What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-04 compared with 2025-02-05 · 119 added, 132 removed, 488 unchanged (34% of the section changed)

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Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K.

Risk Factors and Cautionary Note Regarding Forward-Looking Statements.

Item 1A., Risk Factors and Cautionary Note Regarding Forward-Looking Statements.

For discussion of 2023 items and year-over-year comparisons between 2024 and 2023 that are not included in this 2025 Form 10-K, refer to “Item 7.

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We are a provider of health care services across the post-acute care continuum.

We engage in the operation, ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare related properties and ancillary businesses located in Alabama, Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Tennessee, Texas, Utah, Washington and Wisconsin.

We engage in the operation, ownership, acquisition, development and leasing of skilled nursing, senior living and other healthcare related properties and ancillary businesses located in 17 states.

Our independent subsidiaries, each of which strive to be the operation of choice in the communities they serve, provide a broad spectrum of services.

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Operational Update — Our combined Same Facilities and Transitioning Facilities occupancy increased by 2.7% compared to the same period in 2024.

Since the first quarter of 2024, Same Facilities skilled nursing occupancy has surpassed pre-pandemic occupancy.

Our focus on rebuilding census resulted in Same Facilities occupancy of 82.9% during the year ended December 31, 2025 compared to 80.9% in the same period in 2024.

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These key initiatives together with our dedication to our cultural and operational fundamentals resulted in strong 2025 results.

Operational and New State Expansions — During the year ended December 31, 2024, we expanded our operations with the addition of 28 stand-alone skilled nursing operations and three campus operations, which added a total of 3,030 operational skilled nursing beds and 218 operational senior living units to be operated by our independent subsidiaries.

Subsequent to December 31, 2024, we added seven stand-alone skilled nursing operations, which added 682 operational skilled nursing beds to be operated by our independent subsidiary.

We also invested in new ancillary services that are complementary to our existing businesses.

Twelve of the operations mentioned above are located in Tennessee and Alabama, which are new states for us.

The expansion into the two new states are part of our strategic vision to further strengthen our growing national presence in both existing and new attractive markets.

Operational Expansions — During the year ended December 31, 2025, we expanded our operations with the addition of 40 stand-alone skilled nursing operations, five stand-alone senior living operations and one campus operation.

These new operations added a total of 4,175 operational skilled nursing beds and 313 operational senior living units operated by our independent subsidiaries.

Subsequent to December 31, 2025, we expanded our operations with the addition of five stand-alone skilled nursing operations that added 582 operational skilled nursing beds operated by our independent subsidiaries.

Standard Bearer had previously purchased the real estate for two of these operations, which were subsequently transferred from a third-party operator to the our independent subsidiaries.

Additionally, we invested in new ancillary services that are complementary to our existing businesses.

Expansion into New States — In the first quarter of 2025, we expanded our operations into the states of Alabama, Alaska and Oregon.

These expansions are part of our strategic vision to further strengthen our growing national presence in both existing and new attractive markets.

Standard Bearer Update — Standard Bearer Healthcare REIT, Inc.

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We expect the REIT structure to allow us to better demonstrate the growing value of our owned real estate and provide us with an efficient vehicle for future acquisitions of properties that could be operated by our independent subsidiaries or other third parties.

This structure gives us new pathways to growth with transactions we would not have considered in the past.

During the year ended December 31, 2024, Standard Bearer added $131.9 million of real estate associated with 11 stand-alone skilled nursing operations, three stand-alone senior living operations and three campus operations.

Of these additions, the stand-alone skilled nursing and campus operations are operated by 14 of our independent subsidiaries and the three stand-alone senior living operations are leased to a third-party operator.

During the year ended December 31, 2025, Standard Bearer added $314.2 million of real estate associated with 25 stand-alone skilled nursing operations, one stand-alone senior living operation and two campus operations.

Four of the acquisitions were related to exercising purchase options from CareTrust REIT, Inc.

(CareTrust) lease arrangements where our independent subsidiaries have been operating and managing these locations.

Of these additions, four stand-alone skilled nursing operations are leased to third-party operators and the remaining additions are operated by our independent subsidiaries.

Our existing relationships with third-party operators within our industry have allowed us to expand our growing REIT structure to operators outside of our organization.

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The fair value was determined by a third-party independent valuation specialist and incorporated each property's rental income, capitalization rate, rental yield rate and discount rate.

Subsequent to December 31, 2024, Standard Bearer added $50.9 million of real estate associated with four stand-alone skilled nursing operations and one campus operation.

Four of the acquisitions were related to exercising purchase options from CareTrust REIT, Inc.

(CareTrust) lease arrangements, which the operations are currently operated and managed by our independent subsidiaries.

The remaining real estate acquisition was leased back to our independent subsidiaries.

Insignia Pathway — In December 2024, we funded $35.0 million to the formation of Insignia Pathway, an independent public charity, with a mission to empower, support and expand the post acute care workforce through recruiting talent, providing resources, education, housing and advocacy to enhance professional growth, job satisfaction and community impact.

Insignia Pathway is dedicated to addressing workforce challenges, fostering equity and inspiring the current and next generation to join the essential field of post acute care.

Insignia Pathway is currently in the process of applying for recognition of exemption as an organization under Section 501(c)(3) of the Internal Revenue Code.

Common Stock Repurchase Program — On May 16, 2024, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2024.

We did not repurchase any shares during the fiscal year 2024.

Subsequent to December 31, 2025, Standard Bearer added approximately $18.1 million of real estate associated with two stand-alone skilled nursing operations, as discussed above, where all of the stand-alone skilled nursing facilities were leased back to our independent subsidiaries.

In addition, Standard Bearer had previously purchased the real estate for two of stand-alone skilled nursing operations, which were subsequently transferred from a third-party operator to the Company’s independent subsidiaries.

Insignia Pathway - In November 2025, we donated $10.0 million to Insignia Pathway, a non-profit organization formed in 2024 with a mission to empower, support and expand the post-acute care workforce.

Insignia Pathway is dedicated to inspiring the current and next generation to choose careers in this essential field.

In its first year of operation, the charity awarded over $1.0 million in grants to Registered Nurses from 23 countries who have committed to work for U.S.-based skilled nursing providers.

In total, we have donated $45.0 million to Insignia Pathway since its formation.

Common Stock Repurchase Program — On February 21, 2025, the Board of Directors approved a stock repurchase program pursuant to which we were authorized to repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from March 26, 2025.

During the year ended December 31, 2025, we repurchased 157 shares of our common stock for $20.0 million.

This repurchase program expired upon the repurchase of the fully authorized amount under the plan and is no longer in effect.

On May 15, 2025, the Board of Directors approved a stock repurchase program pursuant to which we are authorized to repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from June 16, 2025.

During the year ended December 31, 2025, we did not repurchase any shares pursuant to this stock repurchase program.

Litigation — During the year ended December 31, 2025, we agreed to settle all alleged wage, hour or labor code-related violations asserted on a class or representative basis against our independent subsidiaries in California for purported violations occurring during the six year period ending December 2025, for $12.0 million, pending court approval.

Key Performance Indicators

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• Average daily rates — The routine revenue by payor source for a period at the skilled nursing facilities divided by actual patient days for that revenue source for that given period.

These rates exclude additional state relief funding, which includes the American Rescue Plan Act (ARPA), the Family First Coronavirus Response Act (FFCRA) and other state specific relief programs.

• Occupancy percentage (operational beds) — The total number of patients occupying a bed in a skilled nursing facility as a percentage of the beds in a facility which are available for occupancy during the measurement period.

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Our results serve as a strong indicator that our strategy is working and our transformation is underway.

Over the last five years, our total revenue increased by $2.2 billion, or 109.2%, representing a 15.9% compound annual growth rate (CAGR) while our diluted GAAP earning per share (EPS) from continuing operations grew by $3.48 from 2019 to 2024, representing a 25.6% CAGR.

Over the last five years, our total revenue increased by $2.7 billion, or 111%, representing a 16% compound annual growth rate (CAGR) while our diluted GAAP earning per share (EPS) grew by $2.78 from 2020 to 2025, representing a 14% CAGR.

Our total revenue for the year ended December 31, 2025 increased $797.4 million, or 18.7%, compared to the year ended December 31, 2024.

Throughout 2024, we continued to make progress on targeted initiatives related to increasing occupancy and the level of acuity and complexity of the patients we serve in our facilities, attracting and developing our people and acquiring underperforming skilled nursing operations and integrating them with our proven cultural and operational principles.

Throughout 2025, we have continued to make progress on targeted initiatives related to increasing occupancy and the level of acuity and complexity of the patients we serve in our facilities, attracting and developing our people and acquiring underperforming skilled nursing operations and integrating them with our proven cultural and operational principles.

During the year ended December 31, 2025, we added 46 new operations.

We consistently experience healthy growth in both revenue and overall results as we continue to work diligently with existing and recently acquired operations so that each can reach its full clinical and financial potential.

Our combined Same Facilities and Transitioning Facilities occupancy increased by 2.9% compared to the same period in 2023.

Since the first quarter of 2024, Same Facilities skilled nursing occupancy has surpassed pre-pandemic occupancy.

Our focus on rebuilding census resulted in Same Facilities occupancy of 81.3% during the year ended December 31, 2024 compared to 79.2% in the same period in 2023, demonstrating our ability to gain additional market share even at our more mature operations.

Further, our Transitioning Facilities occupancy increased by 4.1% to 76.0% compared to the same period in 2023, highlighting our organic growth ability that results from transforming underperforming operations that we have acquired.

Throughout most of our history, our business is affected by seasonal fluctuations in occupancy and acuity, which are most prominent when comparing the summer and winter months of the calendar year.

For skilled nursing occupancy and skilled mix, our historic seasonal trend tends to show stronger occupancy and acuity during the first and fourth quarters and softening in the second and third quarters.

We consistently experience healthy growth in both revenue and overall results as we continue to work diligently with existing and recently acquired operations so that each operation can reach its full clinical and financial potential.

Our Same Facilities occupancy increased by 2.5% to 82.9% during the year ended December 31, 2025 compared to the same period in 2024, demonstrating our ability to gain additional market share even at our more mature operations.

Further, our Transitioning Facilities occupancy increased by 4.2% to 84.2% compared to the same period in 2024, highlighting our ability to organically grow and transform underperforming operations that we have acquired.

Throughout most of our history, our business has been affected by seasonal fluctuations in occupancy and acuity, which are most prominent when comparing the summer and winter months of the calendar year.

For skilled nursing occupancy and skilled mix, we typically experience stronger occupancy and acuity during the first and fourth quarters and softening in the second and third quarters.

Additionally, we historically have acquired operations with lower occupancy and skilled mix.

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Our strength remains in our operating model, which empowers each operator to form their own market-specific strategy and adjust to the needs of their local medical communities, including methods for attracting new healthcare professionals into our workforce and retaining and developing existing staff.

Despite continued labor pressures, there are positive trends on both turnover and agency usage across our operations.

As we continue to execute on core fundamentals, we continue to see positive trends on both turnover and agency usage across our operations.

During 2025, we added over 6,700 full-time equivalent team members, or 17%, to our independent subsidiaries and the Service Center.

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Interest income 0.5 0.7

Other income (expense)

OTHER INCOME (EXPENSE), NET 0.7 % 0.5 %

OTHER INCOME, NET 0.6 % 0.7 %

Income before provision for income taxes 9.0 9.1

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Adjusted EBT $ 515,860 $ 427,976

449,284 333,569

EBITDA 543,132 449,284

Adjusted EBITDA 602,350 490,392

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(2) Standard Bearer segment income includes rental revenue and expenses from our independent subsidiaries.

(3) EBITDA includes litigation related to specific proceedings arising outside of the ordinary course of business as discussed in Item 3.

Legal Proceedings.

The following discussion includes references to Adjusted EBT, EBITDA, Adjusted EBITDA, Adjusted EBITDAR and Funds from Operations (FFO) which are non-GAAP financial measures (collectively, the Non-GAAP Financial Measures).

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• stock-based compensation expense;

• litigation;

• loss (gain) on long-lived assets and gain on business interruption recoveries;

• acquisition related costs;

• costs incurred related to system implementations;

• litigation;

• gain on business interruption recoveries and loss on long-lived assets;

• gain on other investments;

• write off of deferred financing fees;

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We calculate EBITDA as net income, adjusted for net losses attributable to noncontrolling interest, before (a) interest income, (b) provision for income taxes, (c) depreciation and amortization, and (d) interest expense.

EBITDA in the prior period has been recast to conform to the current period presentation.

Adjusted EBITDA

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We believe that the presentation of Adjusted EBITDA, when combined with EBITDA and GAAP net income attributable to The Ensign Group, Inc., is beneficial to an investor’s complete understanding of our operating performance.

Adjusted EBITDA is EBITDA adjusted for the same non-core business items as listed in Adjusted EBT, except for write off of deferred financing fees and amortization of patient base intangible assets.

Adjusted EBITDA is EBITDA adjusted for the same non-core business items as listed in Adjusted EBT, except for amortization of patient base intangible assets and write off of deferred financing fees.

Funds from Operations (FFO)

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12,000 (1,425)

Loss (gain) on long-lived assets and gain on business interruption recoveries

(Gain) loss on business interruption recoveries and long-lived assets, net

(3,285) 2,335

Gain on other investments (2)

Acquisition related costs (3)

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(1) Represents specific proceedings and adjustments arising outside of the ordinary course of business.

(2) Represents gains on the sale of investments that are not part of our core business operations.

These investments have no observable market prices and are held at historical cost basis until sold or impaired.

(3) Represents costs incurred to acquire operations that are not capitalizable.

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12,000 (1,425)

Loss (gain) on long-lived assets and gain on business interruption recoveries

(Gain) loss on business interruption recoveries and long-lived assets, net

(3,285) 2,335

Gain on other investments (2)

Acquisition related costs (3)

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ADJUSTED EBITDAR

(1) Litigation relates to specific proceedings and adjustments arising outside of the ordinary course of business.

(2) Costs incurred to acquire operations that are not capitalizable.

(1) Represents specific proceedings and adjustments arising outside of the ordinary course of business.

(2) Represents gains on the sale of investments that are not part of our core business operations.

These investments have no observable market prices and are held at historical cost basis until sold or impaired.

(3) Represents costs incurred to acquire operations that are not capitalizable.

Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024

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Segment income (loss) 518,463 29,335 (159,369) — 388,429

Gain on sale of assets and insurance recoveries from real estate, net

Loss on long-lived assets

Income before provision for income taxes $ 386,094

Our total revenue increased by $797.4 million, or 18.7%, compared to the year ended December 31, 2024.

The increase in revenue was primarily driven by an increase in occupancy of 2.7% and 4.1% from our skilled services in Same Facilities and Transitioning Facilities, respectively, coupled with increasing daily revenue rates and the impact of acquisitions.

Additionally, our skilled services in Recently Acquired Facilities increased total revenue by $271.7 million, when compared to the same period in 2023.

Skilled Services Segment

The increase in revenue was primarily driven by an increase in occupancy of 2.5% and 4.2% from our skilled services in Same Facilities and Transitioning Facilities, respectively, coupled with increasing skilled mix and daily revenue rates.

In addition, our Recently Acquired Facilities revenue increased by $489.2 million, when compared to the same period in 2024.

The following tables present the skilled services revenue and key performance metrics by category during the years ended December 31, 2025 and 2024:

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Skilled services revenue

$ 3,424,421 $ 3,214,896 $ 209,525 6.5 %

Number of facilities at period end 210 210 — — %

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Skilled services revenue

$ 760,325 $ 697,529 $ 62,796 9.0 %

Number of facilities at period end 48 48 — — %

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(Dollars in thousands)

Skilled services revenue $ 550,507 $ 278,791 $ 271,716 NM

Skilled services revenue

$ 653,063 $ 163,826 $ 489,237 NM

Number of facilities at period end 68 28 40 NM

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Skilled mix by nursing revenue 38.3 % 28.9 % NM NM

Year Ended December 31,

2024 2023 Change % Change

FACILITY CLOSED RESULTS:

(Dollars in thousands)

Skilled services revenue $ 574 $ 3,942 $ (3,368) NM

Actual patient days 2,082 17,228 (15,146) NM

Occupancy percentage — Operational beds 52.6 % 90.8 % NM NM

(1) Campus represents a facility that offers both skilled nursing and senior living services.

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(3) Transitioning Facility results represent all facilities purchased from January 1, 2022 to December 31, 2023.

(4) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2023.

(5) Facility Closed results represent a closed operation during the year ended December 31, 2024 due to the transitioning of an intermediate care facility program to a group home setting, which is included in the All Other category.

The skilled services revenue was excluded from Same Facility results for the years ended December 31, 2024 and 2023 for comparison purposes.

(4) Recently Acquired Facility results represent all facilities purchased on or subsequent to January 1, 2024.

(5) Skilled services revenue and key performance metrics for a closed facility were not material and has been excluded from Same Facilities results during the year ended December 31, 2024.

The facility was closed in 2024 as the program was transitioned from an intermediate care facility to a group home setting.

Skilled services revenue increased $761.0 million, or 18.7%, compared to the year ended December 31, 2024.

The increases in skilled services revenue were across all payer types including increases in Medicaid revenue of $238.0 million, or 14.2%, Medicare revenue of $69.4 million, or 7.0%, managed care revenue of $123.6 million, or 18.6% and private revenue of $67.0 million, or 26.6%.

The increase in skilled services revenue was primarily driven by strong occupancy performance across our skilled services operations.

Our consolidated occupancy increased by 2.5% to 80.5% during the year ended December 31, 2024 compared to the same period in 2023, as a result of an increase in long-term care Medicaid patients and an increase in managed care skilled days.

Revenue in our Same Facilities increased $195.3 million, or 6.9%, compared to the same period in 2023, due to increased occupancy from long-term care patients, strong skilled days and revenue per patient day.

Our diligent efforts to strengthen our partnerships with various managed care organizations, hospitals and local communities, increased our managed care revenue by 12.1%, mainly due to increases in managed care days of 6.5% and revenue per patient day of 3.6%.

We continued to see a shift in our patient population from Medicare to managed care as Medicare Advantage enrollment continues to account for a larger portion of the overall Medicare eligible population.

In addition, Medicaid revenue increased by $89.8 million or 6.8%, mainly from the increases in Medicaid days and revenue per patient day.

Our skilled mix days and revenue percentage decline was due to our non-skilled days and revenue growing at a faster pace than our skilled days and revenue.

Both skilled and non-skilled days and revenue increased from the prior year.

Revenue generated by our Transitioning Facilities increased $34.3 million, or 7.3%, primarily due to improved occupancy growth, increases in skilled mix days and revenue per patient day.

The increases in revenue were derived from managed care revenue of 25.5%, Medicare revenue of 2.1%, Medicaid revenue of 3.9% and private revenue of 16.5%.

These increases demonstrate our ability to focus on increasing occupancy across payer types.

Included in the year ended December 31, 2023 is the revenue related to a facility that was not operating at full capacity starting in the first quarter of 2024 due to flooding.

Skilled services revenue generated by Recently Acquired Facilities increased by approximately $271.7 million compared to the year ended December 31, 2023.

The increases were primarily due to 31 operational expansions between January 1, 2024 and December 31, 2024 across ten states.

The increases in skilled services revenue were across all payer types, primarily driven by strong occupancy and skilled mix performance across our skilled services operations.

Our consolidated occupancy increased by 2.1% to 82.2% during the year ended December 31, 2025 compared to the same period in 2024 across all payors, with an increase in skilled days from our operations within Same Facilities and Transitioning Facilities.

Revenue in our Same Facilities increased $209.5 million, or 6.5%, compared to the year ended December 31, 2024, due to increased occupancy from strong skilled days and revenue per patient day.

Our continuous efforts to strengthen our partnerships with various managed care organizations, hospitals and local communities increased our managed care revenue by 9.3%, resulting from an increase in managed care days and revenue per patient day.

We continued to grow our Medicare patient population in addition to capturing market share in the increases in Medicare Advantage enrollments of the overall Medicare eligible population.

Our Medicare revenue increased by 4.1% due to an increase in Medicare days and revenue per day.

In addition, our other skilled revenue has continued to increase as we support the needs of local communities through the expansion of the Veterans Affairs programs.

Revenue in our Transitioning Facilities increased $62.8 million, or 9.0%, compared to the year ended December 31, 2024, due to improved occupancy growth, increases in skilled mix days and revenue per patient day.

The increases in revenue were derived from managed care revenue of 19.9%, Medicaid revenue of 7.0% and private revenue of 29.5%.

The increases are a result of an increase in patient days across all payer types, which reflect our operational fundamentals as we continue to transition and integrate these facilities.

Revenue in our Recently Acquired Facilities increased $489.2 million, compared to the year ended December 31, 2024.

The 41 operational expansions between January 1, 2025 and December 31, 2025 across 14 states contributed $339.8 million of the total increase.

Historically, we have generally experienced lower occupancy rates and lower skilled mix at Recently Acquired Facilities and therefore, we anticipate lower overall occupancy during years of growth.

Included in our metrics for Recently Acquired Facilities are 17 facilities we acquired in California in 2023 that were more mature and accordingly, had higher occupancy rates, higher skilled mix days and higher skilled mix revenue than our typical acquisitions.

In the future, if we acquire additional turnaround or start-up operations, we expect to see lower occupancy rates and skilled mix and these metrics are expected to vary from period to period based upon the type of the facilities and operations that we acquire.

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$ 422.67 $ 401.49 $ 425.65 $ 397.59 $ 412.24 $ 351.38 $ 421.69 $ 398.66

(1) The rates are based on contractually agreed-upon amounts or rates, excluding the estimates of variable consideration under the revenue recognition standard, Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606 and state relief funding during the year ended December 31, 2023 .

Our Medicare daily rates at Same Facilities and Transitioning Facilities increased by 5.0% and 5.2%, respectively, compared to the year ended December 31, 2024.

The increase is attributable to the 4.0% and 4.2% net market basket increase that became effective in October 2023 and October 2024, respectively, and a shift toward higher acuity patients.

Our average Medicaid rates increased 8.3% due to state reimbursement increases, our participation in supplemental Medicaid payment programs and quality improvement programs in various states and changes in Medicaid mix.

For example, we continue to have an increase in Medicaid days in states with higher rates, such as California.

In addition, during the COVID periods from 2020 through 2023, we received state relief funding through Medicaid programs from various states such as California.

These funds have been excluded from our average daily rates from 2020-2023.

Starting in 2024, several of the states we operate in have incorporated the state relief funding as part of the state per diem rates or enhanced their supplemental programs.

As results, these revenue are included in the 2024 average daily revenue rate.

As such, the increase in Medicaid rates from 2023 to 2024 is not a lateral comparison.

Payor Sources as a Percentage of Skilled Nursing Services — We use our skilled mix as a measure of the quality of reimbursements we receive at our independent skilled nursing facilities over various periods.

The following tables set forth our percentage of skilled nursing patient revenue and days by payor source:

The increases are attributable to the 4.2% and 3.2% net market basket increase that became effective in October 2024 and October 2025, respectively, as well as a shift toward higher acuity patients.

As hospitals continue to discharge individuals with more complex medical conditions to skilled nursing facilities, we are experiencing a greater proportion of higher acuity patients, which necessitates more advanced and specialized care.

Our average Medicaid rates increased 4.6% due to state reimbursement increases, our participation in Medicaid supplemental payment and quality improvement programs in various states.

Percentage of Skilled Nursing Services — We use our skilled mix as a measure of the quality of reimbursements we receive at our independent skilled nursing facilities over various periods.

The following tables set forth our percentage of skilled nursing patient revenue and days:

Year Ended December 31,

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Cost of services related to our skilled services segment increased by $604.1 million, or 18.6%, from the same period in 2024.

Cost of services as a percentage of revenue increased to 79.5% from 79.1%, due to increased labor costs as a result of new acquisitions in the turnaround stage, increased insurance expenses and increased expense related to the deferred compensation investment program.

Our cost of services as a percentage of revenue varies depending on the volume of acquisitions during the period, which typically have higher costs during the transition period.

Cost of services as a percentage of revenue remained consistent at 79.5% as we continued to see stabilization in the labor markets.

In addition, our cost of services as a percentage of revenue varies depending on the volume of acquisitions during the period, which typically have higher costs during the transition period.

Standard Bearer

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FFO — Our FFO increased by $16.6 million, or 28.3%, to $75.2 million, compared to the year ended December 31, 2024.

The increase in rental revenue of $12.6 million is offset by increases in interest expense of $7.4 million associated with the intercompany debt arrangements as Standard Bearer continues to grow its real estate portfolio.

The increase in rental revenue of $31.8 million is offset by increases in interest expense of $14.8 million associated with the debt arrangements between Standard Bearer and us as Standard Bearer continues to grow its real estate portfolio.

All Other Revenue

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Other revenue for the year ended December 31, 2025 includes senior living revenue of $112.0 million, revenue from other ancillary services of $108.3 million and rental income of $12.5 million.

The increase in other revenue is primarily attributable to our senior living and other ancillary services.

The increase in other revenue is primarily attributable to growth in our other ancillary services.

Consolidated Financial Expenses

Rent-cost of services — Our rent-cost of services as a percentage of revenue decreased by 0.2% to 5.1%, as our operational expansions included a higher mix of real estate purchases.

General and administrative expense — General and administrative expense decreased by $37.9 million or 14.4%, to $225.1 million.

General and administrative expense as a percentage of revenue decreased by 1.8% to 5.3%.

This reduction is attributable to a settlement that was outside the ordinary course of business and finalized in 2023.

Excluding the impact of the proceeding in 2023, general and administrative expense as a percentage of revenue would be at 5.4%.

Rent-cost of services — Our rent-cost of services as a percentage of revenue decreased by 0.4% to 4.7%, as the expansions in our footprint have resulted from more real estate purchases than leased properties.

General and administrative expense — General and administrative expense increased by $44.7 million or 19.8%, to $269.8 million.

This increase was primarily driven by additional headcount due to acquisition activities.

General and administrative expense as a percentage of revenue remained consistent at 5.3%.

Depreciation and amortization — Depreciation and amortization expense increased by $20.2 million, or 24.0%, to $104.3 million.

This increase was primarily related to the additional depreciation and amortization incurred as a result of our newly acquired operations and capital expenditures.

Depreciation and amortization expense as a percentage of revenue remained consistent at 1.9%.

Other income (expense), net — Other income (expense), net as a percentage of revenue increased by 0.2%.

Other income primarily includes interest income from our investments, interest expense related to our debt and deferred compensation gains and losses.

Other income (expense), net increased by $10.4 million due to increases in interest income from our investments and gains in our deferred compensation plan which incurs gains or losses depending on market performance.

During the years ended December 31, 2024 and 2023, the deferred compensation plan had gains of $5.2 million and $4.6 million, respectively.

We also recorded an offsetting expense allocated between cost of services and general and administrative expenses.

This increase was primarily related to the additional depreciation and amortization incurred as a result of our newly acquired operations, which have a greater mix of real estate purchases than leases, and capital investments.

Depreciation and amortization increased 0.2%, to 2.1%, as a percentage of revenue.

Other income, net — Other income primarily includes interest income from our investments, interest expense related to our debt and deferred compensation gains and losses.

Other income, net increased by $2.5 million due to a $2.4 million realized gain on other investments not core to our business operations and a $3.2 million gain on our deferred compensation plan offset by a decrease in interest income of $4.2 million as we utilized our cash on hand to fund more real estate purchases during the period.

Changes in our deferred compensation plan are a result of gains or losses depending on market performance.

Other income, net as a percentage of revenue decreased by 0.1%.

Provision for income taxes — Our effective tax rate was 24.4% for the year ended December 31, 2025, compared to 22.7% for the same period in 2024.

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Liquidity and Capital Resources

Our primary sources of liquidity have historically been derived from our cash flows from operations and long-term debt secured by our real property and our Credit Facility (defined below).

Our liquidity as of December 31, 2024 is impacted by cash generated from strong operational performance offset by investments made for our operational expansions and ancillary businesses as well as capital expenditures to improve the quality of care at our existing operations.

Our principal sources of liquidity have historically been derived from our cash flows from operations, long-term debt secured by our real property and borrowings under our Credit Facility (defined below).

Our liquidity as of December 31, 2025 is impacted by cash generated from strong operational performance offset by investments made for our acquisitions as well as capital expenditures to improve the quality of care at our existing operations.

Historically, we have primarily financed the majority of our acquisitions through mortgages on our properties, our Credit Facility and cash generated from operations.

Cash paid to fund acquisitions was $156.5 million for the year ended December 31, 2024 compared to cash paid of $69.0 million for the year ended December 31, 2023.

Cash paid to fund acquisitions was $323.3 million for the year ended December 31, 2025 compared to $156.5 million for the year ended December 31, 2024.

Total capital expenditures for property and equipment were $193.6 million and $158.2 million for the years ended December 31, 2025 and 2024, respectively.

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We may, in the future, seek to raise additional capital to fund growth, capital renovations, operations and other business activities, but such additional capital may not be available on acceptable terms, on a timely basis, or at all.

Our cash and cash equivalents as of December 31, 2024 consisted of bank term deposits, money market funds and U.S.

Treasury bill related investments.

Our cash and cash equivalents of approximately $503.9 million as of December 31, 2025 consisted of bank deposits and money market funds.

In addition, as of December 31, 2025, we held investments of approximately $235.3 million.

We believe our investments that were in an unrealized loss position as of December 31, 2025 do not require an allowance for expected credit losses, nor has any event occurred subsequent to that date that would indicate so.

As mentioned above, our primary source of cash is from our ongoing operations.

Our primary source of cash is from our ongoing operations.

Our positive cash flows have supported our business and have allowed us to pay regular dividends to our stockholders.

We currently anticipate that existing cash and total investments as of December 31, 2025, along with projected operating cash flows and available financing, will support our normal business operations for the foreseeable future.

On May 16, 2024, the Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2024.

On August 29, 2023, the Board of Directors previously approved a stock repurchase program pursuant to which we could repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from September 1, 2023, which the program terminated by its terms on August 31, 2024 and is no longer in effect.

We did not purchase any shares pursuant to the stock repurchase programs during the year ended December 31, 2024.

Under these repurchase programs, we are authorized to repurchase our issued and outstanding common shares from time to time in open-market and privately negotiated transactions, tender offers, pursuant to contractual provisions, and block trades, or otherwise in accordance with federal securities laws.

The stock repurchase programs do not obligate us to acquire any specific number of shares.

Share Repurchases

During the year ended December 31, 2025, we did not repurchase any shares pursuant to this stock repurchase program.

On February 21, 2025, the Board of Directors approved a stock repurchase program pursuant to which we were authorized to repurchase up to $20.0 million of our common stock under the program for a period of approximately 12 months from March 26, 2025.

During the year ended December 31, 2025, we repurchased 157 shares of our common stock for $20.0 million.

This repurchase program expired upon the repurchase of the fully authorized amount under the plan and is no longer in effect.

Under our repurchase program, we are authorized to repurchase our issued and outstanding common shares from time to time in open-market and privately negotiated transactions, tender offers, pursuant to contractual provisions, and block trades, or otherwise in accordance with federal securities laws.

The stock repurchase program does not obligate us to acquire any specific number of shares.

Any such repurchases will depend on our business strategy, prevailing market conditions, our liquidity requirements, contractual restrictions or covenants, compliance with securities laws, and other factors.

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Financing activities (11,810) (2,162)

Net (decrease) increase in cash and cash equivalents

$ (45,028) $ 193,356

Net increase (decrease) in cash and cash equivalents $ 39,283 $ (45,028)

Cash and cash equivalents beginning of period 464,598 509,626

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Cash provided by operating activities is net income adjusted for certain non-cash items and changes in operating assets and liabilities.

The $29.5 million decrease in cash provided by operating activities for the year ended December 31, 2024 compared to the same period in 2023 w as due to payment of the $48.0 million related to the litigation matter discussed in Item 3., Legal Proceedings and we funded $35.0 million to Insignia Pathway, which is discussed in Recent Activities .

This cash outflow was partially offset by an increase in operational performance.

The $217.1 million increase in cash provided by operating activities for the year ended December 31, 2025 compared to the same period in 2024 w as due to an increase in operational performance and timing of payments and accounts receivable collections.

Additionally, in the same period in 2024, we paid $48.0 million related to the litigation matter discussed in Item 3., Legal Proceedings .

Investing Activities

Investing cash flows consist primarily of capital expenditures, investment activities, insurance proceeds and cash used for acquisitions.

The $207.4 million increase in cash used in investing activities for the year ended December 31, 2024 compared to the same period in 2023 was primarily used for operational expansions and capital expenditures as well as increased investment activity as part of our capital strategy.

The $123.1 million increase in cash used in investing activities for the year ended December 31, 2025 compared to the same period in 2024 was primarily used for acquisitions and capital expenditures offset by maturities of our investments.

Financing Activities

Financing cash flows consist primarily of cash provided by the issuance of common stock upon exercise of stock options, payment of dividends to stockholders, issuance and repayment of short-term and long-term debt, payment for share repurchases and the noncontrolling interest activity.

The $1.6 million increase in cash provided by financing activities for the year ended December 31, 2024 compared to the same period in 2023, was primarily due to stock option exercises offset by the purchase of non-controlling interest in one of our ancillary businesses.

A discussion of our cash flows for the year ended December 31, 2022 is included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources, included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 1, 2024.

The $9.6 million increase in cash used by financing activities for the year ended December 31, 2025 compared to the same period in 2024, was primarily due to $20.0 million of share repurchases in 2025 as part of our stock repurchase program offset by an increase in cash provided by the issuance of stock options.

A discussion of our cash flows for the year ended December 31, 2023 is included in Part II., Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources, included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission on February 5, 2025.

Material cash requirements from known contractual and other obligations

Total long-term debt obligations, net of debt discount, outstanding as of the end of each fiscal year were as follows:

Total long-term debt obligations outstanding as of the end of each fiscal year were as follows:

2025 2024 2023 2022 2021

(In thousands)

Mortgage loans and promissory note

148,438 152,388 156,271 159,967 117,806

Mortgage loan and promissory notes 144,352 148,438 152,388 156,271 159,967

TOTAL $ 144,352 $ 148,438 $ 152,388 $ 156,271 $ 159,967

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Not included in the table above are our actuarially determined self-insured general and professional malpractice liability, workers' compensation and medical (including prescription drugs) and dental healthcare obligations, which are broken out between current and long-term liabilities in our financial statements included in this Annual Report on Form 10-K.

As part of the proceeding discussed in Item 3., Legal Proceedings , the parties agreed to settle the litigation for $48.0 million.

The settlement funds were fully paid during the year ended December 31, 2024.

The settlement funds of $48.0 million discussed in Item 3., Legal Proceedings , were fully paid during the year ended December 31, 2024.

Credit Facility with a Lending Consortium Arranged by Truist

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Operating Leases

As of December 31, 2024, 231 of our facilities are under long-term lease arrangements, of which 99 of the operations are under nine triple-net Master Leases and one stand-alone lease with CareTrust.

As of December 31, 2025, 253 of our facilities have long-term lease arrangements, of which 104 of the operations are under eight triple-net Master Leases with CareTrust.

The Master Leases consist of multiple leases, each with its own pool of properties, that have varying maturities and diversity in property geography.

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If we elect to renew the term of a Master Lease, the renewal will be effective as to all, but not less than all, of the leased property then subject to the Master Lease.

Additionally, four of the 100 facilities leased from CareTrust include an option to purchase that we can exercise starting on December 1, 2024.

Subsequent to December 31, 2024, we, through Standard Bearer, exercised the option to purchase the real estate of the four facilities from CareTrust for $44.6 million.

We also lease certain facilities and our administrative offices under non-cancelable operating leases, most of which have initial lease terms ranging from five to 20 years and are subject to annual escalation equal to the percentage change in the Consumer Price Index with a stated cap percentage.

We also lease certain facilities under non-cancelable operating leases, most of which have initial lease terms ranging from 15 to 20 years and are subject to annual escalation equal to the percentage change in the Consumer Price Index with a stated cap percentage.

In addition, we lease certain of our equipment under non-cancelable operating leases with initial terms ranging from three to five years.

Most of these leases contain renewal options, certain of which involve rent increases.

Ninety of our independent subsidiaries, excluding the subsidiaries that are operated under the Master Leases from CareTrust, are operated under 14 separate master lease arrangements.

Our 104 independent subsidiaries, excluding the subsidiaries that are operated under the Master Leases from CareTrust, are operated under 19 separate Master Leases.

Under these master leases, a default at a single facility could subject one or more of the other independent subsidiaries covered by the same master lease to the same default risk.

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Labor, supply expenses and capital expenditures make up a substantial portion of our cost of services.

Those expenses can be subject to increase in periods of rising inflation and when labor shortages occur in the marketplace.

Those expenses can be subject to increase in periods of rising inflation, tariffs enforcement and when labor shortages occur in the marketplace.

To date, we have generally been able to implement cost control measures or obtain increases in reimbursement sufficient to offset increases in these expenses.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis