PACS Group, Inc.

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 June 30, 2026, our portfolio consisted of 324 post-acute care, assisted living, and independent living facilities across 17 states serving 31,900 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 allow 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 September 30, 2026, our portfolio consisted of 355 post-acute care, assisted living, and independent living facilities across 20 states serving 34,700 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 allow 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 and moderately-performing 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 is 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 allow 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, which we define as facilities purchased greater than 36 months prior to the measurement date, as compared to the same metrics for our New facilities, which we define as facilities purchased less than 18 months prior to the measurement date. As of June 30, 2026, our average QM Star rating and occupancy rate for Mature facilities were 4.5 and 94%, respectively, compared to 4.0 and 79%, respectively for New facilities as of the same date.

Current wording

We aim to create value by identifying and acquiring underperforming and moderately-performing 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 is 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 allow 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, which we define as facilities purchased greater than 36 months prior to the measurement date, as compared to the same metrics for our New facilities, which we define as facilities purchased or built less than 18 months prior to the measurement date. As of September 30, 2026, our average QM Star rating and occupancy rate for Mature facilities were 4.5 and 93%, respectively, compared to 3.0 and 76%, respectively for New facilities as of the same date.

Previous wording

As reflected in the table above, our California operations represent our largest geographic concentration, comprising 140 facilities and 16,132 beds/units, or approximately 43% and 45%, respectively, of our total facilities and beds/units.

Current wording

As reflected in the table above, our California operations represent our largest geographic concentration, comprising 140 facilities and 16,132 beds/units, or approximately 39% and 42%, respectively, of our total facilities and beds/units.

Previous wording

During the six months ended June 30, 2026, we expanded our operations with the addition of four assisted living and independent living facilities, three of which were acquired in conjunction with the real estate for the properties and one of which we acquired through a long-term lease. These new operations added a total of 316 assisted living beds to be operated by our affiliated operating subsidiaries. We also made four additional real estate purchases. Regarding these properties, the Company previously operated the facilities and has now acquired the real estate associated with the operations. Additionally, during the same period the Company divested of one facility including 110 skilled nursing beds.

Current wording

During the nine months ended September 30, 2026, we expanded our operations with the addition of 31 skilled nursing facilities and four assisted living and independent living facilities, four of which were acquired in conjunction with the real estate for the properties and 31 of which we acquired through long-term leases. These new operations added a total of 3,115 skilled nursing beds and 316 assisted living beds to be operated by our affiliated operating subsidiaries. We also made nine additional real estate purchases. Regarding these properties, the Company previously operated the facilities and has now acquired the real estate associated with the operations. Additionally, during the same period the Company divested of one facility including 110 skilled nursing beds.

Previous wording

Subsequent to June 30, 2026, we expanded our operations in one existing state through the addition of 20 skilled nursing facilities, which were acquired through long-term leases. The subsequent acquisition added a total of 2,312 skilled nursing beds. Additionally, during the same period we expanded our portfolio of owned properties by acquiring four properties for which we had previously operated the facilities.

Current wording

Subsequent to September 30, 2026, we expanded our operations in one new state and one existing state through the addition of 43 stand-alone facilities, which were acquired through long-term leases. The subsequent acquisitions added a total of 5,334 skilled nursing beds and 49 assisted living beds.

Previous wording

•Number of facilities — The total number of skilled nursing facilities that we operate. This figure excludes 34 and 29 assisted living and independent living facilities for the six months ended June 30, 2026 and 2025, respectively.

Current wording

•Number of facilities — The total number of skilled nursing facilities that we operate. This figure excludes 34 and 30 assisted living and independent living facilities as of September 30, 2026 and 2025, respectively.

Previous wording

The following tables present the above key skilled services metrics by category for the skilled nursing facilities in each of the three facility cohorts, and for all skilled nursing facilities, as of and for the three and six months ended June 30, 2026 and 2025:

Current wording

The following tables present the above key skilled services metrics by category for the skilled nursing facilities in each of the three facility cohorts, and for all skilled nursing facilities, as of and for the three and nine months ended September 30, 2026 and 2025:

Previous wording

The following tables present additional detail regarding our skilled mix, including our percentage of revenue and nursing patient days by payor source for the skilled nursing facilities in each of the three facility cohorts, and for all skilled nursing facilities, for the three and six months ended June 30, 2026 and 2025:

Current wording

The following tables present additional detail regarding our skilled mix, including our percentage of revenue and nursing patient days by payor source for the skilled nursing facilities in each of the three facility cohorts, and for all skilled nursing facilities, for the three and nine months ended September 30, 2026 and 2025:

Previous wording

The following tables present average daily rates by payor source, excluding services that are not covered by the daily rate, for the three and six months ended June 30, 2026 and 2025:

Current wording

The following tables present average daily rates by payor source, excluding services that are not covered by the daily rate, for the three and nine months ended September 30, 2026 and 2025:

Previous wording

The following tables present the above key skilled services metrics by category for all skilled nursing facilities in operation on January 1, 2025, excluding divestitures since that time, as of and for the three and six months ended June 30, 2026 and 2025:

Current wording

The following tables present the above key skilled services metrics by category for all skilled nursing facilities in operation on January 1, 2025, excluding divestitures since that time, as of and for the three and nine months ended September 30, 2026 and 2025:

Previous wording

Adjusted Net Income – We calculate Adjusted Net Income as net income, adjusted for net (loss) income attributable to noncontrolling interest, further adjusted for non-core business items as listed in Adjusted EBITDA, as well as the related income tax effects of these adjustments.

Current wording

Adjusted Net Income – We calculate Adjusted Net Income as net income, adjusted for net loss attributable to noncontrolling interest, further adjusted for non-core business items as listed in Adjusted EBITDA, as well as the related income tax effects of these adjustments.

Previous wording

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

Current wording

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

Previous wording

(1)Represents the Company’s combined federal and state statutory tax rate of approximately 27% for the three and six months ended June 30, 2026 and 2025.

Current wording

(1)Represents the Company’s combined federal and state statutory tax rate of approximately 27% for the three and nine months ended September 30, 2026 and 2025.

Previous wording

Rent - cost of services consists 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, 264 facilities and these amounts do not include taxes, insurance, impounds, capital reserves or other charges payable under the applicable lease agreements.

Current wording

Rent - cost of services consists 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, 289 facilities and these amounts do not include taxes, insurance, impounds, capital reserves or other charges payable under the applicable lease agreements.

Previous wording

Patient and resident service revenue - Patient and resident service revenue increased by $118.6 million to $1.4 billion for the three months ended June 30, 2026, a 9.1% increase compared to the three months ended June 30, 2025. For the three months ended June 30, 2026 and 2025, skilled nursing services revenue represented more than 96% of patient and resident service revenue.

Current wording

Patient and resident service revenue - Patient and resident service revenue increased by $153.8 million to $1.5 billion for the three months ended September 30, 2026, an 11.4% increase compared to the three months ended September 30, 2025. For the three months ended September 30, 2026 and 2025, skilled nursing services revenue represented more than 96% of patient and resident service revenue.

Previous wording

Skilled nursing services revenue increased by 8.8%, or $222.5 million, to $2.8 billion for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. This increase is inclusive of revenue of $23.3 million from payments received under California’s Workforce & Quality Incentive Program (resulting in a net impact to Adjusted EBITDA of $16.3 million), recognized during the six months ended June 30, 2026. The change to skilled nursing services revenue was driven by an increase in patient days of 192,244, or 3.7%, related to an increase in operational bed count and an increase in overall occupancy. Same-store skilled nursing services revenue grew by $173.5 million, or 6.9%, while same-store occupancy grew from 89.3% during the six months ended June 30, 2025 to 90.8% during the six months ended June 30, 2026. Additionally, on a same-store basis, skilled mix by patient days grew 50 bps to 29.9%.

Current wording

Skilled nursing services revenue increased by 10.7%, or $140.4 million, to $1.5 billion for the three months ended September 30, 2026, compared to the three months ended September 30, 2025. This increase is inclusive of revenue of $6.3 million from payments received under California’s Workforce & Quality Incentive Program (resulting in a net impact to Adjusted EBITDA of $4.4 million and net income of $2.9 million), recognized during the three months ended September 30, 2026. The change to skilled nursing services revenue was driven by an increase in patient days of 200,721, or 7.5%, related to an increase in operational bed count and an increase in overall occupancy. Same-store skilled nursing services revenue grew by $83.1 million, or 6.4%, while same-store occupancy grew from 89.3% during the three months ended September 30, 2025 to 91.3% during the three months ended September 30, 2026. Additionally, on a same-store basis, skilled mix by patient days grew 120 bps to 29.5%.

Previous wording

Our skilled nursing services revenue is impacted by fluctuations in our payor source mix. Additionally, our average Medicare daily rates increased by 1.0% for the three months ended June 30, 2026, compared to the three months ended June 30, 2025.

Current wording

Our skilled nursing services revenue is impacted by fluctuations in our payor source mix. Additionally, our average Medicare daily rates decreased by 0.5% for the three months ended September 30, 2026, compared to the three months ended September 30, 2025.

Previous wording

Our average Medicaid rates increased 3.1% due to state reimbursement increases and our participation in supplemental Medicaid payment programs and quality improvement programs in various states. Medicaid rates exclude the amount of state relief revenue we recorded.

Current wording

Our average Medicaid rates increased 1.4% due to state reimbursement increases and our participation in supplemental Medicaid payment programs and quality improvement programs in various states. Medicaid rates exclude the amount of state relief revenue we recorded.

Previous wording

The remaining increase in patient and resident service revenue of $20.5 million was attributable to supplemental revenue and revenue from our assisted living and independent living operations, which growth also included the addition of five assisted living and independent living facilities since June 30, 2025, including one facility added during the three months ended June 30, 2026.

Current wording

The remaining increase in patient and resident service revenue of $13.4 million was attributable to supplemental revenue and revenue from our assisted living and independent living operations, which growth also included the addition of four assisted living and independent living facilities since September 30, 2025.

Previous wording

Other revenue - Other revenue increased by $0.1 million for the three months ended June 30, 2026 compared to the same period in the prior year due to a change in lease income over these periods.

Current wording

Other revenue - Other revenue increased by $0.2 million for the three months ended September 30, 2026 compared to the same period in the prior year due to a change in lease income over these periods.

Previous wording

Cost of services increased by $68.7 million to $1.1 billion, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. The 6.7% increase was primarily driven by an increase of $25.5 million, or 4.0%, in salaries and wages. Our total number of post-acute care facilities, inclusive of skilled nursing facilities and assisted living facilities, increased 2.5% from 316 as of June 30, 2025, to 324 as of June 30, 2026. Of the salaries and wages increase, those attributable to New facilities purchased after June 30, 2025 accounted for $13.1 million, or 51.4% of the increase in salaries and wages. Headcount and operational changes attributable to other New, Ramping, and Mature facilities accounted for the remaining change in salaries and wages. Aside from labor costs, the increase in cost of services was also due to increases of $31.6 million in administrative expenses for facilities, primarily consisting of an increase in liability insurance of $26.2 million; $6.0 million in nursing and dietary expenses; and $3.5 million in contracted services. The remaining change in cost of services was spread out across various expense types.

Current wording

Cost of services increased by $95.9 million to $1.1 billion, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025. The 9.2% increase was primarily driven by an increase of $54.6 million, or 8.4%, in salaries and wages. Our total number of post-acute care facilities, inclusive of skilled nursing facilities and assisted living facilities, increased 10.9% from 320 as of September 30, 2025, to 355 as of September 30, 2026. Of the salaries and wages increase, those attributable to New facilities purchased after September 30, 2025 accounted for $26.1 million, or 47.8% of the increase in salaries and wages. Headcount and operational changes attributable to other New, Ramping, and Mature facilities accounted for the remaining change in salaries and wages. Aside from labor costs, the increase in cost of services was also due to increases of $16.8 million in facility support service expenses, primarily consisting of an increase in liability insurance of $9.7 million; $11.3 million in ancillary expenses; and $7.4 million in nursing and dietary expenses. The remaining change in cost of services was spread out across various expense types.

Previous wording

Rent - cost of services increased slightlyto $94.7 million for the three months ended June 30, 2026, compared to $94.3 million for the three months ended June 30, 2025. The increase was primarily attributable to the addition of new facilities with operating leases since June 30, 2025, as well as to annual escalators on existing facilities' rent. This increase was offset by a reduction in rent due to the acquisition of the real estate for facilities which we previously operated, over that same time.

Current wording

Rent - cost of services increased to $98.2 million for the three months ended September 30, 2026, compared to $95.1 million for the three months ended September 30, 2025. The increase was primarily attributable to the addition of new facilities with operating leases since September 30, 2025, as well as to annual escalators on existing facilities' rent. This increase was offset by a reduction in rent due to the acquisition of the real estate for facilities which we previously operated, over that same time.

Previous wording

General and administrative expense increased by $14.0 million, to $114.3 million for the three months ended June 30, 2026, compared to $100.3 million for the three months ended June 30, 2025. This increase was primarily due to an increase in salaries and wages of $8.7 million due to growth in operations, and to an increase in stock-based compensation expense recognized during the quarter which accounted for an additional $12.2 million increase. These increases within general and administrative expense were partially offset by a decrease in professional fees, including a decrease of $15.9 million in legal expenses associated with the Audit Committee’s independent investigation during the year ended December 31, 2025, and with ongoing government investigations. The remaining change in general and administrative expense was spread out over various expense types.

Current wording

General and administrative expense increased by $35.9 million, to $138.4 million for the three months ended September 30, 2026, compared to $102.5 million for the three months ended September 30, 2025. This increase was primarily due to an increase in salaries and wages of $7.7 million due to growth in operations, and to an increase in stock-based compensation expense of $32.8 million, of which $20.0 million related to the acceleration of vesting for equity awards held by an executive upon his retirement, with the remainder driven by increased equity awards granted to employees. These increases within general and administrative expense were partially offset by a decrease in professional fees, including a decrease of $11.9 million in legal expenses associated with the Audit Committee’s independent investigation during the year ended December 31, 2025, and with ongoing government investigations. The remaining change in general and administrative expense was spread out over various expense types.

Previous wording

Depreciation and amortization increased by $6.9 million to $20.1 million, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. This increase is directly attributable to our acquisitions since June 30, 2025, particularly to new real estate obtained through acquisitions.

Current wording

Depreciation and amortization increased by $5.7 million to $20.1 million, for the three months ended September 30, 2026, compared to the three months ended September 30, 2025. This increase is directly attributable to our real estate acquisitions since September 30, 2025.

Previous wording

Provision for income taxes totaled $62.6 million for the six months ended June 30, 2026, representing an effective tax rate of 28.2%, compared to a provision for income taxes of $42.0 million and an effective tax rate of 34.6% for the six months ended June 30, 2025. The change in effective tax rate in the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to the change in forecasted pre-tax book income and the impact of excess tax benefits from stock-based compensation. See Note 11 “Income Taxes”, in our condensed consolidated financial statements for more information.

Current wording

Provision for income taxes totaled $30.5 million for the three months ended September 30, 2026, representing an effective tax rate of 34.2%, compared to a provision for income taxes of $24.0 million and an effective tax rate of 31.4% for the three months ended September 30, 2025. The Company’s effective tax rate for the three months ended September 30, 2026 differs from the rate calculated from the consolidated statements of income of 33.4%, primarily due to income recognized during the three months ended September 30, 2026 in certain jurisdictions that was offset by prior year-to-date losses for which no tax benefit had previously been recognized due to valuation allowances. The change in effective tax rate in the three months ended September 30, 2026 compared to the three months ended September 30, 2025 was primarily due to the change in forecasted pre-tax book income and an increase in non-deductible expenses. See Note 11 “Income Taxes”, in our condensed consolidated financial statements for more information.

Previous wording

Patient and resident service revenue - Patient and resident service revenue increased by $261.6 million to $2.8 billion for the six months ended June 30, 2026, a 10.1% increase compared to the six months ended June 30, 2025. For the six months ended June 30, 2026 and 2025, skilled nursing services revenue represented more than 96% of patient and resident service revenue.

Current wording

Patient and resident service revenue - Patient and resident service revenue increased by $415.4 million to $4.3 billion for the nine months ended September 30, 2026, a 10.6% increase compared to the nine months ended September 30, 2025. For the nine months ended September 30, 2026 and 2025, skilled nursing services revenue represented more than 96% of patient and resident service revenue.

Previous wording

Skilled nursing services revenue increased by 7.7%, or $98.1 million, to $1.4 billion for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. The change to skilled nursing services revenue was driven by an increase in patient days of 100,539, or 3.9%, related to an increase in operational bed count and an increase in overall occupancy. Same-store skilled nursing services revenue grew by $74.0 million, or 5.8%, while same-store occupancy grew from 89.1% during the three months ended June 30, 2025 to 90.6% during the three months ended June 30, 2026. Additionally, on a same-store basis, skilled mix by patient days grew 50 bps to 29.7%.

Current wording

Skilled nursing services revenue increased by 9.4%, or $362.9 million, to $4.2 billion for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. This increase is inclusive of revenue of $31.9 million from payments received under California’s Workforce & Quality Incentive Program (resulting in a net impact to Adjusted EBITDA of $22.4 million and net income of $15.7 million), recognized during the nine months ended September 30, 2026. The change to skilled nursing services revenue was driven by an increase in patient days of 392,965, or 5.0%, related to an increase in operational bed count and an increase in overall occupancy. Same-store skilled nursing services revenue grew by $256.6 million, or 6.7%, while same-store occupancy grew from 89.3% during the nine months ended September 30, 2025 to 90.9% during the nine months ended September 30, 2026. Additionally, on a same-store basis, skilled mix by patient days grew 80 bps to 29.8%.

Previous wording

Our skilled nursing services revenue is impacted by fluctuations in our payor source mix. Additionally, our average Medicare daily rates increased by 1.1% for the six months ended June 30, 2026, compared to the six months ended June 30, 2025.

Current wording

Our skilled nursing services revenue is impacted by fluctuations in our payor source mix. Additionally, our average Medicare daily rates increased by 0.6% for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025.

Previous wording

Our average Medicaid rates increased 3.6% due to state reimbursement increases and our participation in supplemental Medicaid payment programs and quality improvement programs in various states.

Current wording

Our average Medicaid rates increased 2.8% due to state reimbursement increases and our participation in supplemental Medicaid payment programs and quality improvement programs in various states.

Previous wording

The remaining increase in patient and resident service revenue of $39.2 million was attributable to supplemental revenue and revenue from our assisted living and independent living operations, which growth also included the addition of five assisted living and independent living facilities since June 30, 2025, including four facilities added during the six months ended June 30, 2026.

Current wording

The remaining increase in patient and resident service revenue of $52.5 million was attributable to supplemental revenue and revenue from our assisted living and independent living operations, which growth also included the addition of four assisted living and independent living facilities since September 30, 2025, all of which were added during the nine months ended September 30, 2026.

Previous wording

Other revenue - Other revenue increased by $0.5 million for the six months ended June 30, 2026 compared to the same period in the prior year due to a change in lease income over these periods.

Current wording

Other revenue - Other revenue increased by $0.7 million for the nine months ended September 30, 2026 compared to the same period in the prior year due to a change in lease income over these periods.

Previous wording

Cost of services increased by $119.4 million to $2.2 billion, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The 5.8% increase was primarily driven by an increase of $65.0 million, or 5.1%, in salaries and wages. Our total number of post-acute care facilities, inclusive of skilled nursing facilities and assisted living facilities, increased 2.5% from 316 as of June 30, 2025, to 324 as of June 30, 2026. Of the salaries and wages increase, those attributable to New facilities purchased after June 30, 2025 accounted for $26.0 million, or 40.0% of the increase in salaries and wages. Headcount and operational changes attributable to other New, Ramping, and Mature facilities accounted for the remaining change in salaries and wages. Aside from labor costs, the increase in cost of services was due to increases of $33.6 million in administrative expenses for facilities, primarily consisting of an increase in liability insurance of $28.8 million; $9.3 million in nursing and dietary expenses; and $7.4 million in contracted services. The remaining change in cost of services was spread out across various expense types.

Current wording

Cost of services increased by $215.3 million to $3.3 billion, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. The 7.0% increase was primarily driven by an increase of $119.6 million, or 6.2%, in salaries and wages. Our total number of post-acute care facilities, inclusive of skilled nursing facilities and assisted living facilities, increased 10.9% from 320 as of September 30, 2025, to 355 as of September 30, 2026. Of the salaries and wages increase, those attributable to New facilities purchased after September 30, 2025 accounted for $37.3 million, or 31.2% of the increase in salaries and wages. Headcount and operational changes attributable to other New, Ramping, and Mature facilities accounted for the remaining change in salaries and wages. Aside from labor costs, the increase in cost of services was due to increases of $50.5 million in administrative expenses for facilities, primarily consisting of an increase in liability insurance of $38.5 million; $18.7 million in ancillary expenses; and $16.7 million in nursing and dietary expenses. The remaining change in cost of services was spread out across various expense types.

Previous wording

Rent - cost of services increased to $190.2 million for the six months ended June 30, 2026, compared to $188.1 million for the six months ended June 30, 2025. The increase was primarily attributable to the addition of new facilities with operating leases since June 30, 2025, as well as to annual escalators on existing facilities' rent. This increase was offset by a reduction in rent due to the acquisition of the real estate for facilities which we previously operated, over that same time.

Current wording

Rent - cost of services increased to $288.5 million for the nine months ended September 30, 2026, compared to $283.3 million for the nine months ended September 30, 2025. The increase was primarily attributable to the addition of new facilities with operating leases since September 30, 2025, as well as to annual escalators on existing facilities' rent. This increase was offset by a reduction in rent due to the acquisition of the real estate for facilities which we previously operated, over that same time.

Previous wording

General and administrative expense increased by $27.6 million, to $226.6 million for the six months ended June 30, 2026, compared to $199.1 million for the six months ended June 30, 2025. This increase was primarily due to an increase in salaries and wages of $20.1 million due to growth in operations and to an increase in stock-based compensation expense recognized during the period which accounted for an additional $20.4 million increase. These increases within general and administrative expense were partially offset by a decrease in professional fees, including a decrease of $26.9 million in legal expenses associated with the Audit Committee’s independent investigation during the year ended December 31, 2025 and with ongoing government investigations. The remaining change in general and administrative expense was spread out over various expense types.

Current wording

General and administrative expense increased by $63.5 million, to $365.0 million for the nine months ended September 30, 2026, compared to $301.6 million for the nine months ended September 30, 2025. This increase was primarily due to an increase in salaries and wages of $27.8 million due to growth in operations, an increase in stock-based compensation expense recognized during the period of $53.2 million inclusive of increased equity awards granted to employees as well as the acceleration of vesting for equity awards held by an executive upon his retirement, and a $9.9 million increase to general legal fees. These increases within general and administrative expense were partially offset by a decrease in professional fees, including a decrease of $38.8 million in legal expenses associated with the Audit Committee’s independent investigation during the year ended December 31, 2025 and with ongoing government investigations. The remaining change in general and administrative expense was spread out over various expense types.

Previous wording

Depreciation and amortization increased by $12.3 million to $38.2 million, for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. This increase is directly attributable to our acquisitions since June 30, 2025, particularly to new real estate obtained through acquisitions.

Current wording

Depreciation and amortization increased by $18.0 million to $58.3 million, for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. This increase is directly attributable to our real estate acquisitions since September 30, 2025.

Previous wording

Total other expense, net was $9.8 million for the six months ended June 30, 2026, an increase of $2.5 million compared to $7.3 million for the six months ended June 30, 2025. Total other expense, net consists of interest expense, which increased by $1.2 million, to $12.5 million for the six months ended June 30, 2026 including increased interest expense on finance leases. Additionally, other income, net decreased $1.3 million from $4.0 million for the six months ended June 30, 2025 to $2.7 million for the six months ended June 30, 2026, driven primarily by a decrease from unrealized income to an unrealized loss in equity securities, offset by an increase in unrealized income on our investments in partnerships.

Current wording

Additionally, other (expense) income, net increased $3.2 million from income of $2.5 million for the nine months ended September 30, 2025 to an expense of $0.6 million for the nine months ended September 30, 2026, driven primarily by an increased unrealized loss in equity securities and increased other miscellaneous expense activity, offset by an increase in unrealized income on our investments in partnerships.

Previous wording

Provision for income taxes totaled $29.5 million for the three months ended June 30, 2026, representing an effective tax rate of 27.3%, compared to a provision for income taxes of $27.6 million and an effective tax rate of 35.2% for the three months ended June 30, 2025. The change in effective tax rate in the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was primarily due to the change in forecasted pre-tax book income and the impact of excess tax benefits from stock-based compensation. See Note 11 “Income Taxes”, in our condensed consolidated financial statements for more information.

Current wording

Provision for income taxes totaled $93.1 million for the nine months ended September 30, 2026, representing an effective tax rate of 29.9%, compared to a provision for income taxes of $66.0 million and an effective tax rate of 33.4% for the nine months ended September 30, 2025. The change in effective tax rate in the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 was primarily due to the change in forecasted pre-tax book income and the impact of excess tax benefits from stock-based compensation. See Note 11 “Income Taxes”, in our condensed consolidated financial statements for more information.

Previous wording

As of June 30, 2026, 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 $164.5 million. Following net payments on the line of credit of $45.0 million during the quarter ended June 30, 2026, we had no debt outstanding under our Amended and Restated Credit Facility as of June 30, 2026. In addition, we had outstanding letters of credit of $7.9 million as of June 30, 2026.

Current wording

As of September 30, 2026, 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 $115.3 million. Following net payments on the line of credit of $100.0 million during the nine months ended September 30, 2026, we had no debt outstanding under our Amended and Restated Credit Facility as of September 30, 2026. In addition, we had outstanding letters of credit of $7.9 million as of September 30, 2026.

Previous wording

The terms of the 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 real estate acquisitions was $190.8 million for the six months ended June 30, 2026, compared to $0.2 million for the six months ended June 30, 2025. Total cash paid for capital expenditures for property and equipment were $48.4 million and $36.3 million for the six months ended June 30, 2026 and 2025, respectively.

Current wording

The terms of the 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 real estate and operational acquisitions was $376.3 million for the nine months ended September 30, 2026, compared to $80.6 million for the nine months ended September 30, 2025. Total cash paid for capital expenditures for property and equipment were $80.9 million and $54.3 million for the nine months ended September 30, 2026 and 2025, respectively.

Previous wording

Net cash provided by operating activities for the six months ended June 30, 2026 of $371.8 million increased by $169.0 million as compared with the same period in 2025. The increase was driven by an increase in operational performance across our existing portfolio of facilities as well as the incremental operational performance across our net eight facilities acquired since June 30, 2025. This increase was further driven by an increase in cash flows from the change in operating assets and liabilities of $80.6 million due primarily to the timing of accounts receivable collections as well as the timing of payables and other accrued liabilities. The impact to collections is driven by growth in operating facilities period-over-period, supported by a decrease in days sales outstanding of 5.0, from 51.9 as of June 30, 2025, to 46.9 as of June 30, 2026. This change in days sales outstanding is due to operational efficiencies as facilities continue to mature following facility ownership transition.

Current wording

Net cash provided by operating activities for the nine months ended September 30, 2026 of $583.1 million increased by $175.5 million as compared with the same period in 2025. The increase was driven by an increase in operational performance across our existing portfolio of facilities. This increase was further driven by an increase in cash flows from the change in operating assets and liabilities of $41.7 million due primarily to the timing of accounts receivable collections as well as the timing of payables and other accrued liabilities. The impact to collections is driven by growth in operating facilities period-over-period, supported by a decrease in days sales outstanding of 4.9, from 50.4 as of September 30, 2025, to 45.5 as of September 30, 2026. This change in days sales outstanding is due to operational efficiencies as facilities continue to mature following facility ownership transition.