THE PENNANT GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited, in thousands, except par value) June 30, 2026 December 31, 2025 Assets Current assets: Cash $ 15,273 $ 17,024 Accounts receivable—less allowance for credit losses of $766 and $681, at June 30, 2026 and December 31, 2025, respectively 133,182 123,109 Prepaid expenses and other current assets 35,136 27,273 Total current assets 183,591 167,406 Property and equipment, net 75,296 60,984 Operating lease right-of-use assets 286,237 275,947 Deferred tax assets, net 844 478 Restricted and other assets 27,294 26,676 Equity method investment 28,798 — Goodwill 235,789 237,246 Other indefinite-lived intangibles 199,442 199,442 Total assets $ 1,037,291 $ 968,179 Liabilities and equity Current liabilities: Accounts payable $ 26,241 $ 25,171 Accrued wages and related liabilities 60,473 65,229 Operating lease liabilities—current 26,551 25,013 Current maturities of long-term debt 5,000 5,000 Other accrued liabilities 34,141 26,851 Total current liabilities 152,406 147,264 Long-term operating lease liabilities—less current portion 263,364 254,311 Deferred tax liabilities, net 1,804 150 Other long-term liabilities 22,776 23,365 Long-term debt 192,499 168,837 Total liabilities 632,849 593,927 Commitments and contingencies (Note 17) Equity: Common stock, $0.001 par value; 100,000 shares authorized; 35,081 and 34,848 shares issued and outstanding, respectively, at June 30, 2026; and 34,878 and 34,626 shares issued and outstanding, respectively, at December 31, 2025 35 35 Additional paid-in capital 254,832 245,833 Retained earnings 104,401 86,800 Treasury stock, at cost, 3 shares at June 30, 2026 and December 31, 2025 (65) (65) Total The Pennant Group, Inc. stockholders’ equity 359,203 332,603 Noncontrolling interest 45,239 41,649 Total equity 404,442 374,252 Total liabilities and equity $ 1,037,291 $ 968,179 See accompanying notes to condensed consolidated financial statements. 1 Table of Contents THE PENNANT GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited, in thousands, except for per-share amounts) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenue $ 297,984 $ 219,501 $ 583,348 $ 429,343 Expense: Cost of services 242,635 177,275 475,297 346,020 Rent—cost of services 13,428 11,925 26,526 23,640 General and administrative expense 21,614 17,597 41,301 32,437 Depreciation and amortization 3,112 2,224 5,728 4,116 Loss (gain) on disposition of property and equipment, net 9 (1,048) 9 (1,048) Total expenses 280,798 207,973 548,861 405,165 Income from operations 17,186 11,528 34,487 24,178 Other expense, net: Other income 626 255 480 186 Income from equity method investment 370 — 370 — Interest expense, net (3,348) (1,204) (6,416) (2,409) Other expense, net (2,352) (949) (5,566) (2,223) Income before provision for income taxes 14,834 10,579 28,921 21,955 Provision for income taxes 3,936 2,598 7,730 5,452 Net income 10,898 7,981 21,191 16,503 Less: Net income attributable to noncontrolling interest 1,816 896 3,590 1,643 Net income attributable to The Pennant Group, Inc. $ 9,082 $ 7,085 $ 17,601 $ 14,860 Earnings per share: Basic $ 0.26 $ 0.21 $ 0.51 $ 0.43 Diluted $ 0.25 $ 0.20 $ 0.49 $ 0.42 Weighted average common shares outstanding: Basic 34,835 34,529 34,781 34,500 Diluted 35,957 35,372 35,857 35,284 See accompanying notes to condensed consolidated financial statements. 2 Table of Contents THE PENNANT GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited, in thousands) Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Non-controlling Interest Shares Amount Shares Amount Total Balance at December 31, 2025 34,878 $ 35 $ 245,833 $ 86,800 3 $ (65) $ 41,649 $ 374,252 Net income attributable to The Pennant Group, Inc. — — — 8,519 — — — 8,519 Net income attributable to noncontrolling interests — — — — — — 1,774 1,774 Share-based compensation — — 2,521 — — — — 2,521 Net issuance of common stock due to share based compensation 67 — 1,268 — — — — 1,268 Net issuance of restricted stock 14 — — — — — — — Executive incentive shares issued 33 — 1,102 — — — — 1,102 Balance at March 31, 2026 34,992 $ 35 $ 250,724 $ 95,319 3 $ (65) $ 43,423 $ 389,436 Net income attributable to The Pennant Group, Inc. — — — 9,082 — — — 9,082 Net income attributable to noncontrolling interests — — — — — — 1,816 1,816 Stock-based compensation — — 2,949 — — — — 2,949 Net issuance of common stock due to share based compensation 75 — 1,159 — — — — 1,159 Net issuance of restricted stock 14 — — — — — — — Balance at June 30, 2026 35,081 $ 35 $ 254,832 $ 104,401 3 $ (65) $ 45,239 $ 404,442 Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Non-controlling Interest Shares Amount Shares Amount Total Balance at December 31, 2024 34,670 $ 35 $ 236,091 $ 57,222 3 $ (65) $ 18,682 $ 311,965 Net income attributable to The Pennant Group, Inc. — — — 7,775 — — — 7,775 Net income attributable to noncontrolling interests — — — — — — 747 747 Share-based compensation — — 2,147 — — — — 2,147 Net issuance of common stock due to share based compensation 41 — 392 — — — — 392 Net issuance of restricted stock 25 — — — — — — — Balance at March 31, 2025 34,736 $ 35 $ 238,630 $ 64,997 3 $ (65) $ 19,429 $ 323,026 Net income attributable to The Pennant Group, Inc. — — — 7,085 — — — 7,085 Net income attributable to noncontrolling interests — — — — — — 896 896 Share-based compensation — — 2,183 — — — — 2,183 Net issuance of common stock due to share based compensation 32 — 437 — — — — 437 Net issuance of restricted stock 14 — — — — — — — Balance at June 30, 2025 34,782 $ 35 $ 241,250 $ 72,082 3 $ (65) $ 20,325 $ 333,627 See accompanying notes to condensed consolidated financial statements. 3 Table of Contents THE PENNANT GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Six Months Ended June 30, 2026 2025 Cash flows from operating activities: Net income $ 21,191 $ 16,503 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,728 4,116 Amortization of deferred financing fees 597 435 Loss (gain) on disposition of property and equipment, net 9 (1,048) Provision for credit losses 753 391 Share-based compensation 5,470 4,330 Deferred income taxes 1,289 (751) Income from equity method investment (370) — Change in operating assets and liabilities, net of acquisitions: Accounts receivable (7,756) (14,809) Prepaid expenses and other assets (10,825) (1,070) Operating lease obligations 301 100 Accounts payable 171 555 Accrued wages and related liabilities (3,653) (1,235) Other accrued liabilities 3,231 1,563 Income taxes payable — 3,065 Other long-term liabilities 2,289 1,269 Net cash provided by operating activities 18,425 13,414 Cash flows from investing activities: Purchase of property and equipment (11,606) (5,024) Cash payments for business acquisitions (2,087) (47,620) Cash payments for asset acquisitions (6,906) (8,252) Escrow deposits 4,141 (802) Cash payment for equity method investment (28,428) — Other investing activities (415) 1,343 Net cash used in investing activities (45,301) (60,355) Cash flows from financing activities: Payments on incremental term loans (2,500) — Proceeds from revolver agreement 218,000 164,500 Payments on revolver agreement (192,000) (127,500) Net issuance of common stock due to share based compensation 2,427 830 Other financing activities (802) (750) Net cash provided by financing activities 25,125 37,080 Net decrease in cash (1,751) (9,861) Cash beginning of period 17,024 24,246 Cash end of period $ 15,273 $ 14,385 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents THE PENNANT GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued) (unaudited, in thousands) Six Months Ended June 30, 2026 2025 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 6,462 $ 1,969 Income taxes $ 9,212 $ 3,104 Operating lease liabilities $ 23,690 $ 21,497 Operating lease right-of-use assets obtained in exchange for new lease obligations $ 23,081 $ 13,847 Finance lease right-of-use assets obtained in exchange for new lease obligations $ 1,921 $ 5,349 Non-cash investing activity: Capital expenditures in accounts payable and accrued liabilities $ 1,246 $ 82 See accompanying notes to condensed consolidated financial statements. 5 Table of Contents THE PENNANT GROUP INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share data and operational senior living units) 1. DESCRIPTION OF BUSINESS The Pennant Group, Inc. (herein referred to as “Pennant,” the “Company,” “we,” “it,” or “its”), is a holding company with no direct operating assets, employees or revenue. The Company, through its independent operating subsidiaries, provides healthcare services across the post-acute care continuum. As of June 30, 2026, the Company’s subsidiaries operated 175 home health, hospice and home care agencies and 69 senior living communities located in Alabama, Arizona, California, Colorado, Georgia, Idaho, Montana, Nevada, Oklahoma, Oregon, Tennessee, Texas, Utah, Washington, Wisconsin and Wyoming. We also provide home health and hospice operational support through a management service agreement in Connecticut. See Note 9, Equity Method Investment, for further details about our investment in these operations. Certain of the Company’s subsidiaries, collectively referred to as the Service Center, provide accounting, payroll, human resources, information technology, legal, risk management, and other services to the operations through contractual relationships. The Service Center also provides certain of these services to unaffiliated third parties under management agreements. Each of the Company’s affiliated operations are operated by separate, independent subsidiaries that have their own management, employees and assets. References herein to the consolidated “Company” and “its” assets and activities are not meant to imply, nor should they be construed as meaning, that Pennant has direct operating assets, employees or revenue, or that any of the subsidiaries are operated by Pennant. 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of the Company (the “Interim Financial Statements”) reflect the Company’s financial position, results of operations, and cash flows of the business. The Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the regulations of the Securities and Exchange Commission (“SEC”). Management believes that the Interim Financial Statements reflect, in all material respects, all adjustments which are of a normal and recurring nature necessary to present fairly the Company’s financial position, results of operations, and cash flows for the periods presented in conformity with GAAP. The results reported in these Interim Financial Statements are not necessarily indicative of results that may be expected for the entire year. The Condensed Consolidated Balance Sheet as of December 31, 2025 is derived from the Company’s annual audited Consolidated Financial Statements for the fiscal year ended December 31, 2025, which should be read in conjunction with these Interim Financial Statements. Certain information in the accompanying footnote disclosures normally included in annual financial statements was condensed or omitted for the interim periods presented in accordance with GAAP. All intercompany transactions and balances between the various legal entities comprising the Company have been eliminated in consolidation. The Company presents noncontrolling interests within the equity section of its Condensed Consolidated Balance Sheets and the amount of consolidated net income that is attributable to the Company and the noncontrolling interest in its Condensed Consolidated Statements of Income. The Company consists of various limited liability companies and corporations established to operate home health, hospice, home care, senior living operations, and other ancillary businesses. The Interim Financial Statements include the accounts of all entities controlled by the Company through its ownership of a majority voting interest. Revenue was derived from transactional information specific to the Company’s services provided. Estimates and Assumptions - The preparation of the Interim Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Interim Financial Statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates in the Interim Financial Statements relate to self-insurance reserves, revenue recognition, and intangible assets and goodwill. Actual results could differ from those estimates. State relief funding. The Company receives state relief funding through programs from various states. The funding generally incorporates specific use requirements primarily for direct patient care including labor related expenses that are associated with providing patient care. 6 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) These funds are recognized as a reduction of cost of services expenses when related expenses are incurred. As of June 30, 2026 and December 31, 2025, the Company had $327 and $477 in unapplied state relief funds, respectively. The unapplied state relief funds received are recorded in other accrued liabilities. The Company recognized state relief funding totaling $331 and $807 for the three and six months ended June 30, 2026, and $235 and $917 for the three and six months ended June 30, 2025, which the Company recognized as a reduction of cost of services expense. Recent Accounting Pronouncements Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. For any new pronouncements announced, the Company considers whether the new pronouncements could alter previous generally accepted accounting principles and determines whether any new or modified principles will have a material impact on the Company's reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the Company's financial management and certain standards are under consideration. In November 2024, the FASB issued ASU 2024-03 “Disaggregation of Income Statement Expenses,” which requires the Company to disaggregate key expense categories such as employee compensation, depreciation and intangible asset amortization within its financial statements. This guidance is effective for annual periods beginning after December 15, 2026, which will be the Company’s fiscal year 2027, and interim periods within the Company’s fiscal year 2028, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements. In September 2025, the FASB issued ASU 2025-06 “Targeted Improvements to the Accounting for Internal-Use Software,” which amends certain aspects of the accounting for and disclosure of software costs under ASC 350-40 Internal-Use Software. This guidance is effective for annual periods beginning after December 15, 2027, which will be the Company’s fiscal year 2028, and interim periods within the Company’s fiscal year 2029, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements. 3. TRANSACTIONS WITH ENSIGN Pennant completed its separation from The Ensign Group, Inc. (“Ensign”) in 2019. Certain directors who serve on our Board of Directors also serve as directors of Ensign and own shares of Ensign common stock. Pennant and Ensign continue to partner in the provision of services along the healthcare continuum. The Company incurred costs of $169 and $293 for the three and six months ended June 30, 2026, and $208 and $403 for the three and six months ended June 30, 2025, that related primarily to shared services at proximate operations. Expenses related to room and board charges at Ensign skilled nursing facilities for hospice patients were $2,422 and $4,596 for the three and six months ended June 30, 2026, and $1,536 and $3,208 for the three and six months ended June 30, 2025, and are included in cost of services. The Company’s independent operating subsidiaries leased 35 communities from subsidiaries of Ensign, the majority of which are under master lease arrangements as of June 30, 2026. See further discussion below at Note 12, Leases. 4. NET INCOME PER COMMON SHARE Basic net income per share is computed by dividing net income attributable to stockholders of the Company by the weighted average number of outstanding common shares for the period. The computation of diluted net income per share is similar to the computation of basic net income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. 7 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table sets forth the computation of basic and diluted net income per share for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Numerator: Net income attributable to The Pennant Group, Inc. $ 9,082 $ 7,085 $ 17,601 $ 14,860 Denominator: Weighted average shares outstanding for basic net income per share 34,835 34,529 34,781 34,500 Plus: assumed incremental shares from exercise of options and assumed conversion or vesting of restricted stock(a) 1,122 843 1,076 784 Adjusted weighted average common shares outstanding for diluted income per share 35,957 35,372 35,857 35,284 Earnings Per Share: Basic net income per common share $ 0.26 $ 0.21 $ 0.51 $ 0.43 Diluted net income per common share $ 0.25 $ 0.20 $ 0.49 $ 0.42 (a) The diluted per share amounts do not reflect common share equivalents outstanding of 2,207 and 2,039 for the three and six months ended June 30, 2026, and 1,557 and 1,368 for the three and six months ended June 30, 2025, because of their anti-dilutive effect. 5. REVENUE AND ACCOUNTS RECEIVABLE Revenue is recognized when services are provided to the patients at the amount that reflects the consideration to which the Company expects to be entitled from patients and third-party payors, including Medicare, Medicaid, and managed care programs (Commercial, Medicare Advantage, and Managed Medicaid plans). The healthcare services in home health and hospice patient contracts include routine services in exchange for contractually agreed-upon amounts or rates. Routine services are treated as a single performance obligation satisfied over time as services are rendered. As such, patient care services represent a bundle of services that are not capable of being distinct within the context of the contract. Additionally, there may be ancillary services which are not included in the rates for routine services, but instead are treated as separate performance obligations satisfied at a point in time, if and when those services are rendered. Revenue recognized from healthcare services is adjusted for estimates of variable consideration to arrive at the transaction price. The Company determines the transaction price based on contractually agreed-upon amounts or rates, adjusted for estimates of variable consideration. The Company uses the expected value method in determining the variable component that should be used to arrive at the transaction price, using contractual agreements and historical reimbursement experience within each payor type. The amount of variable consideration which is included in the transaction price may be constrained and is included in the net revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect net service revenue in the period such variances become known. The Company records revenue from Medicare, Medicaid, and managed care programs as services are performed at their expected net realizable amounts under these programs. The Company’s revenue from governmental and managed care programs is subject to audit and retroactive adjustment by governmental and third-party agencies. Consistent with healthcare industry accounting practices, any changes to these governmental revenue estimates are recorded in the period the change or adjustment becomes known based on final settlement. Disaggregation of Revenue The Company disaggregates revenue from contracts with its patients or residents by reportable operating segments and payors. The Company has determined that disaggregating revenue into these categories achieves the disclosure objectives to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. 8 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Company’s service specific revenue recognition policies are as follows: Home Health Revenue Medicare Revenue Net service revenue is recognized in accordance with the Patient Driven Groupings Model (“PDGM”). Under PDGM, Medicare provides agencies with payments for each 30-day payment period provided to beneficiaries. If a beneficiary is still eligible for care after the end of the first 30-day payment period, a second 30-day payment period can begin. There are no limits to the number of periods of care a beneficiary who remains eligible for the home health benefit can receive. While payment for each 30-day payment period is adjusted to reflect the beneficiary’s health condition and needs, a special outlier provision exists to ensure appropriate payment for those beneficiaries that have the most expensive care needs. The payment under the Medicare program is also adjusted for certain variables including, but not limited to: (a) a low utilization payment adjustment if the number of visits is below an established threshold that varies based on the diagnosis of a beneficiary; (b) a partial payment if the patient transferred to another provider or the Company received a patient from another provider before completing the period of care; (c) adjustment to the admission source of claim if it is determined that the patient had a qualifying stay in a post-acute care setting within 14 days prior to the start of a 30-day payment period; (d) the timing of the 30-day payment period provided to a patient in relation to the admission date, regardless of whether the same home health provider provided care for the entire series of payment periods; (e) changes to the acuity of the patient during the previous 30-day payment period; (f) changes in the base payments established by the Medicare program; (g) adjustments to the base payments for case mix and geographic wages; and (h) recoveries of overpayments. The Company adjusts Medicare revenue on completed episodes to reflect differences between estimated and actual payment amounts, an inability to obtain appropriate billing documentation, and other reasons unrelated to credit risk. Therefore, the Company believes that its reported net service revenue and patient accounts receivable will be the net amounts to be realized from Medicare for services rendered. In addition to revenue recognized on completed episodes and periods, the Company also recognizes a portion of revenue associated with episodes and periods in progress. Episodes in progress are 30-day payment periods that begin during the reporting period but were not completed as of the end of the period. As such, the Company estimates revenue and recognizes it on a daily basis. The primary factors underlying this estimate are the number of episodes in progress at the end of the reporting period, expected Medicare revenue per period of care or episode of care, and the Company’s estimate of the average percentage complete based on the scheduled end of period and end of episode dates. Non-Medicare Revenue Episodic Based Revenue - The Company recognizes revenue in a similar manner as it recognizes Medicare revenue for episodic-based rates that are paid by other insurance carriers, including Medicare Advantage programs; however, these rates can vary based upon the negotiated terms. Non-episodic Based Revenue - Revenue is recognized on an accrual basis based upon the date of service at amounts equal to its established or estimated per visit rates, as applicable. Management Services Revenue - The Company recognizes revenue earned from its management service agreements as the services are provided. Fees charged are based upon the contractual terms of each agreement. Hospice Revenue Revenue is recognized on an accrual basis based upon the date of service at amounts equal to the estimated payment rates. The estimated payment rates are calculated as daily rates for each of the levels of care the Company delivers. Revenue is adjusted for an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk. Additionally, as Medicare hospice revenue is subject to an inpatient cap and an overall payment cap, the Company monitors its provider numbers and estimates amounts due back to Medicare if a cap has been exceeded. The Company regularly evaluates and records these adjustments as a reduction to revenue and an increase to other accrued liabilities. 9 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Senior Living Revenue The Company has elected the lessor practical expedient within ASC Topic 842, Leases (“ASC 842”) and therefore recognizes, measures, presents, and discloses the revenue for services rendered under the Company’s senior living residency agreements based upon the predominant component, either the lease or non-lease component, of the contracts. The Company has determined that the services included under the Company’s senior living residency agreements each have the same timing and pattern of transfer. The Company recognizes revenue under ASC Topic 606, Revenue from Contracts with Customers for its senior residency agreements, for which it has determined that the non-lease components of such residency agreements are the predominant component of each such contract. The Company’s senior living revenue consists of fees for basic housing and assisted living care. Accordingly, we record revenue when services are rendered on the date services are provided at amounts billable to individual residents. Residency agreements are generally for a term of 30 days, with resident fees billed monthly in advance. For residents under reimbursement arrangements with Medicaid, revenue is recorded based on contractually agreed-upon amounts or rates on a per resident, daily basis or as services are rendered. Revenue By Payor Revenue by payor for the three months ended June 30, 2026 and 2025, is summarized in the following tables: Three Months Ended June 30, 2026 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 62,264 $ 89,387 $ — $ 151,651 50.9 % Medicaid 4,303 12,959 22,553 39,815 13.4 Subtotal 66,567 102,346 22,553 191,466 64.3 Managed care 47,482 443 — 47,925 16.1 Private and other(a) 20,141 791 37,661 58,593 19.6 Total revenue $ 134,190 $ 103,580 $ 60,214 $ 297,984 100.0 % (a) Private and other payors in the Company’s home health services includes revenue from all payors generated in the Company’s home care operations and management services agreement. Three Months Ended June 30, 2025 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 39,625 $ 64,196 $ — $ 103,821 47.3 % Medicaid 4,184 8,430 18,184 30,798 14.0 Subtotal 43,809 72,626 18,184 134,619 61.3 Managed care 30,182 437 — 30,619 13.9 Private and other(a) 18,259 707 35,297 54,263 24.8 Total revenue $ 92,250 $ 73,770 $ 53,481 $ 219,501 100.0 % (a) Private and other payors in the Company’s home health services includes revenue from all payors generated in the Company’s home care operations and management services agreement. 10 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Revenue by payor for the six months ended June 30, 2026 and 2025, is summarized in the following tables: Six Months Ended June 30, 2026 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 122,814 $ 173,695 $ — $ 296,509 50.8 % Medicaid 8,598 26,003 42,535 77,136 13.2 Subtotal 131,412 199,698 42,535 373,645 64.0 Managed care 92,274 1,378 — 93,652 16.1 Private and other(a) 40,434 1,663 73,954 116,051 19.9 Total revenue $ 264,120 $ 202,739 $ 116,489 $ 583,348 100.0 % (a) Private and other payors in the Company’s home health services includes revenue from all payors generated in the Company’s home care operations and management services agreement. Six Months Ended June 30, 2025 Home Health and Hospice Services Home Health Services Hospice Services Senior Living Services Total Revenue Revenue % Medicare $ 79,301 $ 125,645 $ — $ 204,946 47.8 % Medicaid 7,721 16,018 34,397 58,136 13.5 Subtotal 87,022 141,663 34,397 263,082 61.3 Managed care 59,964 1,369 — 61,333 14.3 Private and other(a) 34,548 1,324 69,056 104,928 24.4 Total revenue $ 181,534 $ 144,356 $ 103,453 $ 429,343 100.0 % (a) Private and other payors in the Company’s home health services includes revenue from all payors generated in the Company’s home care operations and management services agreement. Balance Sheet Impact Included in the Company’s Condensed Consolidated Balance Sheets are contract assets, comprised of billed accounts receivable and unbilled receivables, which are the result of the timing of revenue recognition, billings, and cash collections, as well as contract liabilities, which primarily represent payments the Company receives in advance of services provided. Accounts receivable, net as of June 30, 2026 and December 31, 2025 is summarized in the following table: June 30, 2026 December 31, 2025 Medicare $ 74,383 $ 64,813 Medicaid 17,963 12,132 Managed care 25,912 24,570 Private and other 15,690 22,275 Accounts receivable 133,948 123,790 Less: allowance for credit losses (766) (681) Accounts receivable, net $ 133,182 $ 123,109 Concentrations - Credit Risk The Company has significant accounts receivable balances, the collectability of which is dependent on the availability of funds from certain governmental programs, primarily Medicare and Medicaid, which may be paid directly by those programs 11 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) or administered by third parties, such as in the case of Medicare Advantage plans or state Medicaid funds administered by managed care organizations. These receivables represent the only significant concentration of credit risk for the Company. The Company does not believe there are significant credit risks associated with these governmental programs. The Company believes that an appropriate allowance has been recorded for the possibility of these receivables proving uncollectible, and continually monitors and adjusts these allowances as necessary. The Company’s receivables from the Medicare and Medicaid programs accounted for approximately 68.9% and 62.2% of its total accounts receivable as of June 30, 2026 and December 31, 2025, respectively. Combined revenue from reimbursement under the Medicare and Medicaid programs accounted for 64.3% and 64.0% of the Company’s revenue for the three and six months ended June 30, 2026, and 61.3% of the Company’s revenue for both the three and six months ended June 30, 2025. Practical Expedients and Exemptions As the Company’s contracts have an original duration of one year or less, the Company uses the practical expedient applicable to its contracts and does not consider the time value of money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue. In addition, the Company has applied the practical expedient provided by ASC Topic 340, Other Assets and Deferred Costs, and all incremental customer contract acquisition costs are expensed as they are incurred because the amortization period would have been one year or less. 6. BUSINESS SEGMENTS The Company classifies its operations into the following reportable operating segments: (1) home health and hospice services, which includes the Company’s home health, hospice, home care, and geriatric primary and palliative care businesses; and (2) senior living services, which includes the operation of assisted living, independent living, and memory care communities. The reporting segments are business units that offer different services and are managed separately to provide greater visibility into those operations. The Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker (“CODM”), reviews financial information at the operating segment level. As of June 30, 2026, the Company provided services through 175 affiliated home health, hospice and home care agencies, and 69 affiliated senior living operations. The Company evaluates performance and allocates capital resources to each segment based on an operating model that is designed to maximize the quality of care provided and profitability. The Company’s Service Center provides various services to all lines of business. The CODM does not review assets by segment and therefore assets and capital expenditure by segment are not disclosed below. The CODM uses Segment Adjusted EBITDAR from Operations as the primary measure of profit and loss for the Company's reportable segments and to compare the performance of its operations with those of its competitors. The CODM monitors these results and provides guidance to leadership of the reportable segments to allocate enterprise-wide resources. Segment Adjusted EBITDAR from Operations is net income attributable to the Company's reportable segments excluding interest expense, provision for income taxes, depreciation and amortization expense, rent, unallocated corporate and administrative expenses, and, in order to view the operations’ performance on a comparable basis from period to period, certain adjustments including: (1) activities associated with start-up operations, (2) share-based compensation expense, (3) acquisition related costs, (4) activities associated with transitioning operations, (5) transition services costs, (6) other unusual, non-recurring, or redundant charges, and (7) net income attributable to noncontrolling interest. “All Other” consists of revenues generated at operating locations not included in the segment financial information reviewed by the CODM. Revenue included in the “All Other” category is insignificant individually, and therefore does not constitute a reportable segment. General and administrative expenses are not allocated to the reportable segments, and are included as “Unallocated corporate expenses”, accordingly the segment earnings measure reported is before allocation of corporate general and administrative expenses. The Company's segment measures may be different from the calculation methods used by other companies and, therefore, comparability may be limited. 12 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following tables present certain financial information regarding the Company’s reportable segments, provided that general and administrative expenses are not allocated to the reportable segments: Home Health and Hospice Services Senior Living Services All Other Total Three Months Ended June 30, 2026 Segment Revenue $ 237,353 $ 58,497 $ 2,134 $ 297,984 Segment Cost of Services 196,402 42,535 Segment Adjusted EBITDAR from Operations $ 40,951 $ 15,962 $ 56,913 Three Months Ended June 30, 2025 Segment Revenue $ 165,248 $ 51,862 $ 2,391 $ 219,501 Segment Cost of Services 137,565 37,074 Segment Adjusted EBITDAR from Operations $ 27,683 $ 14,788 $ 42,471 Home Health and Hospice Services Senior Living Services All Other Total Six Months Ended June 30, 2026 Revenue $ 466,185 $ 113,151 $ 4,012 $ 583,348 Segment Cost of Services 388,433 80,925 Segment Adjusted EBITDAR from Operations $ 77,752 $ 32,226 $ 109,978 Six Months Ended June 30, 2025 Revenue $ 324,691 $ 101,396 $ 3,256 $ 429,343 Segment Cost of Services 269,734 72,159 Segment Adjusted EBITDAR from Operations $ 54,957 $ 29,237 $ 84,194 13 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table provides a reconciliation of Segment Adjusted EBITDAR from Operations to Condensed Consolidated Income from Operations: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Segment Adjusted EBITDAR from Operations $ 56,913 $ 42,471 $ 109,978 $ 84,194 Less: Unallocated corporate expenses 19,285 14,235 37,610 27,929 Depreciation and amortization 3,112 2,224 5,728 4,116 Rent—cost of services 13,428 11,925 26,526 23,640 Income from equity method investment 370 — 370 — Other income 626 255 480 186 Adjustments to Segment EBITDAR from Operations: Less: Start-up operations(a) 58 (158) 353 (80) Share-based compensation expense and related taxes(b) 3,057 2,212 5,646 4,379 Acquisition related costs(c) 350 2,166 704 2,438 Activities associated with transitioning operations(d) — (1,036) — (1,016) Transition services costs(e) 1,257 — 1,664 — Other unusual, non-recurring, or redundant charges(f) — 16 — 67 Add: Net income attributable to noncontrolling interest 1,816 896 3,590 1,643 Condensed Consolidated Income from Operations $ 17,186 $ 11,528 $ 34,487 $ 24,178 (a) Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations. (b) Share-based compensation expense and related payroll taxes incurred. Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense. (c) Non-capitalizable costs associated with acquisitions. (d) During 2025, an affiliate of the Company held its memory care units in transition and converted the facility into an assisted living community. In 2026, this community is included in start-up operations. (e) Costs identified as redundant or non-recurring incurred by the Company as a result of the transition services agreement between the Company and UnitedHealth Group Incorporated (“UnitedHealth”) entered into as part of the acquisition agreement consummated on October 1, 2025. All amounts are included in Cost of services. Fees incurred under the transition services agreement were $2,491 and $5,306 for the three and six months ended June 30, 2026. (f) Represents other unusual, non-recurring, or redundant charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses. Adjusted segment depreciation expense Home Health and Hospice Services Senior Living Services Three Months Ended June 30, 2026 $ 601 $ 1,355 Three Months Ended June 30, 2025 $ 209 $ 1,169 Adjusted segment depreciation expense Home Health and Hospice Services Senior Living Services Six Months Ended June 30, 2026 $ 1,005 $ 2,634 Six Months Ended June 30, 2025 $ 439 $ 2,280 7. ACQUISITIONS The Company’s acquisition focus is to purchase or lease operations that are complementary to the Company’s current businesses, accretive to the Company’s business, or otherwise advance the Company’s strategy. The results of all the Company’s independent operating subsidiaries are included in the Interim Financial Statements subsequent to the date of acquisition. Acquisitions are accounted for using the acquisition method of accounting. 14 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2026 Acquisitions During the six months ended June 30, 2026, the Company expanded its operations with the addition of six senior living communities. In connection with four of the senior living communities acquired, the Company entered into new long-term “triple-net” leases. For the remaining two senior living communities acquired, the Company acquired the real estate of each community. The aggregate purchase price of the real estate acquired was $7,065, paid in cash and assumed liabilities, which consisted primarily of land and building. A subsidiary of the Company entered into a separate operations transfer agreement with the prior operator of each acquired operation as part of each transaction. These new communities included 348 operational senior living units to be operated by the Company’s independent operating subsidiaries. On April 17, 2026, the Company acquired an additional hospice business for $2,087, which was allocated primarily to Goodwill. The operations of the acquired business were integrated into an existing hospice agency owned by Pennant. On October 1, 2025, the Company acquired certain operations of UnitedHealth, Amedisys, Inc. (“Amedisys”), and certain other sellers, to complement our home health, hospice, and home care businesses. As of December 31, 2025, our determination and allocation of the purchase price to net tangible and intangible assets was based on preliminary estimates. During the quarter ended June 30, 2026, the Company agreed to final working capital and other closing considerations which resulted in in a $387 reduction in the purchase price. The Company also revised its allocation of the purchase price and recognized adjustments to the provisional values as of June 30, 2026, which increased Accounts receivable, net by $3,070. Combined with the change in purchase price, this resulted in a decrease to Goodwill of $3,457. The following table sets forth the current allocation of the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed of the acquired UnitedHealth and Amedisys operations: Purchase price consideration transferred $ 146,817 Assets acquired: Accounts receivable, net 21,678 Property and equipment, net 358 Right-of-use assets 6,197 Restricted and other assets 678 Indefinite-lived intangibles 77,990 Goodwill 72,254 Total fair value of assets acquired 179,155 Liabilities assumed: Accrued wages and related liabilities $ 3,556 Lease liabilities—current 2,344 Other accrued liabilities 3,507 Long-term lease liabilities—less current portion 3,854 Other long-term liabilities 296 Total fair value of liabilities assumed 13,557 Noncontrolling interest of acquired net assets 18,781 Fair value of net assets acquired $ 146,817 There were no material acquisition costs that were incurred related to the business combinations during the three and six months ended June 30, 2026. 2025 Acquisitions During the six months ended June 30, 2025, the Company expanded its operations with the addition of five home health agencies, four hospice agencies, and four senior living communities. In connection with three of the senior living communities acquired, the Company entered into new long-term “triple-net” leases. For the remaining senior living community 15 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) acquired, the Company acquired the real estate of the community. These new communities included 316 operational senior living units to be operated by the Company's independent operating subsidiaries. There were no material acquisition costs that were expensed related to the business combinations during the six months ended June 30, 2025. Subsequent Events On August 1, 2026, the Company acquired the real estate of one senior living community located in Arizona for $7,000. A subsidiary of the Company entered into a separate operations transfer agreement with the prior operator of the acquired operation as part of the transaction. This new community includes 63 operational senior living units to be operated by one of the Company’s independent operating subsidiaries. 8. PROPERTY AND EQUIPMENT—NET Property and equipment, net consist of the following: June 30, 2026 December 31, 2025 Land $ 10,291 $ 8,688 Building 21,137 16,025 Leasehold improvements 29,721 25,349 Equipment 47,828 37,697 Furniture and fixtures 3,265 2,540 Construction in progress 3,546 6,147 115,788 96,446 Less: accumulated depreciation (40,492) (35,462) Property and equipment, net $ 75,296 $ 60,984 Depreciation expense was $3,112 and $5,728 for the three and six months ended June 30, 2026, and $2,224 and $4,116 for the three and six months ended June 30, 2025. Management has evaluated its long-lived assets and determined there was no impairment recorded during the three and six months ended June 30, 2026 and 2025. 9. EQUITY METHOD INVESTMENT On June 1, 2026, the Company, through a wholly-owned operating subsidiary, entered into a contractual joint operating arrangement to be governed by the existing Management Services Agreement (the “MSA”) with Hartford Healthcare at Home, Inc. related to the provision of certain home health and hospice services in Connecticut. In connection with the arrangement, (i) the Company provides management, administrative, billing, operational, and other consulting services to the operator of the agencies, and (ii) the Company acquired the contractual right to receive 30% of the profits and losses recognized in connection with such arrangement in exchange for a $28,428 purchase payment including transaction costs. Because the Company will not have a majority interest in or exercise control with respect to this arrangement, the arrangement is accounted for using the equity method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures. As of June 30, 2026, the carrying value of this investment was $28,798. For this investment, there was no difference in the carrying amount of the assets and liabilities and the maximum exposure to loss. Net income recognized on our proportionate shares of the net assets of our equity method investments was $370 for the three and six months ended June 30, 2026. 16 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 10. GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS The following table represents activity in goodwill by segment for the six months ended June 30, 2026: Home Health and Hospice Services Senior Living Services Total December 31, 2025 $ 233,604 $ 3,642 $ 237,246 Additions 2,000 — 2,000 Purchase price allocation adjustment (3,457) — (3,457) June 30, 2026 $ 232,147 $ 3,642 $ 235,789 Other indefinite-lived intangible assets consist of the following: June 30, 2026 December 31, 2025 Trade names $ 18,161 $ 18,161 Medicare and Medicaid licenses 181,281 181,281 Total $ 199,442 $ 199,442 No goodwill or intangible asset impairment charges were recorded during the three and six months ended June 30, 2026 and 2025. 11. OTHER ACCRUED LIABILITIES Other accrued liabilities consist of the following: June 30, 2026 December 31, 2025 Self-insurance liabilities $ 10,815 $ 8,368 Hospice CAP liabilities 3,649 3,958 Deferred revenue 2,478 2,291 Refunds payable 3,796 4,049 Property taxes 1,411 1,602 Resident deposits 779 880 Software license payable 908 908 Finance leases liabilities—current 6,502 818 Other 3,803 3,977 Other accrued liabilities $ 34,141 $ 26,851 Deferred revenue occurs when the Company receives payments in advance of services provided. Refunds payable includes payables related to overpayments, duplicate payments and credit balances from various payor sources. Resident deposits include refundable deposits to residents. 12. LEASES The Company has operating leases through which its independent operating subsidiaries lease administrative offices of home health and hospice agencies, senior living communities, and corporate offices with initial lease terms ranging from one to 25 years. Most of these operating leases are non-cancelable, contain renewal options, most involve rent increases, and none contain purchase options. The lease term excludes lease renewals because the renewal rents are not at a bargain, there are no economic penalties for the Company to renew the lease, and it is not reasonably certain that the Company will exercise the extension options. The Company elected the accounting policy practical expedients in ASC 842 to: (i) combine associated lease and non-lease components into a single lease component; and (ii) exclude recording short-term leases as right-of-use assets and liabilities on the Condensed Consolidated Balance Sheets. Non-lease components, which are not significant overall, are combined with lease components. The Company also has finance leases which have initial terms between 2 and 5 years. As of 17 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) June 30, 2026, the Company has a real estate lease with a purchase option that the Company is reasonably certain to exercise and leased vehicles that are considered finance leases under ASC 842. As of June 30, 2026, the Company’s independent operating subsidiaries leased 35 senior living communities from subsidiaries of Ensign (“Ensign Leases”), the majority of which are under master lease arrangements. The existing leases with subsidiaries of Ensign have initial terms of between 14 to 20 years. The total amount of rent expense included in rent - cost of services paid to subsidiaries of Ensign was $4,062 and $7,911 for the three and six months ended June 30, 2026, and $3,755 and $7,509 for the three and six months ended June 30, 2025. In addition to rent, each of the operating companies are required to pay the following: (1) all impositions and taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor); (2) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties; (3) all insurance required in connection with the leased properties and the business conducted on the leased properties; (4) all community maintenance and repair costs; and (5) all fees in connection with any licenses or authorizations necessary or appropriate for the leased properties and the business conducted on the leased properties. Fifteen of the Company’s affiliated senior living communities, excluding the communities that are operated under the Ensign Leases, are operated under three separate master lease arrangements. Under these master leases, a breach at a single community could subject one or more of the other communities covered by the same master lease to the same default risk. Failure to comply with Medicare and Medicaid provider requirements is a default under several of the Company’s leases and master leases. With an indivisible lease, it is difficult to restructure the composition of the portfolio or economic terms of the master lease without the consent of the landlord. Finance lease balances consist of the following: June 30, 2026 December 31, 2025 Finance lease balances: Finance right-of-use assets(a) $ 8,004 $ 6,586 Finance lease liabilities—current(b) $ 6,502 $ 818 Long-term finance lease liabilities—less current portion(c) $ 1,637 $ 5,845 (a) Finance right-of-use assets are included in Restricted and other assets on our Condensed Consolidated Balance Sheets. (b) Finance lease liabilities—current are included in Other accrued liabilities on our Condensed Consolidated Balance Sheets. (c) Long-term finance lease liabilities—less current portion are included in Other long-term liabilities on our Condensed Consolidated Balance Sheets. The components of total lease cost, net are as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Operating lease costs: Community Rent—cost of services $ 10,197 $ 9,700 $ 20,082 $ 19,273 Office Rent—cost of services 3,231 2,225 6,444 4,367 Rent—cost of services(a) $ 13,428 $ 11,925 $ 26,526 $ 23,640 General and administrative expense $ 226 $ 145 $ 511 $ 306 Variable lease cost(b) $ 2,889 $ 2,425 $ 5,606 $ 4,828 Finance lease costs: Amortization of lease assets(c) $ 395 $ 118 $ 658 $ 215 Interest on lease liabilities(d) $ 105 $ 97 $ 201 $ 166 (a) Includes short-term lease cost, which is immaterial. (b) Represents variable lease cost for operating leases, which costs include property taxes, insurance, common area maintenance, and consumer price index increases, incurred as part of the Company’s triple net leases, and which is included in cost of services for our home health and hospice and senior living leases, and general and administrative expense for our Service Center leases for the three and six months ended June 30, 2026 and 2025. (c) Amortization of lease assets is included in Depreciation and amortization on our Condensed Consolidated Statements of Income. (d) Interest on lease liabilities is included in Interest expense, net on our Condensed Consolidated Statements of Income. 18 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table shows the lease maturity analysis for all leases as of June 30, 2026: Year Operating Lease Amounts Finance Lease Amounts 2026 (Remainder) $ 24,253 $ 971 2027 46,943 6,474 2028 44,014 909 2029 41,400 220 2030 39,638 20 Thereafter 232,997 — Total lease payments 429,245 8,594 Less: present value adjustments (139,330) (455) Present value of total lease liabilities 289,915 8,139 Less: current lease liabilities (26,551) (6,502) Long-term lease liabilities $ 263,364 $ 1,637 Lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at each lease’s commencement date to determine each lease's operating lease liability. As of June 30, 2026, for our operating leases, the weighted average remaining lease term is 10.5 years and the weighted average discount rate is 7.9%. As of December 31, 2025, for our operating leases, the weighted average remaining lease term was 10.7 years and the weighted average discount rate was 7.9%. As of June 30, 2026, for our finance leases, the weighted average remaining lease term and the weighted average discount rate was 1.4 years and 6.2%, respectively. As of December 31, 2025, for our finance leases, the weighted average remaining lease term and the weighted average discount rate was 1.5 years and 6.3%, respectively. 13. DEBT Long-term debt consists of the following: June 30, 2026 December 31, 2025 Amended revolving credit facility $ 101,000 $ 75,000 Incremental term loans 97,500 100,000 Total debt 198,500 175,000 Less current maturities 5,000 5,000 Unamortized debt issuance costs(a) (1,001) (1,163) Long-term debt, net $ 192,499 $ 168,837 (a) For the three and six months ended June 30, 2026, outstanding debt issuance costs of $2,641 are recorded in Restricted and other assets and $1,001 are recorded in Long-term debt, net. For the year ended December 31, 2025, outstanding debt issuance costs of $3,058 are recorded in Restricted and other assets and $1,163 are recorded in Long-term debt, net. 19 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) On July 31, 2024, Pennant entered into an Amended and Restated Credit Agreement (the “Amended Credit Agreement”), which provides for a revolving credit facility (the “Amended Revolving Credit Facility”) with a syndicate of banks with a borrowing capacity of $250,000. In conjunction with the amendment, the Company incurred additional debt issuance costs of $3,915 and wrote off previously deferred unamortized debt issuance costs of $428 in 2024. Per the terms of the Amended Credit Agreement, the interest rates applicable to loans under the Amended Revolving Credit Facility are, at the Company’s election, either (i) Term Standard Overnight Financing Rate (“SOFR”) (as defined in the Amended Credit Agreement) plus a margin ranging from 1.75% to 2.75% per annum or (ii) Base Rate plus a margin ranging from 0.75% to 1.75% per annum, in each case based on the ratio of Consolidated Total Net Debt to Consolidated EBITDA (each, as defined in the Amended Credit Agreement). In addition, Pennant pays a commitment fee on the undrawn portion of the commitments under the Amended Revolving Credit Facility that ranges from 0.25% to 0.45% per annum, depending on the Consolidated Total Net Debt to Consolidated EBITDA ratio of the Company and its subsidiaries. The Company is not required to repay any loans under the Amended Credit Agreement prior to maturity in July 2029. On November 3, 2025, Pennant entered into the First Amendment to Amended and Restated Credit Agreement (the “First Amendment”), which provides for an incremental term loan with an aggregate principal amount of $100,000 (the “Incremental Term Loans”). The Incremental Term Loans constitute term loans under, and are subject to the terms and provisions of, the Amended Credit Agreement, including bearing interest at the same interest rate, and having the same maturity date, as the Amended Revolving Credit Facility. In conjunction with the First Amendment, the Company incurred additional debt issuance costs of $1,203. The debt issuance costs associated with the Incremental Term Loans are recorded in Long-term debt, net. As of June 30, 2026, the Company’s weighted average interest rate on its outstanding debt was 5.88%. As of June 30, 2026, the Company had available borrowing on the Amended Revolving Credit Facility of $145,564, which was net of outstanding letters of credit of $3,436. The fair value of the Amended Revolving Credit Facility and the Incremental Term Loans approximates carrying value, due to the short-term nature and variable interest rates. The fair value of this debt is categorized within Level 2 of the fair value hierarchy based on the observable market borrowing rates. The Amended Credit Agreement is guaranteed, jointly and severally, by certain of the Company’s independent operating subsidiaries, and is secured by a pledge of stock of the Company's material independent operating subsidiaries as well as a first lien on substantially all of each material operating subsidiary's personal property. The Amended Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its independent operating subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend certain material agreements and pay certain dividends and other restricted payments. Financial covenants require compliance with certain leverage ratios that impact the amount of interest. As of June 30, 2026, the Company was compliant with all such financial covenants. 14. OPTIONS AND AWARDS Outstanding options and restricted stock awards of the Company were granted under the Amended and Restated 2019 Omnibus Incentive Plan (the “Amended and Restated Plan”) and Long-Term Incentive Plan (the “LTIP”, and together with the Amended and Restated Plan, the “Pennant Plans”). During the second quarter of 2025, the Company’s stockholders approved the Amended and Restated Plan, which increased the total number of shares authorized for issuance under the 2019 Omnibus Incentive Plan (the “Predecessor Plan”). Including the shares rolled over from the Predecessor Plan, the Amended and Restated Plan provides for the issuance of 3,293 shares of common stock. Under the Pennant Plans, stock-based payment awards, including employee stock options, restricted stock awards (“RSA”), and restricted stock units (“RSU” and together with RSA, “Restricted Stock”) are issued based on estimated fair value. The following disclosures represent share-based compensation expense relating to employees of the Company’s subsidiaries and non-employee directors who have awards under the Pennant Plans. Share-Based Compensation The following disclosures represent share-based compensation expense relating to the Pennant Plans, including awards to employees of the Company’s subsidiaries. 20 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Total share-based compensation expense for all Pennant Plans for the three and six months ended June 30, 2026 and 2025 was: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Share-based compensation expense related to stock options $ 2,366 1,642 $ 4,266 $ 2,974 Share-based compensation expense related to Restricted Stock 162 182 370 614 Share-based compensation expense related to Restricted Stock to non-employee directors 421 359 834 742 Total share-based compensation $ 2,949 $ 2,183 $ 5,470 $ 4,330 In future periods, the Company estimates it will recognize the following share-based compensation expense for unvested stock options and unvested Restricted Stock as of June 30, 2026: Unrecognized Compensation Expense Weighted Average Recognition Period (in years) Unvested Stock Options $ 37,340 4.1 Unvested Restricted Stock 1,502 2.8 Total unrecognized share-based compensation expense $ 38,842 Stock Options Under the Pennant Plans, options granted to employees of the subsidiaries of Pennant generally vest over five years at 20% per year on the anniversary of the grant date. Options expire ten years after the date of grant. The Company uses the Black-Scholes option-pricing model to recognize the value of stock-based compensation expense for share-based payment awards under the Pennant Plans. Determining the appropriate fair-value model and calculating the fair value of stock-based awards at the grant date requires considerable judgment, including estimating stock price volatility and expected option life. The Company develops estimates based on historical data and market information, which can change significantly over time. The fair value of each option is estimated on the grant date using a Black-Scholes option-pricing model with the following weighted average assumptions for stock options granted as of June 30: Grant Year Options Granted Risk-Free Interest Rate Expected Life(a) Expected Volatility(b) Dividend Yield Weighted Average Fair Value of Options 2026 988 4.0 % 6.5 52.7 % — % $ 19.57 2025 962 4.1 % 6.5 42.0 % — % $ 13.88 (a) Under the midpoint method, the expected option life is the midpoint between the contractual option life and the average vesting period for the options being granted. This resulted in an expected option life of 6.5 years for the options granted. (b) Because the Company’s equity shares have been traded for a relatively short period of time, expected volatility assumption was based on the volatility of related industry stocks. 21 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table represents the employee stock option activity during the six months ended June 30, 2026: Number ofOptionsOutstanding Weighted Average Exercise Price Number ofOptions Vested WeightedAverageExercise Priceof OptionsVested December 31, 2025 4,367 22.34 1,811 $ 21.44 Granted 988 34.76 Exercised (142) 17.09 Forfeited (126) 23.81 Expired (14) 30.57 June 30, 2026 5,073 $ 24.85 2,184 $ 22.03 Restricted Stock A summary of the status of Pennant’s non-vested Restricted Stock, and changes during the six months ended June 30, 2026, is presented below: Non-Vested Restricted Stock Weighted Average Grant Date Fair Value December 31, 2025 127 $ 18.17 Granted 85 32.11 Vested (85) 32.11 Forfeited (8) 18.41 June 30, 2026 119 $ 18.16 15. INCOME TAXES The Company recorded income tax expense of $3,936 and $2,598, or 26.5% and 24.6% of earnings before income taxes, for the three months ended June 30, 2026 and 2025, respectively. The increase in the effective tax rate is primarily attributable to higher state income taxes driven by changes in the geographic mix of earnings, net of the associated federal tax benefit. The Company recorded income tax expense of $7,730 and $5,452, or 26.7% and 24.8% of earnings before income taxes, for the six months ended June 30, 2026 and 2025, respectively. The increase in the effective tax rate is primarily attributable to higher state income taxes driven by changes in the geographic mix of earnings, net of the associated federal tax benefit. 16. DEFINED CONTRIBUTION AND DEFERRED COMPENSATION PLANS The Company has a 401(k) defined contribution plan (the “401(k) Plan”), whereby eligible employees may contribute up to 90% of their annual basic earnings, subject to applicable annual Internal Revenue Code limits. Additionally, the 401(k) Plan provides for discretionary matching contributions (as defined in the 401(k) Plan) by the Company. The Company expensed matching contributions to the 401(k) Plan of $962 and $1,813 for the three and six months ended June 30, 2026, and $549 and $1,127 for the three months ended June 30, 2025. The Company has a non-qualified deferred compensation plan (the “DCP”) for executives, other highly compensated employees, independent contractors and non-employee directors. The independent contractors and non-employee directors are otherwise ineligible for participation in the Company's 401(k) plan. The DCP allows participants to defer the receipt of a portion of their base compensation, and further allows certain participants to defer up to 80% of their base salary and bonus compensation or director fees. At the participant’s election, payments can be deferred until a specific date at least one year after the year of deferral or until termination of engagement with the Company and can be paid in a lump sum or in up to ten annual installments. Separate deferral elections can be made for each year, and in limited circumstances, existing payment elections may be changed. The amounts deferred are credited with earnings and losses based upon the actual performance of the deemed 22 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) investments selected by the participant. The rate of return for each participant varies depending on the specific investment elections made by the participant. Additionally, the plan deposits the employee deferrals into a rabbi trust and the funds are generally invested in individual variable life insurance contracts owned by the Company that are specifically designed to informally fund savings plans of this nature. The Company paid for related administrative costs, which were immaterial during the fiscal years presented. At June 30, 2026 and December 31, 2025, the Company’s deferred compensation liabilities were $6,638 and $3,816, respectively, in other long-term liabilities on the Condensed Consolidated Balance Sheets. The cash surrender value of the individual variable life insurance contracts is based on investment funds that shadow the investment allocations specified by participants in the DCP. At June 30, 2026 and December 31, 2025, the cash surrender value of the company owned life insurance (“COLI”) policies were $6,634 and $3,812, respectively, and were included as a component of restricted and other assets on the Condensed Consolidated Balance Sheets. There are no outstanding loan amounts offset against the cash surrender value of the COLI policies. The gains and losses recorded for the change in cash surrender value were immaterial for each period presented. 17. COMMITMENTS AND CONTINGENCIES Regulatory Matters - The Company provides services in complex and highly regulated industries. The Company’s compliance with applicable U.S. federal, state and local laws and regulations governing these industries may be subject to governmental review and adverse findings may result in significant regulatory action, which could include sanctions, damages, fines, penalties (many of which may not be covered by insurance), and even temporary or permanent exclusion from government programs. The Company is a party to various regulatory and other governmental audits and investigations in the ordinary course of business and cannot predict the ultimate outcome of any federal or state regulatory survey, audit or investigation. While governmental audits and investigations are the subject of administrative appeals, the appeals process, even if successful, may take several years to resolve and penalties subject to appeal may remain in place during such appeals. The Department of Justice (“DOJ”), Department of Health and Human Services (“HHS”), Centers for Medicare and Medicaid Services (“CMS”), or other federal and state enforcement and regulatory agencies may conduct additional investigations related to the Company's businesses. The Company believes it is presently in compliance in all material respects with all applicable laws and regulations. Cost-Containment Measures - Government and third-party payors have instituted cost-containment measures designed to limit payments made to providers of healthcare services, may propose or implement future cost-containment measures, and there can be no assurance that future measures designed to limit payments made to providers will not adversely affect the Company. Indemnities - From time to time, the Company enters into certain types of contracts that contingently require the Company to indemnify parties against third-party claims. These contracts primarily include (i) certain real estate leases, under which the Company may be required to indemnify property owners or prior operators for post-transfer environmental or other liabilities and other claims arising from the Company’s use of the applicable premises, (ii) operations transfer agreements, in which the Company agrees to indemnify past operators of agencies and communities the Company acquires against certain liabilities arising from the transfer of the operation and/or the operation thereof after the transfer, (iii) certain Ensign lending agreements, and (iv) certain agreements with management, directors and employees, under which the subsidiaries of the Company may be required to indemnify such persons for liabilities arising out of their employment relationships. The terms of such obligations vary by contract and, in most instances, a specific or maximum dollar amount is not explicitly stated therein. Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted. Consequently, because no claims have been asserted, no liabilities have been recorded for these obligations on the Company’s Condensed Consolidated Balance Sheets for any of the periods presented. Litigation - The Company’s businesses involve a significant risk of liability given the age and health of the patients and residents served by its independent operating subsidiaries. The Company, its operating subsidiaries, and others in the industry may be subject to a number of claims and lawsuits, including professional liability claims, alleging that services provided have resulted in personal injury, elder abuse, wrongful death or other related claims. Healthcare litigation (including class action litigation) is common and is filed based upon a wide variety of claims and theories, and the Company is routinely subjected to these claims in the ordinary course of business, including potential claims related to patient care and treatment, and professional negligence. The Company may also face employment related claims, including wage and hour class actions, which are common in our industry. If there were a significant increase in the number of these claims or an increase in amounts owing should plaintiffs be successful in their prosecution of these claims, this could materially adversely affect the Company’s 23 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) business, financial condition, results of operations and cash flows. In addition, the defense of these lawsuits may result in significant legal costs, regardless of the outcome, and may result in large settlement amounts or damage awards. In addition to the potential lawsuits and claims described above, the Company also is subject to potential lawsuits under the False Claims Act (the “FCA”) and comparable state laws alleging submission of fraudulent claims for services to any healthcare program (such as Medicare) or payor. Litigation under the FCA may be commenced by the DOJ or individual plaintiffs alleging a violation of applicable federal laws regarding healthcare payments and service delivery. A violation may provide the basis for exclusion from federally funded healthcare programs. Such exclusions could have a correlative negative impact on the Company’s financial performance. Some states, including California, Arizona and Texas, have enacted similar whistleblower and false claims laws and regulations. In addition, the Deficit Reduction Act of 2005 created incentives for states to enact anti-fraud legislation modeled on the FCA, for which 18 states have qualified, including California and Texas, where we conduct business. As such, the Company could face scrutiny, potential liability and legal expenses and costs based on claims under state false claims acts in markets in which it conducts business. Under the Fraud Enforcement and Recovery Act (“FERA”) and its associated rules, healthcare providers face significant penalties for the knowing retention of government overpayments, even if no false claim was involved. Under current regulations, providers have an obligation to return overpayments to CMS within 60 days of “identification” (i.e., a person has identified an overpayment when the person knowingly receives or retains an overpayment with the same knowledge standard under the FCA) or the date any corresponding cost report is due, whichever is later. This 60-day repayment obligation is suspended, however, when a provider is conducting a good faith investigation to determine the existence of related overpayments that may arise from the same (or similar) cause as the originally identified overpayment, and the provider conducts a timely, good-faith investigation to determine whether related overpayments exist. Retention of overpayments beyond this period may create liability under the FCA. In addition, FERA protects whistleblowers (including employees, contractors, and agents) from retaliation. The Company cannot predict or provide any assurance as to the possible outcome of any litigation. If any litigation were to proceed, and the Company and its operating companies are subjected to, alleged to be liable for, or agree to a settlement of, claims or obligations under federal Medicare statutes, the FCA, or similar state and federal statutes and related regulations, the Company’s business, financial condition and results of operations and cash flows could be materially and adversely affected. Among other things, any settlement or litigation could involve the payment of substantial sums to settle any alleged civil violations, fines, or penalties, and may also include the assumption of specific procedural and financial obligations by the Company or its independent operating subsidiaries going forward under a corporate integrity agreement and/or other arrangement with the government. The Company establishes reserves to cover the anticipated costs of such litigation, including legal fees and expected settlements, based on the Company’s historical litigation experience, current developments, and other factors. Medicare Revenue Recoupments - The Company is subject to probe reviews relating to Medicare services, billings and potential overpayments by Unified Program Integrity Contractors (“UPIC”), Recovery Audit Contractors (“RAC”), Zone Program Integrity Contractors (“ZPIC”), Program Safeguard Contractors (“PSC”), Supplemental Medical Review Contractors (“SMRC”) and Medicaid Integrity Contributors (“MIC”) programs (each of the foregoing collectively referred to as “Reviews”). As of June 30, 2026, 16 of the Company’s independent operating subsidiaries had Reviews scheduled, on appeal or in dispute resolution process, both pre- and post-payment. If an operation fails an initial or subsequent Review, the operation could then be subject to extended Review, suspension of payment, or extrapolation of the identified error rate to all billing in the same time period. The Company, from time to time, receives record requests in Reviews which have resulted in claim denials on paid claims. The Company has appealed substantially all denials arising from these Reviews using the applicable appeals process. As of June 30, 2026, and through the filing of this Quarterly Report on Form 10-Q, the Company’s independent operating subsidiaries have responded to the Reviews that are currently ongoing, on appeal or in dispute resolution process. The Company cannot predict the ultimate outcome of any regulatory and other governmental Reviews. While such Reviews are the subject of administrative appeals, the appeals process, even if successful, may take several years to resolve. The costs to respond to and defend such Reviews may be significant and an adverse determination in such Reviews may subject the Company to sanctions, damages, extrapolation of damage findings, additional recoupments, fines, other penalties (some of which may not be covered by insurance), and termination from Medicare programs which may, either individually or in the aggregate, have a material adverse effect on the Company's business and financial condition. 24 Table of Contents THE PENNANT GROUP, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Insurance - The Company retains risk for a substantial portion of potential claims for general and professional liability, workers’ compensation and automobile liability. The Company recognizes obligations associated with these costs, up to specified deductible limits in the period in which a claim is incurred, including with respect to both reported claims and claims incurred but not reported. The general and professional liability insurance has a retention limit of $250 per claim with a $600 corridor as an additional out-of-pocket retention the Company must satisfy for claims within the policy year before the carrier will reimburse losses. The workers’ compensation insurance has a retention limit of $250 per claim, except for policies held in Texas, which has a retention limit of $100 per claim, California, which has a retention limit of $500 per claim, and Washington and Wyoming, which are subject to state insurance and possess their own limits. The Company is self-insured for claims related to employee health, dental, and vision care. To protect itself against loss exposure, the Company has purchased individual stop-loss insurance coverage that insures individual health claims that exceed $350 for each covered person for fiscal year 2026 and fiscal year 2025. 25 Table of Contents