PACS Group, Inc.

NOTE 1. ORGANIZATION AND NATURE OF BUSINESS

PACS Group, Inc. (PACS Group or the Company) is a holding company which consolidates various operating and other subsidiaries. PACS Group’s applicable operating subsidiaries operate various skilled nursing facilities (SNF) and assisted living facilities (ALF). PACS Group also owns other subsidiaries that are engaged in the acquisition, ownership, and leasing of health care-related properties. As of September 30, 2026, PACS Group subsidiaries operated 355 health care facilities in the states of Alaska, Arizona, California, Colorado, Idaho, Kansas, Kentucky, Missouri, Montana, Nevada, New Mexico, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, and Washington. PACS Group subsidiaries operated 35,933 skilled nursing beds and 2,841 assisted living beds as of that date. As of September 30, 2026, PACS Group subsidiaries operated 289 facilities under long-term lease arrangements and had options to purchase 36 of those facilities.

PACS Group owns subsidiaries that own real estate and related improvements that are leased to applicable affiliated SNF operating entities. PACS Group’s real estate portfolio includes 66 properties which are operated and managed by applicable PACS Group subsidiaries. PACS Group subsidiaries also have equity method investments in partnerships that own the underlying real estate and related improvements of 49 post-acute care facilities that are operated by other PACS Group subsidiaries.

Providence Administrative Consulting Services, Inc., a California corporation, is a subsidiary of PACS Group and provides administrative support services, on a consulting basis, to other subsidiaries of PACS Group.

PACS Group also hastwo wholly-owned captive insurance subsidiaries, Welsch Insurance Ltd. and Welsch Insurance Company, LLC (together, Welsch). Welsch provides coverage to various consolidated operating subsidiaries related to professional liability and general liability (PLGL) insurance.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The condensed consolidated financial statements include the accounts of PACS Group, and its consolidated subsidiaries, or the Company as defined above. All intercompany transactions and balances have been eliminated in consolidation. The Company presents noncontrolling interests within the equity section of its condensed consolidated balance sheets and the amount of condensed consolidated income that is attributable to the Company and the noncontrolling interest in its condensed consolidated statements of income.

The accompanying condensed consolidated financial statements as of September 30, 2026 and for the three and nine months ended September 30, 2026 and 2025 are unaudited. The December 31, 2025 balance sheet data was derived from audited financial statements; however, the accompanying notes to the condensed consolidated financial statements do not include all of the annual disclosures required under U.S. GAAP and should be read in conjunction with the audited combined/consolidated financial statements included in the Company’s Annual Report on Form 10-K, File No. 001-42011 (Annual Report) for the year ended December 31, 2025 filed with the Securities and Exchange Commission (SEC). Management believes that the condensed consolidated financial statements reflect all adjustments which are of a normal and recurring nature necessary to present fairly the Company’s financial position and results of operations in all material respects. The results of operations presented in the condensed consolidated financial statements are not necessarily representative of operations for the entire year.

Recent Accounting Standards Issued But Not Yet Adopted by the Company

In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Disaggregation of Income Statement Expenses, which requires the Company to disaggregate key expense categories such as employee compensation, depreciation, and intangible asset amortization within its financial statements. This guidance is effective for annual periods beginning after December 15, 2026, which will be the Company’s fiscal year 2027, and interim reporting periods beginning after December 15, 2027, which will be the Company’s fiscal year 2028. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on the disclosures included in the notes to the interim condensed consolidated financial statements and annual combined/consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies interim disclosure requirements and the applicability of Topic 270. The guidance will be effective for interim periods beginning January 1, 2028. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. The Company is currently evaluating the impact this guidance will have and does not expect the adoption of this guidance to have a material impact on the interim condensed consolidated financial statements.

NOTE 3. BUSINESS SEGMENTS

The Company hasone reportable segment. The Company’s chief operating decision maker (CODM), the Chief Operating Officer, reviews the consolidated results of operations when making decisions about allocating resources and assessing the performance of the Company as a whole. The Company does not distinguish between markets or regions for the purpose of allocating resources. This structure reflects its current operational and financial management and provides the best structure to maximize the quality of care and investment strategy provided, while maintaining financial discipline. The segment’s measure of profit or loss is net income, which is also reported on the condensed consolidated statements of income. Net income is also used to monitor budget versus actual results.

As the Company’s single reportable segment is at the consolidated level, the accounting policies of the reportable segment are the same as those disclosed in Note 2, “Summary of Significant Accounting Policies”, of its 2025 Annual Report. The Company's CODM does not review segment assets at a different asset level or category than that disclosed in its condensed consolidated balance sheets and therefore assets by segment are not disclosed below.

The following table sets forth financial information for the segment:

(1) Labor expense includes nursing and departmental salaries and wages, payroll taxes and benefits, and agency staffing expenses.

(2) Other segment items included in segment net income include cost of services except for labor cost of services, rent - cost of services, general and administrative expense except for labor general and administrative expense, and other (expense) income except for interest expense, and equity in the net (income) loss of investees accounted for under the equity method.

NOTE 4. REVENUE AND ACCOUNTS RECEIVABLE

Patient and resident service revenue is derived from services rendered, under short-term contracts, to patients for skilled nursing, rehabilitation therapy, and assisted living services. Patient and resident service revenue is reported at the amount that reflects the consideration to which the Company expects to be entitled in exchange for providing patient services. These amounts are due from patients, governmental programs, and other third-party payors, and include variable consideration for retroactive revenue adjustments due to settlement of audits, reviews, and investigations.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with its patients by payors. The Company determined that disaggregating revenue into these categories achieves the disclosure objectives to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The composition of patient and resident service revenue by primary payors for the three and nine months ended September 30, 2026 and 2025 is as follows:

Refund Liability

The balance of the refund liability was $181,129 as of both September 30, 2026 and December 31, 2025, and is presented within current liabilities on the Company’s condensed consolidated balance sheets.

NOTE 5. PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following:

The Company evaluated its long-lived assets and didnot record any impairment charges for the nine months ended September 30, 2026, and 2025.

See Note 13, “Operation Expansions”, for information on expansions and disposals during the nine months ended September 30, 2026.

NOTE 6. GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS

The Company assesses goodwill for impairment at least annually during the fourth quarter of each year. The Company will perform an impairment assessment at other times if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit that has goodwill, is less than its carrying value. There were no indicators of goodwill impairment noted during the nine months ended September 30, 2026. The Company anticipates that 100% of goodwill recognized will be fully deductible for tax purposes as of September 30, 2026.

Goodwill consisted of the following:

The Company reviews other indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. There were no indicators of impairment related to the Company’s other indefinite-lived intangible assets during the nine months ended September 30, 2026.

Other indefinite-lived intangible assets had a value of $6,270 as of both September 30, 2026 and December 31, 2025, respectively.

NOTE 7. FAIR VALUE MEASUREMENT

The Company's financial assets include insurance subsidiary deposits and highly liquid investments which are held by Welsch and are designated to support long-term insurance subsidiary liabilities and are recorded at fair value of $164,703 and $87,192 as of September 30, 2026 and December 31, 2025, respectively. The insurance subsidiary deposits and investments include net unrealized gains of $1,104 and $5,280 as of September 30, 2026 and December 31, 2025, respectively. Gains and losses on investments are recorded within other (expense) income, net. Insurance subsidiary deposits and investments consist of holdings in investment grade bond mutual funds and are derived using Level 2 inputs. These assets are recorded in insurance subsidiary deposits and investments on the condensed consolidated balance sheets and are classified as equity securities. These mutual funds are primarily valued utilizing calculations which incorporate observable inputs such as yield, maturity and credit quality.

NOTE 8. INVESTMENT IN PARTNERSHIPS

As of September 30, 2026 and December 31, 2025, the Company held $13,100 and $30,801, respectively, in multiple equity method investments, referred to as partnerships, included in other assets on the Company’s condensed consolidated balance sheets. These operations were formed to develop, own, and lease health care facilities. Some of the partnerships hold options to purchase the related real estate property holdings. Each of the entities is governed by a managing member who makes the significant decisions that impact the economic performance of the entity. The Company is not the managing member of any of the entities in which it is invested.

On July 31, 2026, the Company purchased the remaining 50.0% ownership interest in the entity BRFS SNF Ventures V, LLC (BRFS). This investment held the underlying real estate forthree post-acute care facilities which it leased to the Company. BRFS is a variable interest entity (VIE), however prior to the purchase of the remaining 50.0% ownership interest, the Company did not consolidate the entity as it did not have the power to direct the activities that most significantly impact its economic performance. Therefore, at that time the Company only accounted for its specific interest in the investment. The investment was $0 on the Company’s condensed consolidated balance sheets as of September 30,

2026, as the Company began fully consolidating the entity following the purchase, and was $14,948 as of December 31, 2025.

The Company holds a 25.8% ownership interest in the entity Next Saddle Investors, LLC (Saddle). This investment holds the underlying real estate for 37 post-acute care facilities which it leases to the Company. The Company determined the Saddle manager held a de facto agency relationship with the Company under FASB ASC Topic 810, Consolidation (ASC 810). Saddle is a VIE; however, because the Company is not the primary beneficiary, it does not consolidate the entity and only accounts for its specific interest in the investment. The investment was $2,426 and $4,986 on the Company’s condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025, respectively.

All of the Company’s other equity investments are individually immaterial with the largest investment of $7,776 in an entity representing an ownership of 49.0%. (Gain) loss from the investment in partnerships was $(332) and $488 for the three months ended September 30, 2026 and 2025, respectively and was $(1,517), and $800 for the nine months ended September 30, 2026 and 2025, respectively.

NOTE 9. CREDIT FACILITIES

The Company maintains a revolving credit facility between the Company and certain of its subsidiaries, and Truist Bank as administrative agent (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 $600,000 which revolving commitments may also be utilized for (x) the issuance of letters of credit in an aggregate face amount not to exceed $50,000 and/or (y) the borrowing of swingline loans in aggregate principal amount not to exceed $20,000 at any time outstanding.

Outstanding borrowings under the Amended and Restated Credit Facility bear interest at the option of the Company equal to either (a) SOFR (plus a 0.10% credit spread adjustment) plus a margin ranging from 2.25% to 3.25% per annum; or (b) the Base Rate (which was defined in a customary manner for credit facilities of this type) plus the applicable margin ranging from 1.25% to 2.25% per annum. The applicable margin is based on the Company’s debt to income ratio as calculated consistent with the terms of the credit agreement. In addition, the Company will pay a commitment fee ranging from 0.25% to 0.45% per annum on the unused portion of the Revolving Commitment, depending on the same debt to income ratio.

The credit agreement contains certain financial and non-financial covenants and restrictions. Default by the applicable credit party on any covenant or restriction could affect the lender’s commitment to lend, and, if not waived or corrected, could make the outstanding balances due on demand. Under the Amended and Restated Credit Facility, the Company must maintain a debt-to-income ratio of not greater than 3.00:1.00. The Amended and Restated Credit Facility also requires that the Company maintain a minimum interest/rent coverage ratio of not less than 1.10:1.00. Additionally, the Amended and Restated Credit Facility, as amended by the Sixth Amendment and Waiver, contained a Liquidity Requirement, as described in further detail below, which applied until the Liquidity Requirement Termination Date.

On May 16, 2024, the Company 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 the Company to the Amended and Restated Credit Facility, as further set forth therein. On November 14, 2024, the Company entered into another amendment to the Amended and Restated Credit Facility that, among other things, extended the deadline for the delivery of unaudited quarterly financial statements for the fiscal quarter ended September 30, 2024. On March 27, 2025, and May 29, 2025, the Company 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 the Company to maintain unrestricted cash and certain permitted investments of at least $100,000 until the Company delivers audited financial statements for the fiscal year ended December 31, 2024 (the “Liquidity Requirement”).

On July 24, 2025 and August 13, 2025 the Company entered intotwo 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 to the 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.

On October 21, 2025, the Company entered into a third forbearance agreement (the “October Forbearance Agreement”). Under the October Forbearance Agreement, the lenders again agreed to temporarily forbear from exercising rights and remedies under the Amended and Restated Credit Agreement with respect to the Initial Technical Events of Default, as well as certain additional technical events of default including without limitation matters relating to the designation of certain immaterial conflicted subsidiaries; failure to join certain subsidiaries to the loan documents; noncompliance with cash management requirements; and inaccuracies in certain representations and warranties made as a result of the foregoing (collectively, with the Initial Technical Events of Default, the “Technical Events of Default”). The Technical Events of Default also triggered an event of default under the Omega Master Lease, which in turn triggered an additional event of default under the Amended and Restated Credit Agreement.

On November 26, 2025, the Company entered into another amendment to and waiver (“Sixth Amendment and Waiver”) under the Amended and Restated Credit Facility that, among other things, waived all Technical Events of Default. The Sixth Amendment and Waiver also amended the Amended and Restated Credit Agreement to, among other things, require that the Liquidity Requirement remain in place until the Company delivered to the Administrative Agent financial statements and a corresponding compliance certificate for the fiscal quarter ended June 30, 2026 (the “Liquidity Requirement Termination Date”). On April 13, 2026, the Company entered into another amendment to the Amended and Restated Credit Facility (the “Seventh Amendment”), which, among other things, made certain technical modifications to a representation and warranty regarding health care permits and to the permitted investments covenant relating to joint ventures. On August 5, 2026, the Liquidity Requirement was lifted.

The Company was in compliance with all such covenants and restrictions as of September 30, 2026.

The Company maintains the Amended and Restated Credit Facility as its single line of credit. As of September 30, 2026, the total commitment limit continued to be $600,000 and was secured by Company assets. The agreement matures on December 7, 2028. The balance outstanding on the credit facility was $0 and $100,000 as of September 30, 2026 and December 31, 2025, respectively. The Company had $7,850 in letters of credit outstanding as of September 30, 2026 and December 31, 2025.

Net deferred financing fees on the line of credit were $6,602 and $8,867 as of September 30, 2026 and December 31, 2025, respectively, and are recorded in other assets on the Company’s condensed consolidated balance sheets. Expense recognized relating to deferred financing fees on the line of credit was $755 for both the three months ended September 30, 2026 and 2025, respectively, and $2,265 for both the nine months ended September 30, 2026 and 2025, respectively, and is included in interest expense on the condensed consolidated statements of income.

NOTE 10. LONG-TERM DEBT

During the nine months ended September 30, 2026 the Company and its subsidiaries didnot enter into any Department of Housing and Urban Development (HUD)-insured mortgage loans. During the same period, the Company assumedtwo HUD-insured loans in the aggregate amount of $27,460 as part of acquisitions. As of September 30, 2026,15 of the Company's subsidiaries had mortgage loans insured by HUD in the aggregate amount of $273,148, of which $4,950 was classified as current and the remaining $268,198 was classified as non-current. As of December 31, 2025, the Company’s subsidiaries had HUD-insured mortgage loans in the aggregate amount of $248,906 of which $4,169 was classified as current and the remaining $244,737 was classified as non-current. These subsidiaries are subject to HUD-mortgage oversight and periodic inspections. As of September 30, 2026, the Company’s HUD-insured mortgage loans bear fixed interest rates ranging from 2.1% to 6.3% per annum and have various maturity dates through October 1, 2061. In addition to the interest rate, the Company incurs 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.

In addition to the HUD-insured mortgage loans above, the Company’s subsidiaries hadfour other mortgage loans or promissory notes. The non-HUD insured mortgage loans and notes bear interest rates that range from 2.0% to 7.5% per annum with various maturity dates through June 1, 2027. As of September 30, 2026, the Company had $3,034 of debt principal outstanding under the non-HUD mortgage loans and promissory notes, of which $3,034 was classified as current andnone was classified as non-current. As of December 31, 2025, the Company had $4,305 of debt principal outstanding under the non-HUD mortgage loans and promissory notes, of which $294 was classified as current and the remaining $4,011 was classified as non-current.

The Company was in compliance with all applicable loan covenants with respect to the foregoing as of September 30, 2026 and December 31, 2025. The notes and loans above are secured through guarantees by the Company and certain stockholders. Additionally, various loans are secured by facility assets and real property with a carrying value amounting to $294,689 and $254,540 at September 30, 2026 and December 31, 2025, respectively.

Long-term debt consists of the following:

Deferred financing fees on long-term debt are being amortized over the life of the respective loans. Expense recognized related to deferred financing fees on long-term debt is included in interest expense and amounted to $32 for both the three months ended September 30, 2026 and 2025, respectively, and $97 for both the nine months ended September 30, 2026 and 2025, respectively.

NOTE 11. INCOME TAXES

The Company recorded income tax expense of $93,058 and $65,962 during the nine months ended September 30, 2026, and 2025, respectively, or 29.9% of earnings before income taxes for the nine months ended September 30, 2026, compared to 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.

The Company is not, to its knowledge, under examination by any federal or state income tax authority. The Company’s federal returns for tax years 2022 and forward are subject to examination, and state returns for tax years 2021 and forward are subject to examination. The Company does not believe the federal or state statute lapses or any other event will significantly impact the balance of unrecognized tax benefits in the next twelve months. The net balance of unrecognized tax benefits was not material to the condensed consolidated financial statements for the nine months ended September 30, 2026, and 2025, respectively.

The Company’s balance of net deferred tax assets or net deferred tax liabilities is included within other assets or other liabilities, respectively, on the condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025, respectively.

NOTE 12. LEASES

Operating Leases

The Company leases most of its skilled nursing and assisted living facilities, as well as office space, under various non-cancelable operating lease agreements. These operating leases expire at various dates through 2049.

Substantially all operating leases for skilled nursing and assisted living facilities are on a “triple-net” basis, which require lessees to pay for all insurance, repairs, utilities, and real property taxes assessed on the leased property, and most of the leases are guaranteed by the Company and/or its stockholders.

For 34 of the facility operating leases, the Company holds 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 each of the purchase options was not reasonably certain.

All facility leases provide for an additional percentage rent based upon specified rates per the terms of the agreements. This additional percentage rent is variable and is expensed as incurred.

Finance Leases

The Company leases certain skilled nursing and assisted living facilities under finance lease agreements. The lease terms ofone of the facility finance leases allow for a purchase option to be exercised during a specified window closing December 31, 2030. The Company has determined that it is reasonably certain to exercise the respective purchase option at the end of the purchase option window. Therefore the Company has calculated the lease term through the end of the purchase option window for this lease. In addition, forone of the facility finance leases, the lessor holds an option which could require the Company to purchase the associated real estate (the “Lessor Option”). The total obligation to purchase such real estate is approximately $32,000. For other facility finance leases, the duration of the lease term represented the major part of the remaining economic life of the facility at inception.

Finance lease right-of-use assets are included in property and equipment and have a balance of $66,655 and $150,595 as of September 30, 2026 and December 31, 2025, respectively. The current portion of finance lease liabilities is included in other accrued expenses and has a balance of $27,090 and $28,935 as of September 30, 2026 and December 31, 2025, respectively. The non-current portion of finance lease liabilities is included in other liabilities and has a balance of $34,148 and $126,960 as of September 30, 2026 and December 31, 2025, respectively.

The components of lease expense were as follows:

(1)Rent - cost of services includes variable lease costs such as Consumer Price Index (CPI) increases and other rent adjustments of $530 and $542 for the three months ended September 30, 2026 and 2025, respectively, and $1,600 and $1,397 for the nine months ended September 30, 2026 and 2025, respectively.

(2)Other variable lease costs of facilities, including property taxes and insurance, are classified in cost of services in the Company’s unaudited condensed consolidated statements of income.

The following table summarizes supplemental cash flow information related to leases:

Information relating to the lease term and discount rate is as follows:

Maturities of lease liabilities as of September 30, 2026 were as follows:

In addition to its lessee activity, the Company generates an immaterial amount of revenue from arrangements where it is a lessor of certain facilities. Revenue from those arrangements is included in other revenue on the condensed consolidated statements of income.

NOTE 13. OPERATION EXPANSIONS

2026 Expansions

On August 1, 2026 and September 1, 2026, the Company finalized the acquisition of operations for 20 and 11 skilled nursing facilities, respectively, from the former operator Eduro Healthcare, LLC (Eduro acquisition). The Eduro acquisition, which includes the addition of 3,115 skilled nursing beds, expanded the Company’s operations infive states, three of which were new operating states. Of the 31 operations, the Company assumed 21 leases from the prior operator and entered into nine newly negotiated leases. The Company has recorded the associated right-of-use assets and right-of-use liabilities for all 30 leases. The Company purchased the underlying real estate forone facility. This transaction was classified as a business combination in accordance with ASC 805.

The table below represents the purchase price allocation to total identifiable assets acquired and net liabilities assumed using the acquisition method, based on their respective fair values as of the acquisition finalization on August 1, 2026 and September 1, 2026.

Prepaid expenses and other current assets acquired consist of on-hand supplies at the facilities. Right-of-use assets specified in the table above are related specifically to the 21 leases assumed as part of the transaction excluding the new lease agreements fornine newly negotiated leases. The value of the right-of-use assets was determined under a market approach. The market approach utilized assumptions based on estimated market rent assessments for the acquired lease contracts.

The goodwill recognized in the acquisition represents the excess of the purchase price over the fair value of net identifiable assets acquired and is attributable to the workforce acquired as well as expected synergies and opportunities to expand the Company’s presence in new markets. The Company expects 100% of the goodwill to be deductible for income tax purposes.

The Company did not assume any liabilities other than those associated with the post-assumption obligations under the assumed leases.

On August 1, 2026 and September 1, 2026, the Company issued a transition working capital loan to the former operator in two tranches of $17,000 and $8,000, respectively, bearing interest of 4.0% per annum. The loan is collateralized by accounts receivable held by the former operator and is expected to be paid back within 12 months. The net balance of the loan is recorded in other receivables.

In addition to the Eduro acquisition, during the nine months ended September 30, 2026, the Company’s operations grew through the addition offour stand-alone facilities, three of which were acquired in conjunction with the real estate for the properties andone of which the Company acquired through a long-term lease. The new facilities added 316 assisted living beds operated by the Company's affiliated operating subsidiaries. The aggregate purchase price for these facilities was $92,766.

Additionally, during the same period the Company expanded its portfolio of owned properties by acquiring nine properties, that it had previously operated, for an aggregate purchase price of $223,910.

During the same period, the Company also divested ofone leased facility which included 110 skilled nursing beds.

The Company’s expansion strategy has been focused on identifying both opportunistic and strategic acquisitions within its target markets that offer strong opportunities to improve both clinical and financial performance of the acquired facilities. The operations added by the Company are frequently underperforming or moderately-performing financially and may have regulatory and clinical challenges to overcome. Financial information, especially with underperforming operations, is often inadequate, inaccurate or unavailable. The Company believes that prior operating results are not typically a meaningful representation of the Company’s current operating results or indicative of the integration potential of its newly acquired operating subsidiaries. Accordingly, pro forma financial information is not presented. The additions have been included in the condensed consolidated balance sheets of the Company, and the operating results have been included in the condensed consolidated statements of income of the Company since the date the Company gained effective control.

Expansions After Period End

Subsequent to September 30, 2026, the Company’s operations expanded inone new state andone existing state through the addition of 43 stand-alone facilities which the Company acquired via long-term leases. These new facilities added 5,334 skilled nursing beds and 49 assisted living beds operated by the Company’s affiliated operating subsidiaries.

NOTE 14. SELF-INSURANCE LIABILITIES

The Company is partially self-insured for general and professional liability claims up to a base amount per claim (the self-insured retention) with an aggregate, one-time deductible above this limit. Losses beyond these amounts are insured through third-party policies with coverage limits per claim, per location, and on an aggregate basis for the Company. The combined self-insured retention is $750 per claim ($650 if an enforceable arbitration agreement applies), subject to an additional one-time deductible of $9,500 for the Company’s independent subsidiaries in California. For the independent subsidiaries not in California, the self-insured claim is $750 per claim ($650 if an enforceable arbitration agreement applies), subject to an additional one-time deductible of $10,200. For a subset of the Company’s independent subsidiaries acquired as part of the Plum acquisition in 2021 across California and Nevada, the combined self-insured retention is $500 per claim, subject to an additional one-time deductible of $6,000. For all independent subsidiaries, except those located in Colorado, Kansas, and Pennsylvania, the third-party coverage above these limits is $1,000 per claim, $3,000 per operation, with a $10,000 aggregate limit in California and for the subset of the Company’s independent subsidiaries acquired as part of the Plum acquisition in 2021, a $12,000 aggregate limit in all other states, and an additional state-specific aggregate where required by state law. In Colorado, Kansas, and Pennsylvania, the third-party coverage above these limits is $1,000 per claim and $3,000 per operation, which is independent of the aforementioned aggregate limits that apply outside of these states.

The majority of the self-insured retention and deductible limits for professional and general liabilities are self-insured through Welsch, the related assets and liabilities of which are included in the accompanying condensed consolidated balance sheets. Welsch is subject to certain statutory requirements as an insurance provider.

The Company’s policy is to accrue amounts equal to the actuarial estimated costs to settle open claims of insureds, as well as an estimate of the cost of insured claims that have been incurred but not reported. The Company develops information about the size of the ultimate claims based on historical experience, current industry information, and actuarial analysis, and evaluates the estimates for claim loss exposure on a quarterly basis. The Company uses actuarial valuations to estimate the liability based on historical experience and industry information.

The following table represents the Company’s self-insurance liabilities, on an undiscounted basis, inclusive of anticipated insurance recoveries, as of September 30, 2026 and December 31, 2025:

PLGL self-insurance liabilities as of September 30, 2026 and December 31, 2025 include $111,816 and $102,882, respectively, that were related to unasserted claims. The anticipated insurance recoveries included in the self-insurance liabilities are presented gross rather than net with the corresponding asset of $18,863 and $28,295 as of September 30, 2026 and $17,453 and $26,179 as of December 31, 2025, included in other receivables and other assets, respectively, on the condensed consolidated balance sheets.

The Company believes that an adequate provision has been made in these financial statements for liabilities that may arise out of patient care, employment practice, and related services to date.

NOTE 15. COMMITMENTS AND CONTINGENCIES

Regulatory Matters

Laws and regulations governing Medicare and Medicaid programs are complex and subject to review and interpretation. Compliance with such laws and regulations is evaluated regularly, the results of which can be subject to future governmental review and interpretation, and can include significant regulatory action including fines, penalties, and exclusion from certain governmental programs. Included in these laws and regulations is monitoring performed by the Office of Civil Rights which covers the Health Insurance Portability and Accountability Act of 1996, the terms of which require healthcare providers (among other things) to safeguard the privacy and security of certain patient protected health information.

Regulatory Investigations

The Company is subject to various governmental inspections, audits, and investigations that arise in the ordinary course of its business. The following governmental investigations are ongoing, although the government entities conducting these investigations have not asserted claims against the Company in connection with these investigations.

On April 8, 2024, Providence Administrative Consulting Services (“Providence”) and Paradise Valley Healthcare Center (“Paradise Valley”) received a Civil Investigative Demand (“CID”) from the U.S. Department of Justice (“DOJ”) requesting information and documents relating to an investigation of Paradise Valley and Providence to determine whether Paradise Valley and Providence violated the False Claims Act by submitting false claims to Medicare. The investigation relates to whether Providence and Paradise Valley improperly induced patient referrals through remuneration in violation of the Anti-Kickback Statute. The CID includes requests for information relating to referral source relationships, including relationships with medical directors and other individuals. Since the receipt of the CID, the DOJ has made additional requests for information from Providence, including marketing materials and certain expense data across all Providence facilities. The Company is cooperating with the investigation, which is ongoing.

On September 11, 2024, the Company received a CID from the DOJ requesting information and documents relating to an investigation of the Company’s California-based skilled nursing facilities to determine whether the Company violated the False Claims Act by submitting false claims to Medicare for reimbursement under the patient-driven payment model (PDPM) for skilled nursing and rehabilitation services. The CID includes requests for information relating to the Company’s practices and incentives pertaining to the completion and submission of Minimum Data Set Assessments and the resulting PDPM rates. The Company is cooperating with the investigation, which is ongoing.

On September 30, 2024, Providence Group, Inc. (“Providence Group”) received a CID from the DOJ requesting information and documents relating to an investigation of its skilled nursing facilities, specifically including Bishop Care Center (“Bishop”) to determine whether Providence Group violated the False Claims Act by submitting false claims to Medicare for reimbursement under the COVID-19 related Hospital Stay Waiver (otherwise known as the 1135 waiver). The CID includes requests for information relating to 1135 COVID Waiver practices at Bishop. The Company is cooperating with the investigation, which is ongoing.

On February 26, 2025, the Company received a subpoena from the DOJ per the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) relating to an investigation into possible violations of various sections of 18 U.S.C. that prohibit the making of fraudulent or false statements to any branch of the government of the United States. The subpoena includes requests for information relating to PACS’s 1135 COVID Waiver practices, billing of Medicare Part B for respiratory and sensory integration therapy services, change of insurance enrollment, cost waivers for co-pays, deductibles, and co-insurance, and claim reimbursement from Medicare for bad debt. The Company is cooperating with the investigation, which is ongoing.

SEC Investigation

The SEC’s Division of Enforcement is conducting an investigation into matters that relate to the Company’s accounting and financial reporting and disclosure, and the Company’s internal controls over financial reporting and disclosure controls.

The Company is cooperating with each of the regulatory investigations identified above and the SEC investigation to produce the requested information and documentation. At this time, the Company cannot predict the outcome of any of these investigations and there can be no assurance that one or more of these investigations will not result in suits or actions alleging, or findings of, violations of federal or state laws that could lead to the imposition of damages, fines, penalties, restitution, other monetary liabilities, sanctions, settlements or changes to our business practices or operations that could have a material adverse effect on our business, financial condition or results of operations. The legal costs associated with responding to the regulatory investigations and SEC investigations can be substantial, regardless of the outcome.

The Company is unable at this time to estimate a loss or range of loss that may arise in the event that a claim is asserted against it in connection with any of these investigations for reasons including that these matters are in early stages, no factual issues have been resolved in these matters, and there is uncertainty as to the outcome of these matters, which can result in large settlement amounts or damage awards.

Litigation

The skilled nursing business involves a significant risk of liability given the age and health of the patients and residents served by the Company’s independent operating subsidiaries. The Company and others in the industry are subject to an increasing number of claims and lawsuits, including professional liability claims, alleging that services provided have resulted in personal injury, elder abuse, wrongful death or other related claims. In addition, the Company, its independent operating subsidiaries, and others in the industry are subject to claims and lawsuits in connection with COVID-19 and a facility’s preparation for and/or response to COVID-19.

Healthcare litigation (including class action litigation) is common and is filed based upon a wide variety of claims and theories. The Company and other companies in its industry are routinely subjected to varying types of claims and suits, including class-actions. Class-action suits have the potential to result in large jury verdicts and settlements, and may result in significant legal costs. The Company expects the plaintiffs’ bar to continue to be aggressive in their pursuit of claims.

The Company has been, and continues to be, subject to other claims and legal actions that arise in the normal course of business, including potential claims filed by patients or others on their behalf related to patient care and treatment (professional negligence claims), as well as employment related claims filed by current or former employees. For example, the Company has been subjected to, and is currently involved in, litigation alleging violations of state and federal wage and hour laws resulting from the alleged failure to pay wages, to timely provide and authorize meal and rest breaks, and related causes of action.

In addition to the litigations described above, the Company is also subject to the following litigation:

Litigation – Securities Class Action and Shareholder Derivative Actions

On November 13, 2024, a putative securities class action captioned Manchin v. PACS Group, Inc., et al., Case No. 1:24-cv-08636-LJL (S.D.N.Y.) (“Manchin Action”) was filed against the Company, individual defendants Jason Murray, Derick Apt, Mark Hancock, Jacqueline Millard, and Taylor Leavitt; and underwriter defendants Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Truist Securities, Inc., RBC Capital Markets, LLC, Goldman Sachs & Co. LLC, Stephens Inc., KeyBanc Capital Markets Inc., Oppenheimer & Co. Inc., and Regions Securities LLC. The complaint brought claims under Sections 11 and 15 of the Securities Act, and Section 10(b), and 20(a) of the Exchange Act, and alleged the Company and its leadership engaged in a multi-year scheme to inflate revenue and profitability by (i) exploiting a COVID-era Medicare waiver to “flip” long-term Medicaid patients to higher-paying Medicare coverage, (ii) billing unnecessary Medicare Part B respiratory and sensory integration therapies, and (iii) falsifying licensure and staffing documentation. On January 7, 2025, the court consolidated the Manchin action with a similar action brought by plaintiff New Orleans Employees’ Retirement System, and on February 11, 2025 the court appointed 1199SEIU Health Care Employees Pension Fund as lead plaintiff, and its counsel, Labaton Keller Sucharow LLP, as lead counsel. Plaintiffs filed a consolidated complaint on December 19, 2025, which added Joshua Jergensen and P.J. Sanford as named defendants, and also brought additional claims pursuant to Section 12(a)(2) of the Securities Act and Section 20A of the Exchange Act. Defendants moved to dismiss the consolidated complaint, and on September 4, 2026, the Court granted in part and denied in part Defendants’ motion to dismiss. On October 9, 2026, Defendants answered the remaining allegations in the consolidated complaint.

On February 14, 2025, a derivative action originally filed by plaintiff Theresa Howard-Hines (“Howard-Hines Action”) captioned IN RE PACS GROUP, INC. DERIVATIVE LITIGATION Lead Case No. 1:25-cv-01343-LJL (S.D.N.Y.) was filed against defendants Jason Murray, Derick Apt, Mark Hancock, Michelle Lewis, Jacqueline Millard, Taylor Leavitt, and Evelyn Dilsaver, with the Company named as nominal defendant. The complaint brings claims of breach of fiduciary duties, unjust enrichment, waste of corporate assets, and contribution, based on substantially similar allegations as in the Manchin Action. On April 8, 2025, the court consolidated the Howard-Hines action with a similar derivative action filed by plaintiff Adam Beckman, under the name In re PACS Group, Inc. Derivative Litigation(“SDNY Derivative Action”). On June 9, 2025, the parties filed a joint stipulation staying the SDNY Derivative Action until the earlier of the dismissal of the Manchin Action, the denial of any motion to dismiss in the Manchin Action, or the termination of the stay. Following the dismissal in part of the Manchin Action, the parties stipulated to further stays of the SDNY Derivative Action. The Court has stayed the SDNY Derivative Action until November 11, 2026, and ordered the parties to file a further status report by that date.

On August 19, 2025, a derivative action captioned Boers v. Murray, et. al., Case No. 1:25-cv-00119-DAK-DBP (D. Utah) was filed against the same defendants and alleging substantially the same claims and theories as IN RE PACS GROUP, INC. DERIVATIVE LITIGATION (“Boers Action”). The plaintiff in the Boers Action voluntarily dismissed this case on December 8, 2025, without prejudice to her ability to refile, and refiled on April 17, 2026, against the same defendants making the same basic claims. On August 18, 2026, the parties in the Boers Action stipulated to stay the case until the earlier of the dismissal of the Manchin Action, the denial of any motion to dismiss in the Manchin Action, or the termination of the stay. Following the dismissal in part of the Manchin Action, the parties stipulated to further stays of the

Boers Action. The Court stayed the Boers Action until November 18, 2026, and ordered the parties to file a further status report by that date.

Legal proceedings can be complex and take many months, or even years, to reach resolution, with the final outcome depending on a number of variables, some of which are not within our control. Therefore, although the Company will vigorously defend itself in each of the actions described above and any other legal proceedings, their ultimate resolution and potential financial and other impacts on the Company are uncertain but could be material. Regardless of final outcomes, however, any such proceedings, claims, and investigations may nonetheless impose a significant burden on management and employees and be costly to defend, with unfavorable preliminary, interim or final rulings.

The Company accrues a liability amount when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount. Such legal matters are inherently unpredictable and subject to significant uncertainties, some of which are beyond the Company’s control. The Company is unable to estimate a loss or range of loss in connection with the Securities Class Action and Shareholder Derivative Actions at this time for reasons including that these matters are in early stages, no factual issues have been resolved in these matters, and there is uncertainty as to the outcome of these matters.

The defense of any of the litigations described above may result in significant legal costs, regardless of the outcome, and can result in large settlement amounts or damage awards. While there can be no assurance, based on the Company’s evaluation of information currently available, management does not believe the results of such litigations would have a material adverse effect on the results of operations, financial position or cash flows of the Company, taken as a whole. However, the Company’s assessment may evolve based upon further developments in the proceedings at issue. The results of legal proceedings are inherently uncertain, and material adverse outcomes are possible.

Indemnities

From time to time, the Company enters into certain types of contracts that contingently require it to indemnify parties against third-party claims. These contracts primarily include (i) certain real estate leases, under which the Company may be required to indemnify property owners or prior facility operators for post-transfer environmental or other liabilities and other claims arising from the Company use of the applicable premises, (ii) operations transfer agreements, in which the Company agrees to indemnify past operators of facilities against certain liabilities arising from the transfer of the operation and/or the operation thereof after the transfer to the Company's independent operating subsidiary, (iii) certain lending agreements, under which the Company may be required to indemnify the lender against various claims and liabilities, and (iv) certain agreements with the Company officers, directors and others, under which the Company may be required to indemnify such persons for liabilities arising out of the nature of their relationship to the Company. The terms of such obligations vary by contract and, in most instances, do not expressly state or include a specific or maximum dollar amount. Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted. Consequently, because no claims have been asserted, no liabilities have been recorded for these obligations on the condensed consolidated balance sheets for any of the periods presented.

Concentration of Credit Risks

The Company’s credit risks primarily relate to cash and cash equivalents, restricted cash, and accounts receivable. Cash and cash equivalents are primarily held in bank accounts and overnight investments. Restricted cash is primarily invested in commercial paper and certificates of deposit with financial institutions and other interest-bearing accounts. Accounts receivable consist primarily of amounts due from patients (funded through Medicare, Medicaid, other contractual programs and through private payors) and from other health care companies for management, accounting and other services. The collectability of accounts receivable balances is dependent on the availability of funds from certain programs that rely on governmental funding, primarily Medicare and Medicaid. The Company’s receivables from Medicare and Medicaid programs accounted for 23% and 28% of total accounts receivable, respectively, at September 30, 2026 and 23% and 30% of total accounts receivable, respectively, at December 31, 2025. These receivables represent the only significant concentration of credit risk for the Company. The Company does not believe there are significant credit risks associated with these governmental programs. The Company performs continual credit evaluations of the Company’s clients and maintains appropriate allowances for credit losses on any accounts receivable proving uncollectible, and continually monitors and adjusts these allowances as necessary.

The Company’s operating subsidiaries, excluding the subsidiaries that exclusively operate assisted living and independent living facilities, have all of their skilled nursing beds designated for care of patients under federal Medicare and/or state Medicaid programs. Approximately 44% of the Company’s skilled nursing beds are located in California.

NOTE 16. COMPUTATION OF NET INCOME PER COMMON SHARE

Basic net income per share is calculated by dividing net income attributable to the common stockholders by the weighted-average shares of common stock outstanding for the period. The computation of diluted net income per share is similar to the computation of basic net income per share, except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the dilutive potential shares of common stock had been issued, which are comprised of restricted stock units and common stock issuable under the employee stock purchase plan, using the treasury stock method.

A reconciliation of the numerator and denominator used in the calculation of basic net income per common share follows:

A reconciliation of the numerator and denominator used in the calculation of diluted net income per common share follows:

(1) The diluted per share amounts do not reflect 2,973 and 2,360 common share equivalents from unvested equity awards for the three and nine months ended September 30, 2026, respectively, and 3,639 and 81,617 common share equivalents from unvested equity awards for the three and nine months ended September 30, 2025, respectively, due to their anti-dilutive effect.

NOTE 17. STOCK AWARDS

Stock-based compensation expense consists of stock-based payment awards made to employees and directors, comprised of restricted stock units, based on their estimated fair values. Stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the three and nine months ended September 30, 2026 and 2025 was based on the vesting of awards granted to date. Stock-based compensation expense also consists of expense recognized from the employee stock purchase plan.

2024 Incentive Award Plan (2024 Plan)

The 2024 Plan allows the Company to make equity-based and cash-based incentive awards to its officers, employees, directors and consultants. The number of shares available for issuance under the 2024 Plan increases annually on the first day of the year by an amount equal to up to 2% of the aggregate number of shares outstanding on the final day of the immediately preceding calendar year. As of September 30, 2026, the total number of shares available for issuance under the 2024 Plan was 5,596,528.

Pursuant to the 2024 Plan, the Company granted restricted stock unit (RSU) awards of 125,790 shares during the three months ended September 30, 2026 andno shares during the three months ended September 30, 2025, and 3,574,976 and 1,962,425 shares during the nine months ended September 30, 2026 and 2025, respectively. Awards granted to key executives at the time of the IPO vested 25% upon issuance with the remaining shares scheduled to vest in equal increments on an annual basis over the next five years. All other awards generally vest in equal increments on an annual basis over three years as the grantees meet the requisite service condition. These awards granted used the market price on the date of the respective grant to determine the award fair value. The fair value per share of RSU awards granted during the nine months ended September 30, 2026 ranged from $34.13 to $46.67, and was $13.72 during the nine months ended September 30, 2025.

A summary of the status of the Company’s non-vested RSU awards as of September 30, 2026 and changes during the nine months ended September 30, 2026 is presented below:

During the nine months ended September 30, 2026, the Company granted 43,572 RSU awards to non-employee directors for their service on the Company’s board of directors from the 2024 Plan. The weighted average fair value per share of these awards were $34.65 based on the market price on the grant date.

During the nine months ended September 30, 2026, the aggregate fair value of RSU awards that vested was $119,845. The number of RSU awards vested includes shares of common stock that the Company withheld on behalf of employees to satisfy statutory tax withholding requirements.

2024 Employee Stock Purchase Plan (2024 ESPP)

Under the 2024 ESPP, eligible employees may purchase common stock of the Company in six-month intervals at 85% of the lower of the fair market value at the beginning or ending of the purchase period. Employees may purchase shares having a value not exceeding 15% of their gross compensation during an offering period. The number of shares available for issuance under the 2024 ESPP increases annually on the first day of the year by an amount equal to up to 1% of the aggregate number of shares outstanding on the final day of the immediately preceding calendar year. As of September 30, 2026 the total number of shares available for issuance under the 2024 ESPP was 4,461,563.

Employees purchased the following shares during the three and nine months ended September 30, 2026 and 2025:

Stock-Based Compensation Expense

Stock-based compensation expense recognized for the Company’s equity incentive plans for the three and nine months ended September 30, 2026 and 2025 were as follows:

On September 18, 2026, the Company recognized $19,973 in stock-based compensation expense related to the retirement of its Chief Legal Officer, due to an acceleration of vesting in line with the executive restricted stock unit agreement and a modification of equity awards due to his consultation agreement.

In future periods, the Company expects to recognize $213,384 in stock-based compensation expense for unvested RSU awards that were outstanding as of September 30, 2026. Future stock-based compensation expense will be recognized over 2.4 weighted average years for unvested RSU awards.

NOTE 18. COMMON STOCK REPURCHASE PROGRAM

On May 7, 2026, the Board of Directors approved a common stock repurchase program pursuant to which the Company is authorized to repurchase up to $250,000 of its common stock under the program. The repurchase program does not have a fixed expiration date. During the three and nine months ended September 30, 2026, the Company did not repurchase any shares pursuant to this repurchase program. As of September 30, 2026, the full $250,000 authorized for repurchase remained available under the repurchase program.

Under the repurchase program, repurchases may be made from time to time in the open market, in privately negotiated transactions, or otherwise. The amount and timing of repurchases, if any, will depend on several factors, including the Company’s stock price performance, ongoing capital allocation priorities, contractual restrictions, and general market conditions. Open market repurchases will be structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The repurchase program does not obligate the Company to acquire any particular amount of common stock, and may be modified, suspended, or terminated at any time at the discretion of the Company’s Board of Directors.