PACS Group, Inc. Reports Third Quarter 2025 Results

FARMINGTON, Utah--( BUSINESS WIRE)--PACS Group, Inc. (NYSE: PACS) (“PACS” or the “Company”), which together with its subsidiaries is one of the largest post-acute healthcare companies in the United States, announced operating results for the third quarter of 2025. The Company has completed the previously announced Restatement of its financial statements for the three months ended March 31, 2024, and for the three and six months ended on June 30, 2024 (the “Restatement”), and is current with its SEC filing obligations.

Third Quarter 2025 Financial Highlights

Year-to-Date 2025 Financial Highlights

Full Year 2024 Financial Highlights (includes Restatement)

Third Quarter Select KPIs

“Since its founding, PACS has been focused on its mission to revolutionize the delivery, leadership, and quality of post-acute care nationally. Our strong third quarter and year-to-date results demonstrate the underlying strength of our business model and the relentless execution of our team to deliver on our mission,” said Jason Murray, PACS’s Chief Executive Officer. “Our performance validates our core strengths – our commitment to clinical and operational excellence, industry-leading talent and a strategy designed for sustainable growth. I am proud to lead a team that has executed with excellence during what has been a challenging and dynamic period for the company. With the Restatement and Audit Committee investigation now complete, we are moving forward with a strong financial foundation, enhanced controls and an even stronger conviction in our ability to drive meaningful growth and create value for shareholders. We thank our stakeholders for their support and trust in PACS, and we remain committed to providing the quality care that our patients have come to expect from us.”

Full-Year 2025 Business Outlook

Based on information available today, PACS is providing the following guidance for full year 2025:

As of today, PACS's growing portfolio comprises 320 healthcare operations across 17 states. PACS owns 51 facilities and holds 38 purchase options on leased facilities and 21 purchase options through partnerships. The Company’s strategy remains focused on expanding its footprint through a balanced approach to leasing and acquiring real estate. In addition, PACS is actively evaluating opportunities to acquire both high-performing and underperforming operations across multiple states, with the goal of driving growth and unlocking long-term value.

“Our third-quarter and year-to-date 2025 revenue growth reflects the operational excellence across our portfolio that continues to drive demand for our services,” said Mark Hancock, PACS’s Interim Chief Financial Officer. “We thank our Audit Committee and advisors for their work and recommendations that have helped accelerate our maturation as a public company. We remain confident that our locally-led, centrally-supported model, coupled with enhanced compliance and controls, will increase our ability to deliver high-touch, high-quality care to our patients and strengthen our communities. With our exceptionally talented team, we are focused on continuing to execute our strategy to drive value for shareholders and the rest of the healthcare ecosystem.”

2024 and 2025 Annual and Quarterly Filings Made

The Company is current with its SEC reporting obligations.

Revenue Restatement

Audit Committee Investigation

The independent Audit Committee of the PACS Board of Directors, assisted by external counsel and forensic accountants retained by the Audit Committee, has completed its previously disclosed independent investigation concerning allegations made in a short seller report against the Company and management, as well as other matters identified during the course of the investigation. Additional details regarding the scope and outcome of the independent investigation are included in the Company’s Form 10-Q for the period ended September 30, 2025, filed with the SEC today, November 19, 2025.

Murray continued, “In November 2024, the Company’s independent Audit Committee, supported by external counsel and advisors, began an independent investigation of the allegations made in a short seller report. That work has concluded. The Committee’s work and its resulting recommendations, which have been or are being implemented, reinforce our commitment to transparency, accountability, and strong governance. Now our focus is squarely on the future – executing our strategy, delivering exceptional care, and continuing to build trust with our stakeholders. PACS moves forward with confidence, strength, and an unwavering commitment to doing things the right way.”

Earnings Conference Call Details

A live webcast will be held November 19, 2025, at 5:30 p.m. Eastern time to discuss PACS’s third quarter financial results. To listen to the webcast please visit the Investors Relations section of PACS’s website at https://IR.pacs.com or by dialing 877-407-0621 / +1 215-268-9899. The webcast will be recorded and will be available for replay via the website for 30 days following the call.

About PACS™

PACS Group, Inc. is a holding company investing in post-acute healthcare facilities, professionals, and ancillary services. Founded in 2013, PACS Group is one of the largest post-acute platforms in the United States. Its independent subsidiaries operate 320 post-acute care facilities across 17 states serving over 31,000 patients daily. References herein to the consolidated “Company,” as well as the use of the terms “we,” “us,” “our,” “its” and similar verbiage, refer to PACS Group, Inc. and its consolidated subsidiaries, taken as a whole. PACS Group, Inc. and its subsidiaries that are not licensed healthcare providers do not provide healthcare services to patients, residents or any other person, and do not direct or control the provision of services provided or the operations of those provider subsidiaries. All healthcare services are provided solely by its applicable subsidiaries that are licensed healthcare providers, under the direction and control of licensed healthcare professionals in accordance with applicable law. More information about PACS is available at https://IR.pacs.com. The information on our website is not part of this press release.

Forward-Looking Statements Disclaimer

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release other than statements of historical fact, including statements regarding our strategy, future financial condition, future results of operations, projected costs, prospects, plans, objectives of management, expected market growth, and other statements that are not historical facts, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “goal,” “objective,” “seeks,” or “continue,” or the negative of these terms or other similar expressions. Forward-looking statements are neither promises nor guarantees and are based on management’s current expectations, estimates, forecasts and assumptions and on trends that we believe may affect our business, results of operations, financial condition and prospects. These statements are subject to risks, uncertainties and other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, our dependence on third party payors, including adverse changes in patient acuity and payor mix, payment methodologies and cost containment initiatives; our potential inability to obtain full reimbursement for services billed under consolidated billing or bundled payments; our exposure to increased labor costs, staffing shortages of nurses, nurse assistants and other skilled personnel, and impacts from national labor unions; state or federal regulatory actions affecting healthcare services, facility construction, expansion or acquisition; our ability to attract and retain patients and to compete effectively with other healthcare providers; internal audits and reviews that may result in billing adjustments, repayments, fines or other corrective actions; ongoing and future investigations and litigation; the limitations and variability of our insurance and self insurance programs; risks relating to the restatement of our financial statements; a material weakness in our internal control over financial reporting and risks related to remediation or the emergence of additional weaknesses; failures to provide consistently high quality care or employee conduct that adversely affects patient health, safety or clinical treatment; reliance on information technology and the risk that failures, inadequacies or interruptions could disrupt operations; reliance on internally calculated operational metrics that may be subject to measurement challenges or perceived inaccuracies; our ability to complete, integrate and realize expected benefits from acquisitions or partnerships and potential liabilities or regulatory issues arising from such transactions; the disposition of underperforming or non-strategic operating subsidiaries and the revenue impact of such dispositions; geographic concentration of facilities that exposes us to local economic downturns, regulatory changes or natural disasters; risks associated with leased real property, including lease terminations, extensions and special charges; failure to generate sufficient cash flow to meet long term debt, mortgage and lease obligations and covenants, which could lead to defaults or loss of facilities; our ability to obtain additional capital on acceptable terms, or at all; extensive and evolving legal and regulatory compliance obligations and the potential costs to achieve or maintain compliance; substantial control of the company by our founders, which may result in conflicts of interest or the appearance of conflicts; and our status as a “controlled company” under NYSE rules and the governance implications of relying on applicable exemptions. These and other important factors are described under the heading “Risk Factors” in our Annual Report on Form 10 K for the year ended December 31, 2024, and in other filings that we make with the Securities and Exchange Commission from time to time. Any forward-looking statements contained in this press release speak only as of the date hereof. We undertake no obligation to update any forward looking statements contained herein to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

PACS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except for share and per share values)

Unaudited

September 30,

December 31,

2025

2024

ASSETS

Current Assets:

Cash and cash equivalents

355,672

157,674

Accounts receivable, net

628,280

641,775

Other receivables

66,428

74,746

Prepaid expenses and other current assets

76,369

64,066

Total Current Assets

1,126,749

938,261

Property and equipment, net

1,133,849

990,580

Operating lease right-of-use assets

3,000,426

2,994,519

Insurance subsidiary deposits and investments

80,300

66,258

Escrow funds

24,418

25,122

Goodwill and other indefinite-lived assets

68,061

67,061

Other assets

193,089

161,108

Total Assets

5,626,892

5,242,909

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable

205,479

175,062

Accrued payroll and benefits

252,539

146,177

Current operating lease liabilities

150,651

136,232

Current maturities of long-term debt

7,474

14,852

Current portion of accrued self-insurance liabilities

120,914

75,966

Line of credit

100,000

142,000

Refund liability

181,133

145,795

Other accrued expenses

179,431

142,348

Total Current Liabilities

1,197,621

978,432

Long-term operating lease liabilities

2,962,999

2,935,773

Long-term debt, less current maturities, net of deferred financing fees

245,903

250,984

Accrued self-insurance liabilities, less current portion

177,480

164,979

Other liabilities

165,973

197,050

Total Liabilities

4,749,976

4,527,218

Commitments and contingencies

Equity:

Common stock: $0.001 par value; 1,250,000,000 shares authorized; 156,615,144 shares issued and outstanding as of September 30, 2025, and 155,177,511 shares issued and outstanding as of December 31, 2024

157

155

Additional paid-in capital

621,288

591,363

Retained earnings

249,877

118,036

Total stockholders' equity

871,322

709,554

Noncontrolling interest in subsidiary

5,594

6,137

Total Equity

876,916

715,691

Total Liabilities and Equity

5,626,892

5,242,909

PACS GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except for share and per share values)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025

2024

2025

2024

Revenue

Patient and resident service revenue

1,344,302

1,024,276

3,930,168

2,878,946

Other revenues

265

2,029

785

2,900

Total Revenue

1,344,567

1,026,305

3,930,953

2,881,846

Operating Expenses

Cost of services

1,046,262

849,599

3,090,932

2,347,738

Rent - cost of services

95,107

72,632

283,250

200,954

General and administrative expense

102,528

70,587

301,579

254,167

Depreciation and amortization

14,401

10,523

40,284

27,893

Total Operating Expenses

1,258,298

1,003,341

3,716,045

2,830,752

Operating income

86,269

22,964

214,908

51,094

Other (Expense) Income

Interest expense

(8,529

)

(9,029

)

(19,787

)

(35,040

)

Gain on lease termination

—

8,046

Other income (expense), net

(1,444

)

19,721

2,517

16,256

Total Other (Expense) Income, Net

(9,973

)

10,692

(17,270

)

(10,738

)

Income before provision for income taxes

76,296

33,656

197,638

40,356

Provision for income taxes

23,966

17,446

65,962

21,203

Net Income

52,330

16,210

131,676

19,153

Less:

Net (loss) income attributable to noncontrolling interest

(76

)

590

(165

)

594

Net Income Attributable To PACS Group, Inc.

52,406

15,620

131,841

18,559

Net Income Per Share Attributable To PACS Group, Inc.

Basic

0.33

0.10

0.84

0.13

Diluted

0.32

0.10

0.80

0.13

Weighted-Average Common Shares Outstanding

Basic

156,575,127

153,124,371

156,034,409

143,804,609

Diluted

164,709,367

158,453,331

165,492,441

145,737,883

PACS GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented:

Nine Months Ended

September 30,

2025

2024

Net cash provided by/(used in):

Operating activities

407,614

302,751

Investing activities

(145,879

)

(338,345

)

Financing activities

(63,521

)

(21,098

)

Net change in cash

198,214

(56,692

)

Cash, cash equivalents, and restricted cash - beginning of period

160,842

118,704

Cash, cash equivalents, and restricted cash - end of period

359,056

62,012

PACS GROUP, INC. AND SUBSIDIARIES

UNAUDITED KEY SKILLED SERVICES METRICS

We categorize our facilities into three cohorts. Mature facilities are defined as facilities purchased more than 36 months prior to a respective measurement date. Ramping facilities are defined as facilities purchased within 18 to 36 months prior to a respective measurement date. New facilities are defined as facilities purchased or built less than 18 months prior to a respective measurement date.

The following tables present key skilled services metrics by category for all facilities, Mature facilities, Ramping facilities and New facilities as of and for the three months ended September 30, 2025 and 2024:

Total Facility Results

Three Months Ended September 30,

2025

2024

Change

% Change

(dollars in thousands)

Skilled nursing services revenue

1,310,933

1,010,277

300,656

29.8

Skilled mix by revenue

48.0

50.5

(2.5

Skilled mix by nursing patient days

28.2

29.3

(1.1

Occupancy for skilled nursing services:

Available patient days

2,994,628

2,399,563

595,065

24.8

Actual patient days

2,664,033

2,171,432

492,601

22.7

Occupancy rate (operational beds)

89.0

90.5

(1.5

Number of facilities at period end

290

249

16.5

Number of operational beds at period end

32,677

27,467

5,210

19.0

Mature Facility Results

Three Months Ended September 30,

2025

2024

Change

% Change

(dollars in thousands)

Skilled nursing services revenue

746,242

315,154

431,088

136.8

Skilled mix by revenue

55.4

54.3

1.1

Skilled mix by nursing patient days

33.0

32.1

0.9

Occupancy for skilled nursing services:

Available patient days

1,481,700

690,783

790,917

114.5

Actual patient days

1,404,408

652,967

751,441

115.1

Occupancy rate (operational beds)

94.8

94.5

0.3

Number of facilities at period end

149

86.3

Number of operational beds at period end

16,406

8,515

7,891

92.7

Ramping Facility Results

Three Months Ended September 30,

2025

2024

Change

% Change

(dollars in thousands)

Skilled nursing services revenue

282,160

432,870

(150,710

)

(34.8

Skilled mix by revenue

40.6

54.2

(13.6

Skilled mix by nursing patient days

22.0

31.2

(9.2

Occupancy for skilled nursing services:

Available patient days

725,220

934,132

(208,912

)

(22.4

Actual patient days

624,612

877,092

(252,480

)

(28.8

Occupancy rate (operational beds)

86.1

93.9

(7.8

Number of facilities at period end

(31

)

(33.3

Number of operational beds at period end

8,116

10,686

(2,570

)

(24.1

New Facility Results

Three Months Ended September 30,

2025

2024

Change

% Change

(dollars in thousands)

Skilled nursing services revenue

282,531

262,253

20,278

7.7

Skilled mix by revenue

35.6

40.4

(4.8

Skilled mix by nursing patient days

23.6

24.0

(0.4

Occupancy for skilled nursing services:

Available patient days

787,708

774,648

13,060

1.7

Actual patient days

635,013

641,373

(6,360

)

(1.0

Occupancy rate (operational beds)

80.6

82.8

(2.2

Number of facilities at period end

3.9

Number of operational beds at period end

8,155

8,266

(111

)

(1.3

The following tables present key skilled services metrics by category for all facilities, Mature facilities, Ramping facilities and New facilities as of and for the nine months ended September 30, 2025 and 2024:

Total Facility Results

Nine Months Ended September 30,

2025

2024

Change

% Change

(dollars in thousands)

Skilled nursing services revenue

3,843,153

2,849,806

993,347

34.9

Skilled mix by revenue

49.1

51.2

(2.1

Skilled mix by nursing patient days

28.9

29.4

(0.5

Occupancy for skilled nursing services:

Available patient days

8,824,037

6,788,832

2,035,205

30.0

Actual patient days

7,846,851

6,165,899

1,680,952

27.3

Occupancy rate (operational beds)

88.9

90.8

(1.9

Number of facilities at period end

290

249

16.5

Number of operational beds at period end

32,677

27,467

5,210

19.0

Mature Facility Results

Nine Months Ended September 30,

2025

2024

Change

% Change

(dollars in thousands)

Skilled nursing services revenue

2,147,833

877,803

1,270,030

144.7

Skilled mix by revenue

56.4

55.0

1.4

Skilled mix by nursing patient days

33.7

32.2

1.5

Occupancy for skilled nursing services:

Available patient days

4,238,699

1,959,687

2,279,012

116.3

Actual patient days

4,025,794

1,850,627

2,175,167

117.5

Occupancy rate (operational beds)

95.0

94.4

0.6

Number of facilities at period end

149

86.3

Number of operational beds at period end

16,406

8,515

7,891

92.7

Ramping Facility Results

Nine Months Ended September 30,

2025

2024

Change

% Change

(dollars in thousands)

Skilled nursing services revenue

807,434

1,227,925

(420,491

)

(34.2

Skilled mix by revenue

41.9

55.9

(14.0

Skilled mix by nursing patient days

22.8

32.7

(9.9

Occupancy for skilled nursing services:

Available patient days

2,047,146

2,613,520

(566,374

)

(21.7

Actual patient days

1,764,784

2,467,398

(702,614

)

(28.5

Occupancy rate (operational beds)

86.2

94.4

(8.2

Number of facilities at period end

(31

)

(33.3

Number of operational beds at period end

8,116

10,686

(2,570

)

(24.1

New Facility Results

Nine Months Ended September 30,

2025

2024

Change

% Change

(dollars in thousands)

Skilled nursing services revenue

887,886

744,078

143,808

19.3

Skilled mix by revenue

38.2

39.3

(1.1

Skilled mix by nursing patient days

24.7

22.3

2.4

Occupancy for skilled nursing services:

Available patient days

2,538,192

2,215,625

322,567

14.6

Actual patient days

2,056,273

1,847,874

208,399

11.3

Occupancy rate (operational beds)

81.0

83.4

(2.4

Number of facilities at period end

3.9

Number of operational beds at period end

8,155

8,266

(111

)

(1.3

The following tables present additional detail regarding our skilled mix, including our percentage of nursing patient days and revenue by payor source for all facilities, Mature facilities, Ramping facilities and New facilities for the three months ended September 30, 2025 and 2024:

Three Months Ended September 30,

Skilled mix by revenue

Mature

Ramping

New

Total

2025

2024

2025

2024

2025

2024

2025

2024

Medicare

39.6

37.0

27.8

36.6

18.9

23.7

32.7

33.3

Managed care

15.8

17.3

12.8

17.6

16.7

15.3

17.2

Skilled mix

55.4

54.3

40.6

54.2

35.6

40.4

48.0

50.5

Medicaid

35.7

38.4

49.9

37.4

53.7

50.4

42.6

41.2

Private and other

8.9

7.3

9.5

8.4

10.7

9.2

9.4

8.3

Total

100.0

Three Months Ended September 30,

Skilled mix by nursing patient days

Mature

Ramping

New

Total

2025

2024

2025

2024

2025

2024

2025

2024

Medicare

21.0

18.5

12.4

18.5

11.1

11.4

16.6

16.4

Managed care

12.0

13.6

9.6

12.7

12.5

12.6

11.6

12.9

Skilled mix

33.0

32.1

22.0

31.2

23.6

24.0

28.2

29.3

Medicaid

57.7

59.6

67.8

59.7

64.2

65.3

61.6

61.4

Private and other

9.3

8.3

10.2

9.1

12.2

10.7

10.2

9.3

Total

100.0

Nine Months Ended September 30,

Skilled mix by revenue

Mature

Ramping

New

Total

2025

2024

2025

2024

2025

2024

2025

2024

Medicare

41.0

37.3

30.0

37.7

20.8

22.9

33.9

33.6

Managed care

15.4

17.7

11.9

18.2

17.4

16.4

15.2

17.6

Skilled mix

56.4

55.0

41.9

55.9

38.2

39.3

49.1

51.2

Medicaid

35.0

38.1

48.7

36.3

51.9

51.5

41.9

40.9

Private and other

8.6

6.9

9.4

7.8

9.9

9.2

9.0

7.9

Total

100.0

Nine Months Ended September 30,

Skilled mix by nursing patient days

Mature

Ramping

New

Total

2025

2024

2025

2024

2025

2024

2025

2024

Medicare

21.8

18.5

13.9

19.3

11.6

10.3

17.4

16.4

Managed care

11.9

13.7

8.9

13.4

13.1

12.0

11.5

13.0

Skilled mix

33.7

32.2

22.8

32.7

24.7

22.3

28.9

29.4

Medicaid

57.1

59.7

67.1

58.3

64.0

67.1

61.2

61.4

Private and other

9.2

8.1

10.1

9.0

11.3

10.6

9.9

9.2

Total

100.0

The following table presents average daily rates by payor source, excluding services that are not covered by the daily rate, for the three months ended September 30, 2025 and 2024:

Three Months Ended September 30,

Average daily rate

Mature

Ramping

New

Total

2025

2024

2025

2024

2025

2024

2025

2024

Medicare

988.41

947.82

991.53

982.32

746.97

880.10

950.49

949.62

Managed care

686.21

603.54

595.45

684.92

586.21

560.68

642.83

623.48

Total for skilled patient payors (1)

878.36

802.49

819.35

861.20

661.91

712.35

824.34

805.90

Medicaid

324.26

305.80

326.92

310.83

366.42

326.88

335.43

314.41

Private and other

495.26

416.36

418.77

455.01

385.54

365.64

446.20

414.55

Total (2)

523.14

474.28

444.63

495.71

438.53

423.64

484.57

467.98

__________________

(1)

Represents weighted average of revenue generated by Medicare and managed care payor sources.

(2)

Represents weighted average.

The following table presents average daily rates by payor source, excluding services that are not covered by the daily rate, for the nine months ended September 30, 2025 and 2024:

Nine Months Ended September 30,

Average daily rate

Mature

Ramping

New

Total

2025

2024

2025

2024

2025

2024

2025

2024

Medicare

984.00

942.70

981.22

971.79

773.80

910.87

946.64

950.39

Managed care

682.71

604.12

604.84

671.59

577.61

565.06

637.92

621.24

Total for skilled patient payors (1)

877.92

798.75

833.92

848.20

670.02

725.35

823.56

804.11

Medicaid

322.18

299.12

330.12

309.23

350.65

314.85

331.95

308.12

Private and other

492.48

396.81

425.86

430.88

380.83

355.44

443.96

395.91

Total (2)

525.23

468.14

454.83

496.61

432.96

410.54

485.22

462.27

__________________

(1)

Represents weighted average of revenue generated by Medicare and managed care payor sources.

(2)

Represents weighted average.

Key Skilled Services Metrics

We monitor the below key skilled services metrics across all of our facilities and by Mature facilities, Ramping facilities, and New facilities.

PACS GROUP, INC. AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

(dollars in thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2025

2024

2025

2024

Net income

52,330

16,210

131,676

19,153

Less: Net (loss) income attributable to noncontrolling interest

(76

)

590

(165

)

594

Add: Interest expense

8,529

9,029

19,787

35,040

Provision for income taxes

23,966

17,446

65,962

21,203

Depreciation and amortization

14,401

10,523

40,284

27,893

EBITDA

99,302

52,618

257,874

102,695

Adjustments to EBITDA:

Acquisition related costs

101

845

310

1,537

Gain on lease termination

—

(8,046

)

Stock-based compensation expense

12,516

12,304

38,322

103,240

Loss from equity method investment

—

2,736

Forfeiture of seller's note

—

500

—

500

Bargain purchase gain

—

(17,185

)

—

(17,185

)

Legal and other costs

19,596

—

66,460

—

Adjusted EBITDA

131,515

49,082

362,966

185,477

Rent - cost of services

95,107

72,632

283,250

200,954

Adjusted EBITDAR

226,622

646,216

PACS GROUP, INC. AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

(dollars in thousands)

Year ended December 31,

2024

2023

2022

Net income

55,344

112,882

150,496

Less: Net (loss) income attributable to noncontrolling interest

(416

)

—

Add: Interest expense

44,341

49,919

25,538

Provision for income taxes

46,210

44,435

56,549

Depreciation and amortization

40,809

25,632

22,311

EBITDA

187,120

232,860

254,894

Adjustments to EBITDA:

Acquisition related costs

2,506

998

201

Lease termination fees

—

421

Loss resulting from debt restructuring

—

3,628

—

Gain on lease termination

(8,046

)

—

Stock-based compensation

115,544

—

Loss from equity method investment

2,736

—

Forfeiture of seller's note

500

—

Bargain purchase gain

(17,185

)

—

Legal and other costs

9,727

—

Employee Retention Tax Credit

(14,599

)

—

Disaster relief payment

1,154

—

Adjusted EBITDA

279,457

237,486

255,516

Rent - cost of services

284,953

216,711

160,003

Adjusted EBITDAR

564,410

Non-GAAP Financial Measures

In addition to our results provided throughout that are determined in accordance with GAAP, we also present the following non-GAAP financial measures: EBITDA, Adjusted EBITDA and Adjusted EBITDAR (collectively, Non-GAAP Financial Measures). EBITDA and Adjusted EBITDA are performance measures. Adjusted EBITDAR is a valuation measure. These Non-GAAP Financial Measures have no standardized meaning defined by GAAP, and therefore have limitations as analytical tools, and they should not be considered in isolation, or as a substitute for analysis of our results as reported in accordance with GAAP. You should review the reconciliation of net income to the Non-GAAP Financial Measures in the table above, together with our current quarter condensed combined/consolidated financial statements and the related notes in their entirety, and should not rely on any single financial measure. Additionally, other companies may define these or similar Non-GAAP Financial Measures with the same or similar names differently, and because these Non-GAAP Financial Measures are not standardized, it may not be possible to compare these financial measures to those of other companies. A reconciliation of Adjusted EBITDA guidance to Net Income on a forward-looking basis cannot be provided without unreasonable efforts, as the Company is unable to provide reconciling information with respect to provision for income taxes, interest expense, depreciation and amortization, and certain other expenses that are not representative of our underlying operating performances, all of which are adjustments to Adjusted EBITDA.

Performance Measures

We use EBITDA and Adjusted EBITDA to facilitate internal comparisons of our historical operating performance on a more consistent basis, as well as for business planning and forecasting purposes. In addition, we believe the presentation of EBITDA and Adjusted EBITDA is useful to investors, analysts and other interested parties in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance.

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

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

Valuation Measure

We use Adjusted EBITDAR as a measure to determine the value of prospective acquisitions and to assess the enterprise value of our business without regard to differences in capital structures and leasing arrangements. In addition, we believe that Adjusted EBITDAR is also a commonly used measure by investors, analysts and other interested parties to compare the enterprise value of different companies in the healthcare industry without regard to differences in capital structures and leasing arrangements, particularly for companies with operating and finance leases. For example, finance lease expenditures are recorded in depreciation and interest and are therefore removed from Adjusted EBITDA, whereas operating lease expenditures are recorded in rent expense and are therefore retained in Adjusted EBITDA. Adjusted EBITDAR is a financial valuation measure that is not specified in GAAP, and is not displayed as a performance measure as it excludes rent expense, which is a normal and recurring cash operating expense, and is therefore presented only for the current period. While we believe that Adjusted EBITDAR provides useful insight regarding our underlying operations, excluding the impact of our operating leases, we must still incur cash operating expenses related to our operating leases and rent and such expenses are necessary to operate our leased operations. As a result, Adjusted EBITDAR may understate the extent of our cash operating expenses for the respective period relative to our actual cash needs to operate our leased operations and business.

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