Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion analyzes our financial condition and results of operations and should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (our "Form 10-Q"). This discussion contains forward-looking statements that involve risks and uncertainties. See "Forward-Looking Statements." When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that characterize our business. Known material factors that could affect our financial performance and actual results, and could cause actual results to differ materially from those expressed or implied in any forward-looking statements included in this discussion or otherwise made by our management, are described in Item 2 of Part I of this Form 10-Q, and in Item 1A, "Risk Factors" of Part I of our Annual Report on Form 10-K for the year ended December 31, 2025 (our "Form 10-K"). Factors that could cause or contribute to such difference are not limited to those identified in "Risk Factors." When used in the following discussion, "Senior" patients and populations mean individuals who are aged 65 and older, and "Specialty" patients and populations mean individuals who have unique, specialized and most often chronic/life-long health conditions and needs.

Overview

We are a leading home and community-based healthcare services platform, focused on delivering complementary pharmacy and provider services to complex patients. We have a differentiated approach to care delivery, with an integrated and scaled model that addresses critical services that the highest-need and highest-cost patients require. With a focus on Senior and Specialty patients, our platform provides pharmacy and provider services (both clinical and supportive care in nature) in lower-cost home and community settings largely to Medicare, Medicaid, and commercially-insured populations. We are an essential part of our nation's health delivery network as a front-line provider of high-quality and cost-effective care to a large and growing number of people, who increasingly require a combination of specialized solutions to enable holistic health care management. Our presence spans all 50 states; we serve over 475,000 patients daily through our approximately 12,400 clinical providers and pharmacists; and our services make a profound impact in the lives and communities of the people we serve.

Unless otherwise noted, amounts and disclosures throughout this Management's Discussion and Analysis relate to our continuing operations. Refer to "PART I - Item 1. Note 2" of our Form 10-K for additional information regarding discontinued operations.

For additional overview of our business, see "PART I - Item 1. Business" of our Form 10-K.

First Quarter of 2026 Key Highlights

Financial Performance Highlights: First Quarter of 2026 Compared to First Quarter of 2025

(1) Reconciliation of GAAP to non-GAAP results is provided below under the section entitled "Non-GAAP Financial Measures."

Recent Developments

On January 17, 2025, the Company entered into a purchase agreement with National Mentor Holding, Inc. to divest our community living services, home and community based waiver programs, and intermediate care facilities (the "Community Living business"), for $835 million, subject to typical adjustments for working capital and other customary items. The divestiture closed on March 30, 2026. The Company has determined the divestiture of the Community Living business represents a strategic shift that will have a major effect on its business and therefore met the criteria for classification as discontinued operations in the first fiscal quarter of 2025. This transaction provides for continuity of important intellectual and developmental disability services while BrightSpring focuses on a concentrated group of customers, patients and stakeholders in the future. We believe the Company's streamlined service offerings will result in increased strategic focus, operational efficiencies, a refined payer mix, and greater clinical integration and business synergy across the Provider Services segment. The divestiture will also augment our expected revenue and Adjusted EBITDA growth rates and maximize exposure to target growth markets that require BrightSpring's needed and valuable solutions, such as home health, hospice, rehab, and primary care. Unless otherwise noted, amounts and disclosures throughout this Management's Discussion and Analysis relate to our continuing operations. Refer to "PART I - Item 1. Note 2" of our Form 10-K for additional information regarding discontinued operations.

On March 4, 2026, KKR Stockholder and certain management selling stockholders completed a registered secondary public offering of 20,000,000 shares of the Company's common stock (the "March 2026 Offering"). The Company did not sell any shares of common stock that were offered in the March 2026 Offering. Also, the Company did not receive any proceeds from the March 2026 Offering, other than proceeds received in connection with the cash exercise of stock options by the management selling stockholders in connection with the March 2026 Offering.

In connection with the March 2026 Offering, the Company concurrently purchased from the underwriter, out of the aggregate of 20,000,000 shares of common stock that were the subject of the March 2026 Offering, 1,464,807 shares of common stock at a price of $40.96 per share, for a total purchase price of $60.0 million. The purchase price reflected a discount to the closing market price on the date of purchase. The repurchase was reviewed and approved by the Audit Committee of our Board of Directors.

Our Service Offerings

We are one of the largest independent providers of home and community-based health services in the United States, delivering both pharmacy and provider services. We believe our high-quality and complementary health services offerings address significant and important patient and stakeholder needs. We enhance patient outcomes through the delivery and coordination of high-quality services that high-need, high-cost patients require. Our services are principally delivered in patient-preferred and lower-cost settings and often over longer periods of time, given the chronic nature of the patient conditions that we address. We believe our breadth of service capabilities and proven outcomes position us as a provider of choice for patients, families, referral sources, customers, and payors. We deliver services through two reportable segments: Pharmacy Solutions and Provider Services. For additional details regarding our diversified service offerings within each reportable segment see "PART I - Item 1. Business" of our Form 10-K.

The following table summarizes the revenues generated by each of our reportable segments:

Payor Mix

We are characterized by payor diversification across our platform. Our payors are principally federal, state, and local governmental agencies, commercial insurance, private, and other payors. Additionally, our Medicaid payors can be further broken down across each individual state with our top 10 Medicaid states representing 6% of total Company revenue for the three months ended March 31, 2026 and 2025.

We provide our services across all 50 states, Puerto Rico and Canada, with our top 10 states of operations comprising 52% and 53% of total Company revenues for the three months ended March 31, 2026 and 2025, respectively. The federal, state, and local programs under which we operate are subject to legislative and budgetary changes that can influence reimbursement rates.

The following tables summarize the percentage of revenue generated by each payor type for each of our service offerings and reportable segments:

See Note 3 of the unaudited condensed consolidated financial statements and related notes in this Form 10-Q for more information regarding revenue by payor type for each reportable segment for the three months ended March 31, 2026 and 2025.

Trends and Other Factors Affecting Business

Expansion of our Pharmacy Solutions

We focus on providing health-dependent medications in a timely and well-supported manner to our patients receiving pharmacy solutions in their home and community-based settings. Our pharmacy services are primarily delivered directly to patients in their place of residence, home, or stay, and sometimes in a clinic setting. According to industry reports, pharmacy solutions delivered to and tailored for the home environment, such as home infusion services, oncology services, and daily medication management services in the home, will continue to grow faster than the overall and general pharmacy market. We have continued to expand our pharmacy capabilities to serve this need. We are a leading independent pharmacy provider in our respective pharmacy patient markets, and we expect to continue to increase our share, including home infusion patients, specialty oncology patients, behavioral patients, in-home Seniors, and hospice patients.

Continued Growth of our Provider Services Patient Populations

We focus on delivering high-touch and coordinated services to medically complex Senior and Specialty patients in the home and community-based settings where they live. As the baby boomer population ages, Seniors, who comprise a significant majority of our patients, will represent a higher percentage of the overall population. Given the proven value proposition of home-based health services, we believe patients will increasingly seek treatment and referral sources and payors will increasingly support treatment in homes more often than in higher cost, less convenient, higher acuity institutional settings.

The vast majority of patients we serve in our provider businesses are served in the home, and we have purposefully continued to expand our service offering and footprint to serve patients in this lower cost setting. Since 2019, we built upon supportive care services to patients, as we have meaningfully expanded our footprint of highly clinical and expert services to home health, rehabilitation, and hospice patients to address a large national healthcare need and more completely and better serve Senior and Specialty patients in the home as evidenced by continued census growth within the Provider Services segment. Our complementary services that address the multiple needs of these patient populations will increasingly provide integrated care opportunities to provide more complete and better coordinated services to patients across health settings and stages.

Stable Reimbursement Environment Across our Portfolio of Businesses

Our revenue is dependent upon our contracts and relationships with payors for our "must-serve" patient populations. We partner with a large and diverse set of payor groups nationally and in each of our markets, to form provider networks and to lower the overall cost of care. We structure our payor contracts to help both providers and payors achieve their objectives in a mutually aligned manner. Maintaining, supporting, and both deepening and increasing the number of these contracts and relationships, particularly as we continue to grow market share and enter new markets, is important for our long-term success.

We have observed relatively stable reimbursement rates from government and commercial payors in our pharmacy and provider services over a number of years, particularly for services provided to high-need, medically complex populations. Due to the medical necessity of our services, which are lower cost than healthcare services provided in other settings and reduce ER, hospital and institutional facility utilization, we have a history of reimbursement stability.

Culture of Quality and Compliance and Consistent Operations Execution

Quality and compliance are central to our strategies and mission. We have demonstrated leading and excellent service and customer/patient/family satisfaction scores across the organization, as referenced in prior filings such as our Form 10-K. In addition to quality and compliance resources and programs in field operations, we invest in people, training, auditing, signature programs, accreditations, advocacy, and technologies to support quality, compliance, and safety as part of our "Quality First" framework. We have demonstrated consistently high and often leading marks for service levels, satisfaction scores, and quality metrics in our industries.

Operational excellence is also an ongoing focus at the Company, including how we collect and share key metrics, hold operational reviews, audit, conduct training, deploy expert support resources, execute on corrective and preventative actions, and implement continuous improvement initiatives across the organization. We have continued to make investments in automation, data, and technology systems to support enhanced workflows, further scale, and future growth across service lines.

Ability to Build De Novo Locations

We have a proven ability to augment growth of existing operations by expanding our presence and opening new locations - in both of our reportable segments, Pharmacy Solutions and Provider Services - across geographies with consistent ramp-up in performance after site opening. We believe our platform can continue to build further scale nationally, adding density to additional and targeted key markets as a lever to facilitate maximum pharmacy and provider services overlap, integrated and value-based care, and growth. The Company's geographic and operations scale, and platform of complementary segments and service lines, provides us with access to more de novo opportunities to consider and prioritize.

We typically identify and open new locations within proximity of an existing location as we leverage existing market knowledge and presence to expand in target markets, regions, and states. Our internal support resources in real estate, purchasing, IT, credentialing, payor contracting, HR, and sales and marketing, along with our Project Management Office, help to support and manage de novo locations from start to opening. We expect to continue to selectively and strategically expand our footprint within the United States and extend our service offerings to our patients and for customers, referral sources, and payors. We believe de novo investments facilitate more integrated care capability and are a meaningful organic growth driver for the Company.

Ability to Facilitate Integrated Care

Our operating model consists of complementary pharmacy and provider services that high-need Senior and Specialty populations require, and it is designed to increasingly coordinate, manage, and serve patients across our various needs and settings over time, leading to improved patient, family, physician, and referral source satisfaction, improved payor experiences, and better outcomes. Our performance and potential to drive increased service volume for increased patient and health outcomes impact is driven partly by our appeal with our patients, families, customers, referral sources, and payors to provide multiple integrated care services - either in the same setting at the same time or across settings and stages of health - within our collection of pharmacy solutions and provider services and differentiated overall capabilities.

We provide multiple pharmacy and provider services to approximately 9,000 patients today, and we believe that there are substantially more opportunities to deliver more integrated care, given the hundreds of thousands of patients we serve and a similar number of patients discharging from customers annually. Value-add, beneficial, and multiple integrated care opportunities exist for our customer base and all Senior and Specialty patient populations not only across pharmacy and provider services, but also within each segment. Within pharmacy services, Continue CareRx is aimed at providing medication risk and therapy management continuously and longitudinally post discharge from hospitals and skilled nursing customers. Within provider services, patients often transition from home health to hospice services and can receive therapy and supportive care services concurrent with each other and with home health and hospice.

Aligning to Value-Based Care Reimbursement Models with Innovative Solutions

The scale and depth of our complimentary platform of diverse yet related customer and patient services - that complex patients require - positions us at the forefront with governmental and commercial payors who are increasingly seeking ways to expand value-based reimbursement models. Our high-quality services that are delivered in home and community-based and patient and family-preferred settings at lower comparable costs are well-positioned for the long-term, and we continue to add wraparound care management capabilities and offerings to our core services. In addition to our large Medicare and Medicaid beneficiary populations, we have a large number of non-governmental payor contracts across the organization today, which both diversifies our payor mix, and provides for additional value-based opportunities and partnerships. The Company's focused build out of its (i) Home-Based Primary Care, transitional care programs, and in-home medication therapy management, and (ii) Clinical (Nursing) Hub, are key enablers to coordinate base pharmacy and provider services and drive improved quality and lower costs for value-based care constructs. In addition to numerous payor contracts that feature reimbursement incentives, in the past year the Company has entered into several accountable care organization ("ACO") arrangements to participate in shared savings from its attributed primary care patients and other ACO partnerships and contract as a preferred provider.

Components of Results of Operations

Revenues. The Company recognizes the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. For transactions involving the transfer of goods, revenues are primarily recognized when the customer obtains control of the products sold, which is generally upon shipment or delivery, depending on the delivery terms specified in the sales agreement. For transactions exclusively involving provision of services, revenues are recognized over time based on an appropriate measure of progress.

Cost of Goods and Cost of Services. We classify expenses directly related to providing goods and services, including depreciation and amortization, as cost of goods and cost of services. Direct costs and expenses principally include cost of drugs, net of rebates, salaries and benefits for direct care and service professionals, contracted labor costs, insurance costs, transportation costs for clients requiring services, certain client expenses such as food, supplies and medicine, residential occupancy expenses, which primarily comprise rent and utilities, and other miscellaneous direct goods or service-related expenses.

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses consist of expenses incurred in support of our operations and administrative functions and include labor costs, such as salaries, bonuses, commissions, benefits, and travel-related expenses, distribution expenses, facilities rental costs, third-party revenue cycle management costs, and corporate support costs including finance, information technology, legal costs and settlements, human resources, procurement, and other administrative costs.

Interest Expense, net. Interest expense, net includes the debt service costs associated with our various debt instruments, including our First Lien Facilities, and the amortization of related deferred financing fees, which are amortized over the term of the respective credit agreement. Interest expense, net also includes the portion of the gain or loss on our interest rate swap agreements that is reclassified into earnings.

Income Tax Expense (Benefit). Our provision for income taxes is based on permanent book/tax differences and statutory tax rates in the various jurisdictions in which we operate. Significant estimates and judgments are required in determining the provision for income taxes.

Results of Operations

Consolidated Results of Operations

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

The following table sets forth, for the periods indicated, our consolidated results of operations.

* n.m.: not meaningful

(1) Reconciliation of GAAP to non-GAAP results is provided below under the section entitled "Non-GAAP Financial Measures."

The following discussion of our results of operations should be read in conjunction with the foregoing table summarizing our consolidated results of operations.

Revenues

Revenues were $3,613.7 million for the three months ended March 31, 2026, as compared with $2,878.1 million for the three months ended March 31, 2025, an increase of $735.6 million or 25.6%. The increase resulted from growth in our Pharmacy Solutions and Provider Services segments. See additional discussion in "-Segment Results of Operations" below.

Cost of Goods

Cost of goods was $2,870.6 million for the three months ended March 31, 2026, as compared with $2,328.2 million for the three months ended March 31, 2025, an increase of $542.4 million or 23.3%. The increase resulted from an increase in Pharmacy Solutions cost of goods. See additional discussion in "-Segment Results of Operations" below.

Cost of Services

Cost of services was $260.9 million for the three months ended March 31, 2026, as compared with $211.5 million for the three months ended March 31, 2025, an increase of $49.4 million or 23.3%. The increase resulted from an increase in Provider Services cost of services. See additional discussion in "-Segment Results of Operations" below.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were $360.8 million for the three months ended March 31, 2026, as compared with $287.6 million for the three months ended March 31, 2025, an increase of $73.1 million or 25.4%. The increase primarily resulted from the following segment activity and factors:

Interest Expense, net

Interest expense, net was $38.6 million for the three months ended March 31, 2026, as compared with $41.8 million for the three months ended March 31, 2025, a decrease of $3.1 million or 7.5%. The decrease primarily resulted from a decrease in both the variable-rate and applicable margin for the three months ended March 31, 2026 as compared to the prior period and lower outstanding term debt as compared to the prior period, and was partially offset by a $3.9 million decrease in interest income received related to cash flow hedges of interest rate risk.

Income Tax Expense (Benefit)

Income tax expense was $8.6 million for the three months ended March 31, 2026, as compared with an income tax benefit of $0.2 million for the three months ended March 31, 2025. The $8.8 million increase in the income tax expense is primarily driven by the increase in pre-tax book income for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, and an increase in the effective tax rate for the three months ended March 31, 2026 of 10.3% compared to (2.7)% for the three months ended March 31, 2025. The increase in the effective tax rate is primarily attributable to the comparatively favorable impact of year-to-date discrete tax benefits on pre-tax income in each respective period.

Net Income

Net income was $74.3 million for the three months ended March 31, 2026, as compared with $9.2 million for the three months ended March 31, 2025, an increase of $65.1 million. The increase in net income is primarily attributable to the increase in gross profit and the aforementioned decrease in interest expense, net, partially offset by an increase in selling, general, and administrative expenses and income tax expense.

Adjusted EBITDA (1)

Adjusted EBITDA was $189.8 million for the three months ended March 31, 2026, as compared with $131.1 million for the three months ended March 31, 2025, an increase of $58.7 million or 44.8%. The increase primarily resulted from the following segment activity and factors:

(1) Reconciliation of GAAP to non-GAAP results is provided below under the section entitled "Non-GAAP Financial Measures."

Segment Results of Operations

Pharmacy Solutions Segment

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

The following table sets forth, for the periods indicated, our segment results of operations for Pharmacy Solutions.

The following discussion of our Pharmacy Solutions segment results of operations should be read in conjunction with the foregoing table summarizing our segment results of operations.

Revenues

Revenues were $3,171.3 million for the three months ended March 31, 2026, as compared with $2,532.2 million for the three months ended March 31, 2025, an increase of $639.2 million or 25.2%. The increase primarily resulted from volume growth in prescriptions dispensed within Infusion and Specialty Pharmacy partially offset by a decline in prescriptions dispensed within Home and Community Pharmacy. Revenues attributable to Infusion and Specialty Pharmacy were $2,644.2 million for the three months ended March 31, 2026, as compared with $1,951.5 million for the three months ended March 31, 2025, an increase of $692.7 million or 35.5% attributable to an increase in prescriptions dispensed on certain specialty branded drugs. Revenues attributable to Home and Community Pharmacy were $527.1 million for the three months ended March 31, 2026, as compared with $580.7 million for the three months ended March 31, 2025, a decrease of $53.6 million or 9.2%, primarily attributable to impacts from the Inflation Reduction Act which, has resulted in significant reductions in federal healthcare spending, including through mandatory Medicare drug price negotiations and rebates, and statutory caps on negotiated prices.

The increase in revenue per prescription dispensed is due to mix changes year-over-year and a greater relative increase in volume growth in certain specialty brand drugs, which carry a higher revenue per prescription dispensed.

Cost of Goods

Cost of goods was $2,870.6 million for the three months ended March 31, 2026, as compared with $2,328.2 million for the three months ended March 31, 2025, an increase of $542.4 million or 23.3%. The increase primarily resulted from the aforementioned revenue growth in the period as well as an increase in cost per prescription dispensed as a result of mix shift.

Gross profit was $300.8 million for the three months ended March 31, 2026, as compared with $204.0 million for the three months ended March 31, 2025, an increase of $96.8 million or 47.5%. The increase primarily resulted from the aforementioned revenue growth in the period, primarily the result of outsized volume growth as well as mix in certain specialty branded drugs, which have lower margins.

Gross profit margin for the three months ended March 31, 2026 was 9.5% compared to 8.1% for the three months ended March 31, 2025. The increase in gross profit margin is due to mix shift in the Pharmacy Solutions segment with greater relative volume growth in Infusion and Specialty Pharmacy, along with product-level mix shifts and rate changes, partially offset by an increase in the fulfillment cost per script in Home and Community Pharmacy.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were $157.0 million for the three months ended March 31, 2026, as compared with $115.7 million for the three months ended March 31, 2025, an increase of $41.3 million or 35.7%. The increase primarily resulted from the aforementioned revenue and gross profit growth in the period.

Segment EBITDA

Segment EBITDA was $169.1 million for the three months ended March 31, 2026, as compared with $115.7 million for the three months ended March 31, 2025, an increase of $53.3 million or 46.1%. The increase primarily resulted from the aforementioned revenue and gross profit growth in the period. See Note 11 "Segment Information" to our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q for further discussion.

Provider Services Segment

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

The following table sets forth, for the years indicated, our segment results of operations for Provider Services.

The following discussion of our Provider Services segment results of operations should be read in conjunction with the foregoing table summarizing our segment results of operations.

Revenues

Revenues were $442.4 million for the three months ended March 31, 2026, as compared with $345.9 million for the three months ended March 31, 2025, an increase of $96.4 million or 27.9%. The increase primarily resulted from the following segment activity and factors:

Revenues attributable to Home Health Care were $265.7 million for the three months ended March 31, 2026, as compared with $178.4 million for the three months ended March 31, 2025, an increase of $87.3 million or 48.9%. Revenues attributable to Rehab Care were $74.8 million for the three months ended March 31, 2026, as compared with $69.8 million for the three months ended March 31, 2025, an increase of $5.0 million or 7.2%. Revenues attributable to Personal Care were $101.9 million for the three months ended March 31, 2026, as compared with $97.7 million for the three months ended March 31, 2025, an increase of $4.2 million or 4.3%.

Cost of Services

Cost of services was $260.9 million for the three months ended March 31, 2026, as compared with $211.5 million for the three months ended March 31, 2025, an increase of $49.4 million or 23.3%. The increase primarily resulted from the aforementioned revenue growth.

Gross profit was $181.4 million for the three months ended March 31, 2026, as compared with $134.4 million for the three months ended March 31, 2025, an increase of $47.0 million or 35.0%. The increase primarily resulted from the aforementioned revenue growth and costs of services improvements in the period.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were $122.4 million for the three months ended March 31, 2026, as compared with $90.1 million for the three months ended March 31, 2025, an increase of $32.3 million or 35.9%. The increase primarily resulted from the aforementioned revenue and gross profit growth in the period.

Segment EBITDA

Segment EBITDA was $66.0 million for the three months ended March 31, 2026, as compared with $51.1 million for the three months ended March 31, 2025, an increase of $14.9 million or 29.2%. The increase primarily resulted from the aforementioned revenue growth. See Note 11 "Segment Information" to our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q for further discussion.

Non-GAAP Financial Measures

In addition to our results of operations prepared in accordance with U.S. GAAP, which we have discussed above, we also evaluate our financial performance using EBITDA, Adjusted EBITDA, and Adjusted EPS. These non-GAAP financial measures are not intended to replace financial performance measures determined in accordance with U.S. GAAP, such as net income and diluted EPS. Rather, we present EBITDA, Adjusted EBITDA, and Adjusted EPS as supplemental measures of our performance.

EBITDA, Adjusted EBITDA, and Adjusted EPS

The following are key financial metrics and, when used in conjunction with U.S. GAAP measures, we believe they provide useful information for evaluating our core business performance, enable comparison of financial results across periods, and allow for greater transparency with respect to key metrics used by management for financial and operational decision-making. We define EBITDA as net income before income tax expense (benefit), interest expense, net, and depreciation and amortization. Adjusted EBITDA and Adjusted EPS exclude certain other items that are either non-recurring, infrequent, non-cash, unusual, or items deemed by management to not be indicative of the performance of our core operations, including non-cash, share-based compensation; acquisition, integration, and transaction-related costs; and restructuring and divestiture-related and other costs. In determining which adjustments are made to arrive at Adjusted EBITDA and Adjusted EPS, management considers both (1) certain non-recurring, infrequent, non-cash, or unusual items, which can vary significantly from year to year, as well as (2) certain other items that may be recurring, frequent, or settled in cash but which management does not believe are indicative of our core operating performance. The financial measure calculated under U.S. GAAP which is most directly comparable to Adjusted EBITDA is net income. The financial measure calculated under U.S. GAAP which is most directly comparable to Adjusted EPS is diluted EPS.

We have historically incurred substantial acquisition, integration, and transaction-related costs. The underlying acquisition activities take place over a defined timeframe, have distinct project timelines, and are incremental to activities and costs that arise in the ordinary course of our business. Therefore, we have excluded these costs from our Adjusted EBITDA and Adjusted EPS because it provides management a normalized view of our core, ongoing operations after integrating our acquired companies.

EBITDA, Adjusted EBITDA, and Adjusted EPS are not measures of financial performance under U.S. GAAP and should be considered in addition to, and not as a substitute for, net income, diluted EPS or other financial measures calculated in accordance with U.S. GAAP. Our method of determining non-GAAP financial measures may differ from other companies' financial measures and therefore may not be comparable to methods used by other companies.

Given our determination of adjustments in arriving at our computations of EBITDA, Adjusted EBITDA and Adjusted EPS, these non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as substitutes or alternatives to net income or loss, operating income or loss, earnings or loss per diluted share, cash flows from operating activities, total indebtedness, or any other financial measures calculated in accordance with U.S. GAAP.

The following table reconciles net income from continuing operations to EBITDA and Adjusted EBITDA:

The following table reconciles diluted EPS to Adjusted EPS:

Liquidity and Capital Resources

Our principal sources of cash have historically been from operating activities. Our principal source of liquidity in excess of cash from operating activities has historically been from proceeds from our debt facilities and issuances of common stock. Our principal uses of cash and liquidity have historically been for acquisitions, debt service requirements, and financing of working capital. We believe that our operating cash flows, available cash on hand, and availability under our Revolving Credit Facility and the LC Facility will be sufficient to meet our cash requirements for the next twelve months and beyond. Our cash flows are primarily provided by the continuing operations of the Company. Our future capital requirements will depend on many factors that are difficult to predict, including the size, timing, and structure of any future acquisitions, future capital investments, and future results of operations. We cannot assure you that cash provided by operating activities or cash and cash equivalents will be sufficient to meet our future needs. If we are unable to generate sufficient cash flows from operations in the future, we may have to obtain additional financing. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that

indebtedness may contain significant financial and other covenants that may significantly restrict our operations. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all.

We evaluate our liquidity based upon the availability we have under our First Lien Facilities in addition to the net cash provided by (used in) operating, investing, and financing activities. Specifically, we review the activity under the Revolving Credit Facility and the LC Facility and consider period end balances outstanding under the Revolving Credit Facility and the LC Facility. Based upon the outstanding borrowings and letters of credit under the Revolving Credit Facility and the LC Facility, we calculate the availability for incremental borrowings under the Revolving Credit Facility and the LC Facility. Such amount, in addition to cash on our balance sheet, is what we consider to be our "Total Liquidity."

The following table provides a calculation of our Total Liquidity:

Cash Flow Activity

The activity discussed in this section relates to our consolidated company results and includes the impacts of discontinued operations.

Three Months Ended March 31, 2026 and 2025

The following table sets forth a summary of our cash flows provided by (used in) operating, investing, and financing activities for the periods presented:

Operating Activities

Net cash provided by operating activities was $122.9 million for the three months ended March 31, 2026, compared to $101.6 million for the three months ended March 31, 2025. The change was primarily due to the following:

Investing Activities

Net cash provided by (used in) investing activities increased by $771.6 million, from a cash outflow of $24.2 million in the three months ended March 31, 2025 to a cash inflow of $747.4 million in the three months ended March 31, 2026. The increase was primarily due to proceeds from the sale of our Community Living business of $810.9 million, offset by a $35.4 million decrease in cash paid for acquisitions in 2026 compared to 2025.

Financing Activities

Net cash used in financing activities was $70.0 million for the three months ended March 31, 2026, primarily attributable to repayments on our long-term debt of $12.4 million, repurchase of shares of common stock of $60.0 million in connection with the March 2026 secondary offering, and payment of finance lease obligations of $4.0 million, offset by other financing activities.

Net cash used in financing activities was $86.0 million for the three months ended March 31, 2025, primarily attributable to repayments on our long-term debt of $11.8 million, net repayments on our Revolving Credit Facility of $63.3 million, payment of financing lease obligations of $3.4 million, and other financing activities.

Debt

We typically incur debt to finance mergers and acquisitions, and we borrow under our Revolving Credit Facility for working capital purposes, as well as to finance acquisitions, as needed. Below is a summary of our long-term indebtedness as of March 31, 2026 and December 31, 2025.

First Lien Credit Agreement

On March 5, 2019, the Company entered into the First Lien Credit Agreement, among Phoenix Intermediate Holdings Inc., as Holdings, Phoenix Guarantor Inc., as the Borrower, the several lenders from time to time parties thereto and Morgan Stanley Senior Funding, Inc., as the Administrative Agent and Collateral Agent (the "First Lien Credit Agreement"). On December 11, 2024 we amended the First Lien to refinance the outstanding principal by establishing Tranche B-5 in an aggregate principal amount of $2,553.2 million at a rate equal to SOFR plus 2.50% or ABR plus 1.50% with a maturity date of February 21, 2031.

For additional information about our First Lien Credit Agreement, see Note 6 of the unaudited condensed consolidated financial statements and related notes in this Quarterly Report on Form 10-Q.

The First Lien Credit Agreement described above contain customary negative covenants, including, but not limited to, restrictions on the Company and its restricted subsidiaries' ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances, or investments, pay dividends, sell or otherwise transfer assets, prepay or modify terms of certain junior indebtedness, enter into transactions with affiliates, or change their lines of business or fiscal year. In addition, under the Revolving Credit Facility, the Company will not permit the consolidated first lien secured debt to consolidated EBITDA (as defined in the First Lien Credit Agreement) ratio to be greater than 6.90 to 1.00, which shall be tested as of the end of the most recent quarter at any time when the aggregate revolving credit loans exceed 35% of the total revolving credit commitments.

We were in compliance with all applicable financial covenants as of March 31, 2026 and December 31, 2025.

Revolving Credit Facility

The total borrowing capacity under the Revolving Credit Facility included in the First Lien Credit Agreement (the "Revolver") was $475.0 million as of March 31, 2026 and December 31, 2025. As of March 31, 2026 and December 31, 2025, the Company had $475.0 million of borrowing capacity available under the Revolver as there were no borrowings under the Revolver or letters of credit outstanding.

The First Lien Credit Agreement, as amended on September 17, 2024, provides for an additional $65.0 million of letter of credit commitments, or the LC Facility, which are not subject to the LC Sublimit. As of March 31, 2026, there were $62.9 million of letters of credit outstanding under the LC Facility, resulting in an available borrowing capacity of $2.1 million. As of December 31, 2025, there were $62.8 million of letters of credit outstanding under the LC Facility, resulting in an available borrowing capacity of $2.2 million.

For additional information about our Revolving Credit Facility and LC Facility, see Note 6 of the unaudited condensed consolidated financial statements and related notes in this Quarterly Report on Form 10-Q.

Interest Rate Swap Agreements

To manage fluctuations in cash flows resulting from changes in the variable interest rates, the Company entered into receive-variable, pay-fixed interest rate swap agreements. For the three months ended March 31, 2026 and the year ended December 31, 2025, interest expense, net includes interest income received related to cash flow hedges of interest rate risk of $0.6 million and $15.2 million, respectively. Refer to Note 6 within our unaudited condensed consolidated financial statements and related notes in this Quarterly Report on Form 10-Q for further discussion.

Tangible Equity Units

Concurrently with the IPO, we issued 8,000,000 TEUs, which have a stated amount of $50.00 per unit. Each TEU is comprised of a prepaid stock purchase contract ("Purchase Contract") and a senior amortizing note ("Amortizing Note") due February 1, 2027, each issued by the Company. The Company will pay equal quarterly cash installments of $0.8438 per Amortizing Note on February 1, May 1, August 1 and November 1, commencing on May 1, 2024, except for the May 1, 2024 installment payment, which was $0.8531 per Amortizing Note, with a final installment payment date of February 1, 2027. In the aggregate, the annual quarterly cash installments will be equivalent of 6.75% per year. Each installment payment constitutes a payment of interest and a partial repayment of principal. Each TEU may be separated by a holder into its constituent Purchase Contract and Amortizing Note. Refer to Note 7 within our unaudited condensed consolidated financial statements and related notes in this Quarterly Report on Form 10-Q for further discussion.

The table below summarizes the total outstanding debt of the Company:

Our Company leverage, as calculated under our First Lien Credit Agreement, was 2.27x and 2.99x at March 31, 2026 and December 31, 2025, respectively. The results of the Community Living business are excluded from the calculation for March 31, 2026 since the Company divested the Community Living business prior to the end of the period. The results of the Community Living business are included in the calculation for December 31, 2025 pursuant to the terms of our First Lien Credit Agreement.

Critical Accounting Policies and Use of Estimates

In preparing our unaudited condensed consolidated financial statements in conformity with U.S. GAAP, we must use estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures and the reported amounts of revenue and expenses. In general, our estimates are based on historical experience and various other assumptions we believe are reasonable under the circumstances. We evaluate our estimates on an ongoing basis and make changes to the estimates and related disclosures as experience develops or new information becomes known. Actual results could differ from those estimates.

We consider our critical accounting policies and estimates to be those that involve significant judgments and uncertainties and may potentially result in materially different results under different assumptions and conditions. There have been no material changes

to our critical accounting policies and estimates from those disclosed in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025, which are hereby incorporated by reference.