Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the PSLRA, Section 27A of the Securities Act, and Section 21E of the Exchange Act, about our expectations, beliefs, plans and intentions regarding our product development efforts, business, financial condition, results of operations, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those contained in "Item 1A - Risk Factors" of this Annual Report on Form 10-K. Forward-looking statements reflect our views only as of the date they are made. We do not undertake any obligation to update forward-looking statements except as required by applicable law. We intend that all forward-looking statements be subject to the safe harbor provisions of PSLRA.

Our fiscal year ends on the Saturday that is closest to December 31 of a given year, resulting in either a 52-week or 53-week fiscal year. Our "fiscal year 2025" refers to the 53-week fiscal year ended on January 3, 2026. Our "fiscal year 2024" refers to the 52-week fiscal year ended on December 28, 2024. Our "fiscal year 2023" refers to the 52-week fiscal year ended on December 30, 2023.

Overview

We are a leading, diversified home care platform focused on providing care to medically complex, high-cost patient populations. We directly address the most pressing challenges facing the U.S. healthcare system by providing safe, high-quality care in the home, the lower cost care setting preferred by patients. Our patient-centered care delivery platform is designed to improve the quality of care our patients receive, which allows them to remain in their homes and minimizes the overutilization of high-cost care settings such as hospitals. Our clinical model is led by our caregivers, primarily skilled nurses, who provide specialized care to address the complex needs of each patient we serve across the full range of patient populations: newborns, children, adults and seniors. We have invested significantly in our platform to bring together best-in-class talent at all levels of the organization and support such talent with industry leading training, clinical programs, infrastructure and technology-enabled systems, which are increasingly essential in an evolving healthcare industry. We believe our platform creates sustainable competitive advantages that support our ability to continue driving rapid growth, both organically and through acquisitions, and positions us as the partner of choice for the patients we serve.

Segments

We deliver our services to patients through three segments: Private Duty Services ("PDS"); Home Health & Hospice ("HHH"); and Medical Solutions ("MS").

The following table summarizes the revenues generated by each of our segments for the fiscal years ended January 3, 2026 and December 28, 2024:

PDS Segment

Private Duty Services predominantly includes private duty nursing services ("PDN Services"), as well as pediatric therapy services ("Therapy Services"). PDN Services patients typically enter our service as children, as our most significant referral sources for new patients are children's hospitals. It is common for PDN Services patients to continue to receive our services into adulthood, as approximately 30% of our PDN Services patients are over the age of 18.

PDN Services involve the provision of clinical and non-clinical hourly care to patients in their homes, which is the preferred setting for patient care. PDN Services typically last four to 24 hours a day, provided by our registered nurses, licensed practical nurses, home health aides, and other non-clinical caregivers who are focused on providing high-quality short-term and long-term clinical care to medically complex children and adults with a wide variety of serious illnesses and conditions. Patients who typically qualify for PDN Services include those with the following conditions:

PDN Services include:

Therapy Services provide a valuable multidisciplinary approach that we believe serves all of a child's therapy needs. We provide both in-clinic and home-based therapy services to our patients. Therapy Services include physical, occupational and speech services. We regularly collaborate with physicians and other community healthcare providers, which allows us to provide more comprehensive care.

HHH Segment

Our Home Health and Hospice segment predominantly includes home health services ("HH Services"), as well as hospice and specialty program services. Our HHH patients typically enter our service as seniors, and our most significant referral sources for new patients are hospitals, physicians and long-term care facilities.

HH Services involve the provision of in-home services to our patients by our clinicians, which may include nurses, therapists, social workers and home health aides. Our caregivers work with our patients' physicians to deliver a personalized plan of care to our patients in their homes. Home healthcare can help our patients recover after a hospitalization or surgery and assist patients in managing chronic illnesses. We also help our patients manage their medications. Through our care, we help our patients recover more fully in the comfort of their own homes, while remaining as independent as possible. HH Services include: in-home skilled nursing services; physical, occupational and speech therapy; medical social services and aide services.

Our hospice services involve a supportive philosophy and concept of care for those nearing the end of life. Our hospice care is a positive, empowering form of care designed to provide comfort and support to our patients and their families when a life-limiting illness no longer responds to cure-oriented treatments. The goal of hospice is to neither prolong life nor hasten death, but to help our patients live as dignified and pain-free as possible. Our hospice care is provided by a team of specially trained professionals in a variety of living situations, including at home, at the hospital, a nursing home, or an assisted living facility.

MS Segment

Through our Medical Solutions segment, we offer a comprehensive line of enteral nutrition supplies and other products to adults and children, delivered on a periodic or as-needed basis. We provide our patients with access to a large selection of enteral formulas, supplies and pumps in our industry, with more than 300 nutritional formulas available. Our registered nurses, registered dietitians and customer service technicians support our patients 24 hours per day, 365 days per year, in-hospital, at-home, or remotely to help ensure that our patients have the best nutrition assessments, change order reviews and formula selection expertise.

Recent Developments

Regulatory Developments

On June 30, 2025, the Centers for Medicare & Medicaid Services ("CMS") issued its calendar year 2026 ("CY 2026") proposed rule for the home health prospective payment system. CMS estimates the proposed rule would reduce home health payments by 6.4% in CY 2026 relative to 2025. On November 28, 2025, CMS released the final rule which reduced Medicare reimbursement rates by 1.3%. This update includes a 3.2% market basket update, reduced by a 0.8% cut for productivity. Future changes in CMS reimbursement methodology, or future decreases in reimbursement rates could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

On July 4, 2025, H.R. 1, also known as the One Big Beautiful Bill Act ("OBBBA"), was enacted into law. The Congressional Budget Office projects OBBBA will result in a reduction to federal Medicaid spending by an estimated $1.15 trillion over the next ten years. The changes to Medicaid made by OBBBA include provisions expected to reduce the population of Medicaid recipients through more stringent eligibility requirements, reductions in provider taxes, work (community engagement) requirements, limits on state-directed payments, and other changes. Most of the applicable provisions have implementation dates of December 31, 2026, or later. While there were no specific changes to the Medicaid waiver programs that a majority of our patient population qualifies for services under and no provisions that we believe directly impact the reimbursement rates of the services we provide, the resulting reductions to state Medicaid budgets may indirectly impact future rate expansion for certain Medicaid-funded services.

Agreement to Acquire Family First Homecare

On March 12, 2026, the Company announced that it had entered into a definitive agreement to acquire Family First Holding, LLC, a scaled, multi-state provider of pediatric home care that primarily provides skilled Private Duty Nursing services with 27 locations in seven states including Florida, Illinois, Iowa, Pennsylvania, South Dakota, Texas, and North Carolina, where it is currently launching operations. The purchase price for the acquisition is $175.5 million in cash, subject to customary adjustments. The transaction is expected to close in the second fiscal quarter of 2026, subject to, among other things, customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. We intend to fund the acquisition with a combination of cash on hand and borrowings under our Securitization Facility.

Important Operating Metrics

We review the following important metrics on a segment basis and not on a consolidated basis:

PDS Segment and MS Segment Operating Metrics

Volume

Volume represents PDS hours of care provided and MS unique patients served, which is how we measure the amount of our patient services provided. We review the number of hours of PDS care provided on a weekly basis and the number of MS unique patients served on a weekly basis. We believe volume is an important metric because it helps us understand how the Company is growing in each of

these segments through strategic planning and acquisitions. We also use this metric to inform strategic decision making in determining opportunities for growth.

Revenue Rate

For our PDS and MS segments, revenue rate is calculated as revenue divided by PDS hours of care provided or the number of MS unique patients served, respectively. We believe revenue rate is an important metric because it represents the amount of revenue we receive per PDS hour of patient service or per individual MS patient transaction and helps management assess the amount of fees that we are able to bill for our services. Management uses this metric to assess how effectively we optimize reimbursement rates.

Cost of Revenue Rate

For our PDS and MS segments, cost of revenue rate is calculated as cost of revenue divided by PDS hours of care provided or the number of unique patients served, respectively. We believe cost of revenue rate is an important metric because it helps us understand the cost per PDS hour of patient service or per individual MS patient transaction. Management uses this metric to understand how effectively we manage labor and product costs.

Spread Rate

For our PDS and MS segments, spread rate represents the difference between the respective revenue rates and cost of revenue rates. Spread rate is an important metric because it helps us better understand the margins being recognized per PDS hour of patient service or per individual MS patient transaction. Management uses this metric to assess how successful we have been in optimizing reimbursement rates, managing labor and product costs, and assessing opportunities for growth.

HHH Segment Operating Metrics

Home Health Total Admissions and Home Health Episodic Admissions

Home health total admissions represents the number of new patients who have begun receiving services. We review the number of home health admissions on a daily basis as we believe it is a leading indicator of our growth. We measure home health admissions by reimbursement structure, separating them into home health episodic admissions, which are reimbursed for a fixed duration of care (typically 30 days), and other admissions, which primarily follow a per-visit reimbursement model. This allows us to better understand the payor mix of our home health business.

Home Health Total Episodes

Home health total episodes represents the number of episodic admissions and episodic recertifications to capture patients who have either started to receive services or have been recertified for another episode of care. Management reviews home health total episodes on a monthly basis to understand the volume of patients who were authorized to receive care during the month.

Home Health Episodic Mix

Home health episodic mix is calculated by dividing the total home health episodic admissions by the home health total admissions. Management monitors home health episodic mix as a simplified metric representing our home health admissions by reimbursement structure, which allows us to better understand the payer mix of our home health business.

Home Health Revenue Per Completed Episode

Home health revenue per completed episode is calculated by dividing total payments received from completed episodes by the number of completed episodes during the period. Episodic payments are determined by multiple factors including type of referral source, patient diagnoses, and utilization. Management tracks home health revenue per completed episode over time to evaluate both the clinical and financial profile of the business in a single metric.

Results of Operations

Fiscal Year Ended January 3, 2026 Compared to the Fiscal Year Ended December 28, 2024

The following table summarizes our consolidated results of operations, including Field contribution, which is a non-GAAP measure (see "Non-GAAP Financial Measures" below),for the fiscal years indicated:

NM = A percentage calculation that is not meaningful due to a percentage change greater than 1000%.

The following table summarizes our consolidated key performance measures, including Field contribution and Field contribution margin, which are non-GAAP measures (see "Non-GAAP Financial Measures" below), for the fiscal years indicated:

The following tables summarize our key performance measures by segment for the fiscal years indicated:

The following discussion of our results of operations should be read in conjunction with the foregoing tables summarizing our consolidated results of operations and key performance measures, as well as the Consolidated Financial Statements.

Summary Operating Results

Operating Income

Operating income was $256.5 million, or 10.5% of revenue, for the fiscal year ended January 3, 2026, as compared to an operating income of $139.8 million, or 6.9% of revenue, for the fiscal year ended December 28, 2024, an increase of $116.7 million.

The change in operating income for fiscal year 2025 was positively impacted by an increase of $153.3 million, or 54.2% in Field contribution as compared to fiscal year 2024. The $153.3 million increase in Field contribution resulted from a $408.7 million, or 20.2%, increase in consolidated revenue and a 3.9% improvement in Field contribution margin to 17.9% for fiscal year 2025 from 14.0% for fiscal year 2024. The primary drivers of our higher Field contribution margin over the comparable fiscal year period was a 1.9% improvement in gross margin percentage, along with a 2.0% decrease in branch and regional administrative expense as a percentage of revenue to 15.4% for fiscal year 2025 from 17.4% for fiscal year 2024.

The following items primarily contributed to the $116.7 million increase in operating income over the comparable fiscal year:

Net Income (Loss)

Net income for fiscal year 2025 was $225.0 million, as compared to net loss of $10.9 million for fiscal year 2024. The $236.0 million increase in net income was primarily driven by the following:

Revenue

Revenue was $2,433.2 million for the fiscal year ended January 3, 2026 as compared to $2,024.5 million for the fiscal year ended December 28, 2024, an increase of $408.7 million, or 20.2%. This increase resulted from the following segment activity:

Our PDS segment revenue growth of $366.5 million, or 22.4%, for the fiscal year ended January 3, 2026 was attributable to an increase in volume of 11.0% and an increase in revenue rate of 11.4%. The increase in PDS volume on a year over year basis was primarily attributable to growth in demand for non-clinical services and volume from the Thrive acquisition, which was completed on June 2, 2025.

The 11.4% increase in PDS revenue rate for the fiscal year ended January 3, 2026, as compared to the fiscal year ended December 28, 2024, resulted primarily from the following: (i) reimbursement rate increases issued by various state Medicaid programs and Managed Medicaid payers; (ii) higher reimbursement rates associated with volumes attributed to the Thrive acquisition; and (iii) improved collections on fully reserved aged receivables.

Our HHH segment revenue growth of $30.8 million, or 14.1%, for the fiscal year ended January 3, 2026 resulted primarily from an increase in total episodes and an increase of 3.5% in home health revenue per completed episode due to improvements in patient mix over the comparable fiscal year period.

Our MS segment revenue growth of $11.4 million, or 6.6%, for the fiscal year ended January 3, 2026, as compared to the fiscal year ended December 28, 2024, was attributable to a 7.7% increase in revenue rate, offset by a decline in volume of 1.1% over the comparable period. The revenue rate increase was primarily driven by improved collections of previously reserved aged receivables.

Cost of Revenue, Excluding Depreciation and Amortization

Cost of revenue, excluding depreciation and amortization, was $1,622.7 million for the fiscal year ended January 3, 2026, as compared to $1,389.0 million for the fiscal year ended December 28, 2024, an increase of $233.8 million, or 16.8%. This increase resulted from the following segment activity:

The 18.4% increase in PDS cost of revenue for the fiscal year ended January 3, 2026 resulted from the previously described 11.0% increase in PDS volume for the fiscal year ended January 3, 2026 and a7.4% increase in PDS cost of revenue rate. The 7.4% increase in cost of revenue rate primarily resulted from higher caregiver labor costs, including pass-through of reimbursement rate increases and slightly higher general and professional liability expense over the comparable period.

The 12.8% increase in HHH cost of revenue for the fiscal year ended January 3, 2026 was driven primarily by higher home health total episodes over the comparable period.

The 1.6% increase in MS cost of revenue for the fiscal year ended January 3, 2026 was driven primarily by a 2.7% increase in cost of revenue rate, partially offset by a decline in volume of 1.1% over the comparable period.

Gross Margin and Gross Margin Percentage

Gross margin was $810.5 million, or 33.3% of revenue, for the fiscal year ended January 3, 2026, as compared to $635.5 million, or 31.4% of revenue, for the fiscal year ended December 28, 2024. Gross margin increased $174.9 million, or 27.5%, year over year. The 1.9% increase in gross margin percentage for the fiscal year ended January 3, 2026 compared to the fiscal year ended December 28, 2024 resulted from the combined changes in our revenue rates and cost of revenue rates in each of our segments, which we refer to as the change in our spread rate in our PDS and MS segments, and the change in gross margin percentage in our HHH segment, as follows:

Branch and Regional Administrative Expenses

Branch and regional administrative expenses were $374.5 million, or 15.4% of revenue, for the fiscal year ended January 3, 2026, as compared to $352.8 million, or 17.4% of revenue, for the fiscal year ended December 28, 2024, an increase of $21.7 million, or 6.1%.

The 6.1% increase in branch and regional administrative expenses for the fiscal year ended January 3, 2026, as compared to the fiscal year ended December 28, 2024, was primarily due to increased costs related to the acquisition of Thrive, which was completed on June 2, 2025 and increased our operating footprint, including by adding new locations and support personnel. The overall 2.0% decrease in branch and regional administrative expenses as a percentage of revenue over the comparable period is the result of leveraging our

operating support model to effectively incorporate increased volume from acquisitions and higher demand driven from our existing operating footprint.

Field Contribution and Field Contribution Margin

Field contribution was $436.0 million, or 17.9% of revenue, for the fiscal year ended January 3, 2026, as compared to $282.7 million, or 14.0% of revenue, for the fiscal year ended December 28, 2024, an increase of $153.3 million, or 54.2%. The 3.9% increase in Field contribution margin for the fiscal year ended January 3, 2026 resulted from the following:

Field contribution and Field contribution margin are non-GAAP financial measures. See "Non-GAAP Financial Measures" below.

Corporate Expenses

Corporate expenses as a percentage of revenue for the fiscal years ended January 3, 2026 and December 28, 2024 were as follows:

Corporate expenses were $163.3 million, or 6.7% of revenue, for the fiscal year ended January 3, 2026, as compared to $125.4 million, or 6.2% of revenue, for the fiscal year ended December 28, 2024. The $37.9 million or 30.2% increase in year over year corporate expenses resulted primarily from $16.0 million of professional services associated with refinancing our credit facilities, higher compensation and benefits to support operations and Thrive integration activities, and higher non-cash share-based compensation costs, primarily due to the acceleration of the SMRP (as defined below) in the first quarter of 2025.

Depreciation and Amortization

Depreciation and amortization was $10.5 million for the fiscal year ended January 3, 2026, compared to $10.8 million for the fiscal year ended December 28, 2024, a decrease of approximately $0.2 million, or 2.2%. The $0.2 million decrease primarily resulted from improved capital asset management.

Acquisition-Related Costs

Acquisition related costs were $3.8 million for the fiscal year ended January 3, 2026 and $1.5 million for the fiscal year ended December 28, 2024. Costs in both periods were primarily associated with the acquisition of Thrive.

Other Operating Expense

Other operating expense was $1.9 million for the fiscal year ended January 3, 2026, compared to other operating expense of $5.3 million. The $3.4 million decrease in other operating expense primarily resulted from impairment of a certain facility lease asset recorded in the 2024 fiscal year.

Interest Expense, net of Interest Income

Interest expense, net of interest income was $137.3 million for the fiscal year ended January 3, 2026, compared to $156.1 million for the fiscal year ended December 28, 2024, a decrease of $18.8 million, or 12.1%. Interest expense decreased primarily due to decreased borrowing under our Securitization Facility and a lower U.S. federal funds rate during the fiscal year ended January 3, 2026 compared to the prior fiscal year period. Further, on September 17, 2025, we entered into the fourth joinder and twelfth amendment (the "Refinancing Amendment") to its First Lien Credit Agreement and terminated our Second Lien Term Loan Facility (as described in Note 7 to our Consolidated Financial Statements). The drivers above reduced our weighted average interest rate from 9.2% as of December 28, 2024, to 7.3% as of January 3, 2026, resulting in lower interest expenseSee further analysis under Liquidity and Capital Resourcesbelow.

Loss on Debt Extinguishment

During the fiscal year ended January 3, 2026, we restructured our Existing Credit Agreement, as well as terminated our Second Lien Term Loan Credit Agreement (each as described in Note 7 to our Consolidated Financial Statements). As a result of the debt refinancing, we recognized a $5.9 million loss on debt extinguishment for the fiscal year ended January 3, 2026.

Other (Expense) Income

Other expense was $6.4 million for the fiscal year ended January 3, 2026, compared to other income of $21.4 million for the fiscal year ended December 28, 2024. We realized a $14.5 million increase in non-cash valuation losses associated with interest rate derivatives in fiscal year 2025 resulting from changes in market expectations of future interest rates in the comparable periods, as well as a $13.3 million decline in net settlements with interest rate derivative counterparties as interest rates decreased compared to the prior year period due to lower market interest rates. Details of other (expense) income included the following:

Income Taxes

We incurred income tax benefit of $118.1 million for the fiscal year ended January 3, 2026, as compared to income tax expense of $16.0 million for the fiscal year ended December 28, 2024. The increase in tax benefit was primarily driven by the release of certain federal and state valuation allowances based on the Company's assessment of positive and negative evidence associated with the future realization of tax benefits on existing deferred tax assets, as well as federal and state current tax expense.

Non-GAAP Financial Measures

In addition to our results of operations prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP", or "GAAP"), which we have discussed above, we also evaluate our financial performance using EBITDA, Adjusted EBITDA, Field contribution and Field contribution margin.

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are non-GAAP financial measures and are not intended to replace financial performance measures determined in accordance with U.S. GAAP, such as net income (loss). Rather, we present EBITDA and Adjusted EBITDA as supplemental measures of our performance. We define EBITDA as net income (loss) before interest expense, net; income tax expense or benefit; and depreciation and amortization. We define Adjusted EBITDA as EBITDA, adjusted for the impact of 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 impairments of goodwill, intangible assets, and other long-lived assets; non-cash, share-based compensation, and associated payroll taxes; loss on extinguishment of debt; fees related to debt modifications; the effect of interest rate derivatives; acquisition-related and integration costs; legal costs and settlements associated with acquisition matters; restructuring costs; other legal matters; and other costs including gains and losses on acquisitions and dispositions of certain businesses. As non-GAAP

financial measures, our computations of EBITDA and Adjusted EBITDA may vary from similarly termed non-GAAP financial measures used by other companies, making comparisons with other companies on the basis of this measure impracticable.

Management believes our computations of EBITDA and Adjusted EBITDA are helpful in highlighting trends in our core operating performance. In determining which adjustments are made to arrive at EBITDA and Adjusted EBITDA, 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. We use EBITDA and Adjusted EBITDA to assess operating performance and make business decisions.

We have incurred substantial acquisition-related costs and integration 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 believe it is important to exclude these costs from our Adjusted EBITDA because it provides management a normalized view of our core, ongoing operations after integrating our acquired companies, which is an important measure in assessing our performance.

Given our determination of adjustments in arriving at our computations of EBITDA and Adjusted EBITDA, 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, revenue, operating income or loss, 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 (loss) to EBITDA and Adjusted EBITDA for the periods indicated:

Field Contribution and Field Contribution Margin

Field contribution and Field contribution margin are non-GAAP financial measures and are not intended to replace financial performance measures determined in accordance with U.S. GAAP, such as gross margin and gross margin percentage. Rather, we present Field contribution and Field contribution margin as supplemental measures of our performance. We define Field contribution as gross margin less branch and regional administrative expenses. Field contribution margin is Field contribution as a percentage of revenue. As non-GAAP financial measures, our computations of Field contribution and Field contribution margin may vary from similarly termed non-GAAP financial measures used by other companies, making comparisons with other companies on the basis of these measures impracticable.

Field contribution and Field contribution margin have limitations as analytical tools and should not be considered in isolation or as substitutes or alternatives to gross margin, gross margin percentage, net income or loss, revenue, operating income or loss, cash flows from operating activities, total indebtedness or any other financial measures calculated in accordance with U.S. GAAP.

Management believes Field contribution and Field contribution margin are helpful in highlighting trends in our core operating performance and evaluating trends in our branch and regional results, which can vary from year to year. We use Field contribution and Field contribution margin to make business decisions and assess the operating performance and results delivered by our core field operations, prior to corporate and other costs not directly related to our field operations. These metrics are also important because they guide us in determining whether or not our branch and regional administrative expenses are appropriately sized to support our caregivers

and direct patient care operations. Additionally, Field contribution and Field contribution margin determine how effective we are in managing our field supervisory and administrative costs associated with supporting our provision of services and sale of products.

The following table reconciles gross margin to Field contribution and Field contribution margin for the periods indicated:

Liquidity and Capital Resources

Overview

Our principal sources of cash have historically been from operating activities. Our principal source of liquidity, in addition to cash provided by operating activities, has historically been from proceeds from our credit facilities and issuances of common stock.

Our principal uses of cash and liquidity have historically been for acquisitions, interest and principal payments under our credit facilities, payments under our interest rate derivatives, and financing of working capital. Payment of interest and related fees under our credit facilities is currently the most significant use of our operating cash flow. Our goal is to use cashflow provided by operations primarily as a source of cash to supplement the purchase price for acquisitions and reduce our net leverage.

In September 2023, in response to a $7.9 million arbitration award rendered against us in connection with a civil litigation matter, we promptly obtained a $9.1 million appellate bond with the trial court. The $9.1 million appellate bond was collateralized with letters of credit. During the second fiscal quarter of 2025, a settlement agreement between all parties was reached. On June 9, 2025, the court entered an agreed final judgment in the matter and ordered release of the bond. The letters of credit securing the bond were released on June 16, 2025.

For additional information with respect to the foregoing litigation matters, please see "Litigation and Other Current Liabilities"set forth in Note 14 to the Consolidated Financial Statements.

As noted in Recent Developments, we entered into an agreement to acquire Family First Holding, LLC for a purchase price of $175.5 million, subject to customary adjustments. The purchase agreement is expected to close in the second fiscal quarter of 2026, and intended to be funded with a combination of cash on hand and borrowings under our Securitization Facility.

At January 3, 2026 we had $193.3 million in cash on hand, $110.0 million available to us under our Securitization Facility and $225.5 million of borrowing capacity under the Revolving Credit Facility (as defined below). Available borrowing capacity under the Revolving Credit Facility is subject to a maintenance leverage covenant that becomes effective if more than 40% of the total commitment is utilized. We believe that our operating cash flows, available cash on hand, and availability under our Securitization Facility and Revolving Credit Facility will be sufficient to meet our cash requirements for at least the next twelve months. For additional information with respect to the terms and other covenants governing our Securitization Facility and Revolving Credit Facility, please see Note 7 to the Consolidated Financial Statements.

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 on hand 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.

Cash Flow Activity

The following table sets forth a summary of our cash flows from operating, investing, and financing activities for the fiscal years presented:

Operating Activities

The primary sources or uses of our operating cash flow are operating income or operating losses, net of any goodwill impairments that we record as well as any other significant non-cash items such as depreciation, amortization and share-based compensation, less cash paid for interest. The timing of collections of accounts receivable and the payment of accounts payable, other accrued liabilities and accrued payroll can also impact and cause fluctuations in our operating cash flow. Cash flow provided by operating activities increased by $93.2 million for fiscal year 2025 compared to fiscal year 2024, primarily due to:

Days Sales Outstanding ("DSO")

DSO provides us with a gauge to measure the timing of cash collections against accounts receivable and related revenue. DSO is derived by dividing our average patient accounts receivable for the fiscal period by our average daily revenue for the fiscal period. The collection cycle for our HHH segment is generally longer than that of our PDS segment, primarily due to longer billing cycles for HHH, which is generally billed in thirty-day increments. The following table presents our trailing five quarter DSO for the respective periods:

Investing Activities

Net cash used in investing activities was $22.3 million for the fiscal year ended January 3, 2026, as compared to $6.3 million for the fiscal year ended December 28, 2024. The $16.0 million increase in cash used in the fiscal year ended January 3, 2026 was primarily related to the purchase of Thrive in fiscal year 2025.

Financing Activities

Net cash provided by financing activities decreased by $8.6 million, from $14.0 million for the fiscal year ended December 28, 2024 to $5.4 million for the fiscal year ended January 3, 2026. The $5.4 million net cash provided in fiscal year 2025 was primarily related to the following items:

The $14.0 million net cash provided in fiscal year 2024 was primarily related to the following items:

Indebtedness

We have historically incurred term loan indebtedness to finance our acquisitions, and we have borrowed under our Securitization Facility and Revolving Credit Facility from time to time for working capital purposes, as well as to finance acquisitions, as needed. The following table presents our current and long-term obligations under our credit facilities as of January 3, 2026 and December 28, 2024, as well as related interest expense for fiscal years 2025 and 2024, respectively:

We were in compliance with all financial covenants and restrictions related to existing credit facilities at January 3, 2026 and December 28, 2024.

On June 25, 2025, we amended the Securitization Facility (the "Seventh Amendment") to increase the maximum amount available thereunder from $225.0 million to $275.0 million, subject to certain borrowing base requirements. The amendment also, among other things, provided for an extension to the scheduled termination date of the Securitization Facility to three years from the effective date of the Seventh Amendment. As a result of the Seventh Amendment to the Securitization Facility, the Existing Revolving Credit Facility's maturity date was effectively extended to April 15, 2028.

On September 17, 2025, Aveanna Healthcare LLC (the "Borrower"), a wholly owned subsidiary of the Company, entered into the fourth joinder and twelfth amendment (the "Refinancing Amendment") to its First Lien Credit Agreement, dated as of March 16, 2017 (as further amended, supplemented, or otherwise modified from time to time, the "Existing Credit Agreement"), among the Company, the borrowing subsidiaries party thereto, the lenders party thereto, Barclays Bank PLC as administrative agent and collateral agent (in such capacities, the "Administrative Agent"), and other agents party thereto (the Existing Credit Agreement, as amended by the Refinancing Amendment, the "Amended Credit Agreement"). The Existing Credit Agreement provided for among other things, a senior secured term loan facility (the "Existing Term Loan Facility") with an outstanding balance as of the Closing Date of $886.0 million (the "Existing Term Loans") and availability of $170.3 million via the Existing Revolving Credit Facility.

The Refinancing Amendment provides for, among other things, the refinancing of the Existing Revolving Credit Facility under the Existing Credit Agreement and incremental revolving loan commitments in an aggregate principal amount of $79.7 million, resulting in total aggregate revolving loan commitments of $250.0 million (the "2025 Refinancing Revolving Credit Facility"), a portion of which may be used for the issuance of letters of credit and swingline loans. The Refinancing Amendment additionally provides for the refinancing of the term loans previously outstanding ("2025 Refinancing Term Loans") under the Existing Term Loan Facility (the "2025 Refinancing Term Facility") and an incremental senior secured term loan facility, with aggregate commitments increased by $439.1 million (the "2025 Incremental Term Loans"). Combined, the 2025 Refinancing Term Loans and 2025 Incremental Term Loans aggregate to a total principal balance of $1,325.0 million (the "2025 Term Loans"). The 2025 Refinancing Revolving Credit Facility and the 2025 Refinancing Term Facility replace the Existing Revolving Facility and the Existing Term Loan Facility, respectively. The maturity date for loans and commitments under the 2025 Refinancing Revolving Credit Facility is September 17, 2030. The maturity date for loans and commitments under the 2025 Refinancing Term Facility is September 17, 2032. Loans under the 2025 Refinancing Term Facility amortize at a rate equal to 1.00% per annum, payable in equal quarterly installments, and were issued with original issue discount at 99.75% of par.

Proceeds from the 2025 Term Loans were used to immediately refinance in full the Existing Term Loans and the second lien term loan (the "Second Lien Term Loan") provided by the Second Lien Credit Agreement, dated as of December 10, 2021, by and among the Company, the Borrower, a syndicate of lending institutions, from time to time party thereto, and Barclays Bank PLC, as administrative agent and collateral agent, to pay accrued interest and to fund working capital and general corporate purposes.

The 2025 Term Loans under the Amended Credit Agreement bear interest at a rate equal to, at the election of the Borrower, Term SOFR (as defined in the Amended Credit Agreement) plus an applicable margin equal to 3.75% per annum or an alternative base rate ("ABR") plus an applicable margin equal to 2.75% per annum. Loans under the 2025 Refinancing Revolving Credit Facility bear interest at a rate equal to, at the election of the Borrower, Term SOFR, plus an applicable margin equal to 3.75% per annum or a base rate plus an applicable margin equal to 2.75% per annum, so long as the Consolidated First Lien Net Leverage Ratio (as defined in the Amended Credit Agreement) is greater than 3.90 to 1.00 as of the last day of the preceding fiscal quarter, subject to (a) a decrease of 0.25% in the event that, and for so long as, the Consolidated First Lien Net Leverage Ratio is less than or equal to 3.90 to 1.00 and greater than 3.40 to 1.00 as of the last day of the preceding fiscal quarter and (b) a decrease of 0.50% in the event that, and for so long as, the Consolidated First Lien Net Leverage Ratio is less than or equal to 3.40 to 1.00 as of the last day of the preceding fiscal quarter. As of January 3, 2026, the principal amount of the 2025 Term Loan and borrowings under the 2025 Refinancing Revolving Credit Facility each accrued interest at a rate of 7.47%.

On September 17, 2025, substantially concurrently with the Refinancing Amendment, the Company terminated its Second Lien Credit Agreement, dated as of December, 10, 2021, by and among the Company, a syndicate of lending institutions from time to time party thereto, and Barclays Bank PLC, as administrative agent and collateral agent (the "Second Lien Credit Agreement"). The Second Lien Credit Agreement provided for a second lien term loan in an aggregate principal amount of $415.0 million (the "Second Lien Term Loan"), which was secured by a second lien on certain collateral specified therein. The entirety of the Second Lien Term Loan was repaid with proceeds from the 2025 Incremental Term Loans.

Contractual Obligations

Our contractual obligations consist primarily of long-term debt obligations, interest payments, and operating leases. These contractual obligations impact our short-term and long-term liquidity and capital needs.

Critical Accounting Estimates

In preparing our consolidated financial statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP", or "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 believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Patient Services and Product Revenue

Because our services have no fixed duration and can be terminated by the patient or the facility at any time, we consider each treatment as a stand-alone contract for revenue recognition purposes. Additionally, as services ordered by a healthcare provider in an episode of care cannot be separately identified, we combine all services provided into a single performance obligation for each contract. We recognize patient revenue in the reporting period in which we perform the service, and we recognize product revenue on the date required shipping commitments have been completed. We have minimal unsatisfied performance obligations at the end of the reporting period as our patients typically are under no obligation to remain under our care.

All revenue is recognized based on established billing rates reduced by contractual adjustments provided to third-party payers and implicit price concessions which are estimated based on historical collection experience. Our revenue cycle management systems calculate contractual adjustments on a patient-by-patient or product-by-product basis based on the rates in effect for each primary third-party payer. Due to complexities involved in determining amounts ultimately due under reimbursement arrangements with third-party payers, which are often subject to interpretation and review, we may receive reimbursement for healthcare services authorized and provided that is different from our estimates. In addition, due to changes in general economic conditions, patient accounting service center operations, or payer mix, historical collection experience may not accurately reflect current period collections.

We continually review the contractual and implicit concession estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms that result from contract renegotiations and renewals. In addition, laws and regulations governing the Medicaid, Medicaid MCO and Medicare programs are complex and subject to interpretation. If actual results are not consistent with our assumptions and judgments, we may be exposed to gains or losses that could be material.

Business Combinations

We account for acquisitions of entities that qualify as business combinations under the acquisition method of accounting in accordance with ASC 805, Business Combinations. In determining whether an acquisition should be accounted for as a business combination or asset acquisition, we first determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this is the case, the single identifiable asset or the group of similar assets is not deemed to be a business and is instead deemed to be an asset. Under the acquisition method of accounting, the total consideration is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

In determining the fair value of assets acquired and liabilities assumed in a business combination, we primarily use an income approach to estimate the value of tradenames acquired and a cost approach to estimate the value of licenses acquired. The income approach utilizes projected operating results and cash flows and includes significant assumptions such as base revenue, revenue growth rate, projected EBITDA margin, discount rates, rates of increase in operating expenses, and the future effective income tax rates. The cost approach utilizes projected cash outflows and includes significant assumptions such as projected facility costs, projected administrative costs and estimates of the time and effort to acquire a license. The valuations of our significant acquired companies have been performed by a third-party valuation specialist under our management's supervision. We believe that the estimated fair value assigned to the assets acquired and liabilities assumed is based on reasonable assumptions and estimates that marketplace participants would use. However, such assumptions are inherently uncertain and actual results could differ from those estimates. Future changes in our assumptions or the interrelationship of those assumptions may result in purchase price allocations that are different than those recorded in recent years.

Acquisitions related costs are not considered part of the consideration paid and are expensed as operating expenses as incurred. Contingent consideration, if any, is measured at fair value initially on the acquisition date as well as subsequently at the end of each reporting period until the contingency is resolved and settlement occurs. Subsequent adjustments to contingent considerations are recorded in our consolidated statements of operations. We include the results of operations of the businesses acquired as of the beginning of the acquisition dates.

Goodwill

We perform an impairment test for goodwill at least annually or more frequently if adverse events or changes in circumstances indicate that the asset may be impaired. We perform our annual goodwill impairment test on the first day of the fourth quarter of each fiscal year for each of our reporting units. Tests are performed more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. The annual impairment test is either a qualitative test or a single-step quantitative test. We have the option to first qualitatively assess factors to determine whether it is more likely than not that

the fair value of a reporting unit is less than its carrying value. If we elect not to use this option, or it is determined that qualitative factors alone are not sufficient to conclude whether it is more likely than not that the fair value of the reporting unit is less than its carrying value, or it is determined from the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then we perform the quantitative goodwill impairment test. Our last quantitative assessment was as of September 29, 2024. The quantitative process requires us to estimate and compare the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value exceeds the carrying amount, the goodwill is not considered impaired. To the extent a reporting unit's carrying amount exceeds its fair value, the reporting unit's goodwill is deemed impaired, and an impairment charge is recognized based on the excess of a reporting unit's carrying amount over its fair value up to the amount of goodwill in the reporting unit. The fair value of the reporting units is measured using Level 3 inputs such as operating cash flows and market data.

A reporting unit is either an operating segment or one level below the operating segment, referred to as a component. When the components within our operating segments have similar economic characteristics, we aggregate the components of our operating segments into one reporting unit. Since quoted market prices for our reporting units are not available, we apply judgment in determining the fair value of these reporting units for purposes of performing the goodwill impairment test. We engage a third-party valuation firm to assist management in assessing a reporting unit's fair value. The assessment includes an income approach and a market approach. The income approach utilizes projected operating results and cash flows and includes significant assumptions such as revenue growth rates, projected EBITDA margins, and discount rates. The market approach compares its reporting units' earnings and revenue multiples to those of comparable companies.The income approach utilizes projected operating results and cash flows and includes significant assumptions such as revenue growth rates, projected EBITDA margins, and discount rates. The market approach compares reporting units' earnings and revenue multiples to those of comparable public companies. Estimates of fair value may differ from actual results due to, among other things, economic conditions, changes to business models or changes in operating performance. These factors increase the risk of differences between projected and actual performance that could impact future estimates of fair value of all reporting units. Significant differences between these estimates and actual future performance could result in impairment in future fiscal periods. During our annual goodwill impairment tests for both fiscal year 2024 and 2025, which occurred on the first day of the fourth quarter of each fiscal year, we did not identify any reporting units in which the related carrying value exceeded the estimated fair value.

We can provide no assurance that our goodwill will not become subject to impairment in any future period.

Insurance Reserves

As is typical in the healthcare industry, we are subject to claims that our services have resulted in patient injury or other adverse effects.

The Company maintains primary commercial insurance coverage on a claims made basis for professional malpractice claims with a $2.0 million per claim deductible, a $2.0 million aggregate buffer retention, and $5.0 million per claim and annual aggregate limits as of October 1, 2025. The Company maintains excess insurance coverage for professional malpractice claims. In addition, the Company maintains workers' compensation insurance with a $0.5 million per claim deductible and statutory limits. Our insurance reserves include estimates of the ultimate costs, including third-party legal defense costs for claims that have been reported but not paid and claims that have been incurred but not reported at the balance sheet dates. Although substantially all reported claims are paid directly by our commercial insurance carriers (less any applicable deductibles and/or self-insured retentions), we are ultimately responsible for payment of these claims in the event our insurance carriers become insolvent or otherwise do not honor the contractual obligations under the malpractice policies. We are required under U.S. GAAP to recognize these estimated liabilities in our consolidated financial statements on a gross basis, with a corresponding receivable from the insurance carriers reflecting the contractual indemnity provided by the carriers under the related malpractice policies.

Our insurance reserves require management to make assumptions and apply judgment to estimate the ultimate cost of reported claims and claims incurred but not reported as of the balance sheet date. Our reserves and provisions for professional liability, general liability, and workers' compensation risks are based largely upon semi-annual actuarial calculations prepared by third-party actuaries. Periodically, we review our assumptions and the valuations provided by third-party actuaries to determine the adequacy of our insurance reserves. The following are certain of the key assumptions and other factors that significantly influence our estimate of insurance reserves:

The time period to resolve claims can vary depending upon the jurisdiction, the nature, and the form of resolution of the claims. The estimation of the timing of payments beyond a year can vary significantly. In addition, if current and future claims differ from historical trends, our estimated reserves for insured claims may be significantly affected. Our insurance reserves are not discounted.

We believe our insurance reserves are adequate to cover projected costs for claims that have been reported but not paid and for claims that have been incurred but not reported. Due to the considerable variability that is inherent in such estimates, there can be no assurance that the ultimate liability will not exceed management's estimates. If actual results are not consistent with our assumptions and judgments, we may be exposed to gains or losses that could be material.