default that had occurred and was then continuing under the Amended and Restated Credit Facility and modified the affirmative covenants thereunder requiring the joinder of certain subsidiaries of PACS Group, Inc. to the Amended and Restated Credit Facility, as further set forth therein. On November 14, 2024, we entered into another amendment to the Amended and Restated Credit Facility that, among other things, extended the deadline for our delivery of unaudited quarterly financial statements for the fiscal quarter ended September 30, 2024. On March 27, 2025, and May 29, 2025, we entered into further amendments to the Amended and Restated Credit Facility that, among other things, extended the deadline for delivery of audited annual financial statements for the fiscal year ended December 31, 2024. The May 29, 2025 amendment also supplemented the Amended and Restated Credit Agreement’s financial covenants requiring us to maintain unrestricted cash and certain permitted investments of at least $100 million until delivery of audited financial statements for the fiscal year ended December 31, 2024 (the “Liquidity Requirement”).

Previous wording

On July 24, 2025 and August 13, 2025 we entered into two separate forbearance agreements with the Administrative Agent and the lenders, pursuant to which the lenders agreed to temporarily forbear from exercising remedies under the Amended and Restated 2023 Credit Facility with respect to certain technical events of default, including without limitation matters relating to inaccuracies in certain representations and warranties made, which inaccuracies also triggered an event of default under the Third Consolidated Master Lease, dated June 30, 2023 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Omega Master Lease”), which in turn triggered an additional event of default under the Amended and Restated 2023 Credit Facility. In addition, a separate representation and warranty event of default occurred under the Omega Master Lease, which triggered an event of default under the Amended and Restated Credit Agreement (all such technical events of default under the Amended and Restated 2023 Credit Facility, the “Initial Technical Events of Default”). The August 13, 2025 Forbearance Agreement and Fifth Amendment Credit Agreement required that the Liquidity Requirement remain in place for the entirety of the forbearance period and further extended the delivery period with respect to the fiscal year 2024 financial statements. The forbearance period was scheduled to run until October 31, 2025, subject to extension by the Administrative Agent through November 30, 2025, or by the Required Lenders thereafter, or earlier termination upon the occurrence of certain specified events of default.

Current wording

On July 24, 2025 and August 13, 2025 we entered into two separate forbearance agreements with the Administrative Agent and the lenders, pursuant to which the lenders agreed to temporarily forbear from exercising remedies under the Amended and Restated Credit Facility with respect to certain technical events of default, including without limitation matters relating to inaccuracies in certain representations and warranties made, which inaccuracies also triggered an event of default under the Third Consolidated Master Lease, dated June 30, 2023 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Omega Master Lease”), which in turn triggered an additional event of default under the Amended and Restated Credit Facility. In addition, a separate representation and warranty event of default occurred under the Omega Master Lease, which triggered an event of default under the Amended and Restated Credit Agreement (all such technical events of default under the Amended and Restated Credit Facility, the “Initial Technical Events of Default”). The August 13, 2025 Forbearance Agreement and Fifth Amendment Credit Agreement required that the Liquidity Requirement remain in place for the entirety of the forbearance period and further extended the delivery period with respect to the fiscal year 2024 financial statements.

Previous wording

During the years ended December 31, 2024 and 2023, some of our subsidiaries entered into Department of Housing and Urban Development (HUD)-insured mortgage loans in the aggregate amount of $68.3 million and $88.8 million, respectively. Additionally, we converted a $22.5 million construction loan to a HUD-insured mortgage loan during the year ended December 31, 2024. As a result, thirteen of our subsidiaries had mortgage loans insured with HUD in the aggregate amount of $252.9 million as of December 31, 2024, of which $4.0 million is classified as current and the remaining $248.9 million is classified as non-current. As of December 31, 2023, our subsidiaries had HUD-insured mortgage loans in the aggregate amount of $166.2 million of which $2.4 million was classified as current and the remaining $163.8 million was classified as non-current. These subsidiaries are subject to HUD-mortgage oversight and periodic inspections. As of December 31, 2024, our HUD-insured mortgage loans bear fixed interest rates ranging from 2.4% to 6.3% per annum and have various maturity dates through October 1, 2061. In addition to the interest rate, we incur other fees for HUD placement, including but not limited to audit fees. Amounts borrowed under the mortgage loans may be prepaid, subject to prepayment fees based on the principal balance on the date of prepayment. The original terms for all the HUD-insured mortgage loans are 24 to 37 years.

Current wording

During the year ended December 31, 2025, none of our subsidiaries entered into Department of Housing and Urban Development (HUD)-insured mortgage loans, whereas in the year ended December 31, 2024, certain of our subsidiaries entered into HUD-insured mortgage loans in the aggregate amount of $68.3 million. Additionally, we converted a $22.5 million construction loan to a HUD-insured mortgage loan during the year ended December 31, 2024. As of December 31, 2025, 13 of our subsidiaries had mortgage loans insured with HUD in the aggregate amount of $248.9 million as of December 31, 2025, of which $4.2 million was classified as current and the remaining $244.7 million was classified as non-current. As of December 31, 2024, 13 of our subsidiaries had HUD-insured mortgage loans in the aggregate amount of $252.9 million of which $4.0 million was classified as current and the remaining $248.9 million was classified as non-current. These subsidiaries are subject to HUD-mortgage oversight and periodic inspections. As of December 31, 2025, our HUD-insured mortgage loans bear fixed interest rates ranging from 2.4% to 6.3% per annum and have various maturity dates through October 1, 2061. In addition to the interest rate, we incur other fees for HUD placement, including but not limited to audit fees. Amounts borrowed under the mortgage loans may be prepaid, subject to prepayment fees based on the principal balance on the date of prepayment. The original terms for all the HUD-insured mortgage loans are 24 to 37 years.

Previous wording

In addition to the HUD-insured mortgage loans above, our subsidiaries have eight other mortgage loans or promissory notes. The non-HUD insured mortgage loans and notes bear interest rates in the range of 2.0% and 7.5% per annum with various maturity dates through June 1, 2027. The notes are secured by equipment and guarantees by PACS Group, Inc. and its stockholders. As of December 31, 2024 and 2023, we had $17.0 million and $48.8 million, respectively, of debt outstanding under the non-HUD mortgage loans and promissory notes, of which $10.8 million is classified as current and the remaining $6.2 million is classified as non-current as of December 31, 2024, and $14.5 million is classified as current and the remaining $34.3 million is classified as non-current as of December 31, 2023.

Current wording

In addition to the HUD-insured mortgage loans above, our subsidiaries have four other mortgage loans or promissory notes. The non-HUD insured mortgage loans and notes bear interest rates in the range of 2.0% and 7.5% per annum with various maturity dates through June 1, 2027. The notes are secured by equipment and guarantees by PACS Group, Inc. and its stockholders. As of December 31, 2025 and 2024, we had $4.3 million and $17.0 million, respectively, of debt outstanding under the non-HUD mortgage loans and promissory notes, of which $0.3 million is classified as current and the remaining $4.0 million is classified as non-current as of December 31, 2025, and $10.8 million is classified as current and the remaining $6.2 million is classified as non-current as of December 31, 2024.

Previous wording

We lease most of our skilled nursing and assisted living facilities, as well as office space and certain vehicles and equipment, under various non-cancelable operating lease agreements. These operating leases expire at various dates throughout 2049.

Current wording

We lease most of our skilled nursing and assisted living facilities, as well as office space and certain vehicles and equipment, under various non-cancelable operating lease agreements. These operating leases expire at various dates through 2050.

Previous wording

For 35 of the facility operating leases, we hold an option to purchase the real estate which can be exercised at varying times until March 31, 2038. At lease inception it was determined that the exercise of these purchase options was not reasonably assured. Options on three of the leases have become subject to disagreement with the landlord regarding whether the option exercise window has closed, and the Company will be working with the landlord to resolve the disagreement.

Current wording

For 36 of the facility operating leases, we hold an option to purchase the real estate which can be exercised at varying times until March 31, 2038. At lease inception it was determined that the exercise of these purchase options was not reasonably assured. Options on three leases have become subject to disagreement with the landlord regarding whether the option exercise window has closed, and the Company will be working with the landlord to resolve the disagreement.

Previous wording

At our option, the facility leases are generally renewable for additional terms ranging from 3 to 20 years. All facility leases provide for an additional percentage rent based upon specified rates per the terms of the agreements.

Current wording

At our option, the facility leases are generally renewable for additional terms ranging from 5 to 20 years. All facility leases provide for an additional percentage rent based upon specified rates per the terms of the agreements.

Previous wording

We also lease certain skilled nursing and assisted living facilities under finance lease agreements. The lease terms of two of the facility finance leases allow for a purchase option during a specified window. We have determined that we are reasonably certain to exercise the purchase option at the end of each purchase option window. Therefore, we have calculated the lease term through the end of the purchase option window for each such lease. In addition, for six of the facility finance leases, the lessor holds an option which could require us to purchase the associated real estate. The total obligation to purchase such real estate is approximately $86,751 and can be exercised by the lessor through June 14, 2026. For other finance leases, the duration of the lease term represented the major part of the remaining economic life of the facility at inception.

Current wording

We also lease certain skilled nursing and assisted living facilities under finance lease agreements. The lease terms of one of the facility finance leases allow for a purchase option during a specified window. We have determined that we are reasonably certain to exercise the purchase option at the end of the purchase option window. Therefore, we have calculated the lease term through the end of the purchase option window for such lease. In addition, for one of the facility finance leases, the lessor holds an option which could require us to purchase the associated real estate. The total obligation to purchase such real estate is approximately $32,000 and can be exercised by the lessor through June 30, 2026. For other finance leases, the duration of the lease term represented the major part of the remaining economic life of the facility at inception.

Previous wording

We may enter into off-balance sheet arrangements and transactions that can give rise to material off-balance sheet obligations. As of December 31, 2024, we had $13.9 million of borrowing capacity under the Amended and Restated 2023 Credit Facility pledged as collateral to secure outstanding letters of credit. We may enter into further contractual arrangements in the future in order to support our business plans. There are no other transactions, arrangements or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect our liquidity or availability of our capital resources.

Current wording

We may enter into off-balance sheet arrangements and transactions that can give rise to material off-balance sheet obligations. As of December 31, 2025, we had $7.9 million of borrowing capacity under the Amended and Restated Credit Facility pledged as collateral to secure outstanding letters of credit. We may enter into further contractual arrangements in the future in order to support our business plans. There are no other transactions, arrangements or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect our liquidity or availability of our capital resources.

Previous wording

Accrued Risk Reserves- We are principally self-insured for risks related to professional and general liability. Accrued risk reserves include the accrual for risks associated with professional liability claims and include a liability for unpaid reported claims and estimates for incurred but unreported claims.

Current wording

Professional Liability and General Liability Self-Insurance Liabilities- We are principally self-insured for risks related to professional and general liability. Accrued risk reserves include the accrual for risks associated with professional liability claims and include a liability for unpaid reported claims and estimates for incurred but unreported claims.