AVAH 10-K & 10-Q changes, risk factors and insider trading

In home health and hospice markets that do not require a CON,certificate POA,of need (“CON”), power-of-attorney (“POA”), or similar approval, there are relatively few barriers to entry. Accordingly, other companies, including hospitals and other healthcare organizations that are not currently providing services, may expand their services to include home health and hospice services or similar services. If states with such existing laws remove such barriers, we could face increased competition in these states. We may encounter increased competition in the future that could negatively impact patient referrals to us, limit our ability to maintain or increase our market position and could have a material adverse effect on our business, financial position, results of operations and liquidity.

Managed care organizations, such as health maintenance organizations (“HMOs”) and preferred provider organizations (“PPOs”), and other third-party payers continue to consolidate, which enhances their ability to influence the delivery of healthcare services. Consequently, the healthcare needs of patients in the United States are increasingly served by a smaller number of managed care organizations. These organizations generally enter into service agreements with a limited number of providers. In addition, managed care organizations experienced significant financial pressure during fiscal 2025, as enrollments declined and utilization among existing members increased among such organizations, increasing competition. Our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected if these organizations terminate us as a provider and/or engage our competitors as a preferred or exclusive provider. In addition, should private payers, including managed care payers, seek to negotiate discounted fee structures or the assumption by healthcare providers of all or a portion of the financial risk through prepaid capitation arrangements, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected.

Third-party payers including Medicare, Medicaid and private health insurance payers provide substantially all funding for our home health and hospice services, and we cannot control reimbursement rates. During the past several years, third-party healthcare payers in the adult home care and hospice space, such as federal and state governments, insurance companies and employers, have undertaken cost containment initiatives. As part of the efforts, such payers increasingly are demanding discounted fee structures or the assumption by healthcare providers of all or a portion of the financial risk relating to paying for care provided, often in exchange for exclusive or preferred participation in their benefit plans. We expect efforts to impose greater discounts and more stringent cost controls by government and other third-party payers to continue, thereby reducing the payments we receive for our services. For example, the CMS Medicaid Integrity Program is increasing the scrutiny placed on Medicaid payments and could result in recoupments of alleged overpayments. CMS conducts similar audits on Medicare payments which may also result in recoupments of alleged overpayments. These payer audits are conducted by CMS contractors, many of whom are incentivized based upon the dollar value of said recoupments, such as Recovery Audit Contractor (“RAC”) and Supplemental Medical Review Contractor (“SMRC”) audits, as well as the Unified Program Integrity Contractors (“UPIC”) program and the Zone Program Integrity Contractor (“ZPIC”) program audits. While most audits are conducted on a post paymentpost-payment basis, including RAC, ZPIC, UPIC, and SMRC audits, CMS also performs Targeted Probe and Educate (“TPE”) audits on all home health and hospice providers to help reduce provider billing errors and educate providers on appropriate billing practices. These audits occasionally result in recoupment of Medicare reimbursement. Similarly, private third-party payers may be successful in negotiating reduced reimbursement schedules for our services. Fixed fee schedules, capitation payment arrangements, exclusion from participation in or inability to reach agreements with private insurance organizations or government funded programs, reduction or elimination of payments or an increase in the payments at a rate that is less than the increase in our costs, or other factors affecting payments for healthcare services over which we have no control could have a material adverse effect on our business, prospects, results of operations and financial condition. Further, we cannot assure you that our services will be considered cost-effective by third-party payers, that reimbursement will continue to be available, or that changes to third-party payer reimbursement policies will not have a material adverse effect on our ability to sell our services on a profitable basis, if at all.

Also, beginning onSince April 1, 2013, Medicare reimbursement washas cutbeen ansubject additionalto a 2% reduction through sequestration as mandated by the Budget Control Act of 2011 and American Taxpayer Relief Act of 2011. TheAlthough Coronavirusthis Aid,reduction Relief,was andtemporarily Economicsuspended Securityor (CARES)reduced Actat (thevarious “CARESpoints Act”),during the ConsolidatedCOVID-19 Appropriations Act of 2021, and the Act to Prevent Across-the-Board Direct Spending Cuts suspended the 2% sequestration mandated by the Budget Control Act of 2011 and the American Relief Act of 2011 through December 31, 2021. In December 2021, Congress extended the suspension of the automatic 2% reduction through March 2022 and reduced the sequestration adjustment to 1% beginning on April 1, 2022 through June 30, 2022, withpandemic, the full 2% sequestration reduction forhas sequestrationbeen resumingin oneffect since July 1, 2022. Further, Medicare routinely reclassifies home health resource groups. As a result of those reclassifications, we could receive lower reimbursement rates depending on the case mix of the patients we service. If our cost of providing services increases by more than the annual Medicare price adjustment, or if these reclassifications result in lower reimbursement rates, our results of operations, net income and cash flows could be adversely impacted.

In June 2019, CMS implemented the Review Choice Demonstration ("“RCD"”) for home health providers who submit claims to Palmetto GBA Medicare Administrative Contractor, specifically home health providers in Illinois, Ohio, Texas, North Carolina, and Florida. On September 1, 2021, CMS mandated participation for North Carolina and Florida providers. The Demonstration Project runs in six-month cycles until May 31, 2029, and is intended to reduce the number of Medicare appeals, and improve provider compliance with Medicare program requirements. Upon initiation of RCD, HHAs had three initial choices; pre-claim review of 100% of claims; post-payment review; or minimal post-payment review with a 25% payment reduction. HHAs must have met a 90% target full provisional affirmation rate based on a minimum 10 requests/claims submitted to have successfully completed Cycle 1. For those HHAs who met the target affirmation rate and demonstrated compliance with certain Medicare rules, an additional review option of 5% Spot Check Review was available to choose for subsequent cycles. Our home health business in the states of Florida and North Carolina are subject to the requirements of the RCD. If we do not comply with the requirements of the RCD, we are at risk for significant advance payment or post-payment reviews and our reimbursement from the Medicare program could be delayed or reduced, thereby adversely impacting our results of operations, net income and cash flows. Additionally, states participating in the RCD are excluded from certain other CMS Auditsaudits that are referenced above.

The Consolidated Appropriations Act passed by Congress at the end of 2022 (also referred to as the “Omnibus Budget Bill”) contained several provisions that could impact our business. As to budget enforcement rules previously enacted by Congress, Section 1001 of the Omnibus Budget Bill waiveswaived Statutory Pay-As-You-Go (S-PAYGO) for two years through December 31, 2024. The S-PAYGO 4% mandatory sequestration of Medicare benefit payments that previously would have become effective on January 1, 2023 has now becomebecame effective as of January 1, 2025. Additionally, Section 4163 of the Omnibus Budget Bill extended the current Budget Control Act (BCA) mandatory sequestration of 2% of Medicare benefits through the first six (6) months of 2023 and revised the sequestration percentages for fiscal years 2030 through 2032 to 2%.

While we will make every effort to mitigate the impact of reduction adjustments in 2025, we cannot assure you thatThe implementation and application of any other reduction adjustmentadjustments beginningthat began on January 1, 2025 willhave not havehad a material adverse effect on our business.business in 2025.

We may be similarly impacted by increased enrollment of Medicare and Medicaid beneficiaries in managed care plans, shifting away from traditional fee-for-service models. Under a managed Medicare plan, also known as Medicare Advantage, the federal government contracts with private health insurers to provide Medicare benefits and the insurers may choose to offer supplemental benefits. Approximately 54% of all Medicare beneficiaries were enrolled in a Medicare Advantage plan in 2024,2025, a figure that continues to grow. Enrollment in managed Medicaid plans ishas alsogrown growing,over the past several years, as states are increasingly relying on managed care organizations to deliver Medicaid program services as a strategy to control costs and manage resources. We cannot assure you that we will be successful in our efforts to be included in managed plan networks, that we will be able to secure favorable contracts with all or some of the managed care organizations, that our reimbursement under these programs will remain at current levels, that the authorizations for services will remain at current levels or that our profitability will remain at levels consistent with past performance. We may also face increased competition for managed care contracts as a result of state regulation and limitations. In addition, operational processes may not be well-defined as a state transitions Medicaid recipients to managed care. For example, membership, new referrals and the related authorization for services to be provided may be delayed, which may result in delays in service delivery to consumers or in payment for services rendered. Difficulties with operational processes associated with new managed care contracts may negatively affect our revenue growth rates, cash flow and profitability for services provided.

Delays in collection or non-collection of our patient accounts receivable, or recoupment of payments previously received, particularly during the business integration process, or during system transitions, or in connection with complying with Electronic Visit Verification ("EVV") data collection and submission requirements, could adversely affect our business, financial position, results of operations and liquidity.

Prompt billing and collection are important factors in our liquidity and our business is characterized by delays from the time we provide services to the time we receive payment for these services. We bill numerous and varied payers, such as Medicare, Medicaid and private insurance payers. These different payers typically have different billing requirements that must be satisfied prior to receiving payment for services rendered. Reimbursement is typically conditioned on our documenting medical necessity and correctly applying diagnosis codes. Incorrect or incomplete documentation and billing information could result in non-payment for services rendered. Billing and collection of our patient accounts receivable with Medicare and Medicaid are further subject to the complex regulations that govern Medicare and Medicaid reimbursement, and to rules imposed by nongovernmentnon-government payers. For example, recent efforts have focused on improved coordination of regulation across the various types of Medicaid programs through which personal care services are offered. The 21st Century Cures Act, as amended, mandated that states implement EVV, a technology that collects and verifies data that home services are rendered, such as when the visit begins and ends. In several states, providers are now required to obtain state licenses or registrations and must comply with laws and regulations governing standards of practice. Providers must dedicate substantial resources to ensure continuing compliance with all applicable regulations and significant expenditures may be necessary to offer new services or to expand into new markets. The failure to comply with regulatory requirements could lead to the termination of rights to participate in federal and state-sponsored programs, repayment of payments previously received, and the suspension or revocation of licenses. We believe new licensing requirements and regulations, including EVV, the increasing focus on improving health outcomes, the rising cost and complexity of operations, technology and pressure on reimbursement rates due to constrained government resources may discourage new providers and may encourage industry consolidation. Further, states that fail to meet federally imposed EVV deadlines could potentially lose, without an application for a good cause extension, an escalating amount of their funding. Each state has different timelines and methodologies, including the data aggregators and processors used by each state, for implementing respective EVV process requirements. In order to comply with current and future state and federal regulations around EVV use, we utilize several different vendors. In states with an “open” model, the payer is able to choose its preferred EVV vendor. In states mandating the EVV vendor, a “closed” system, we utilize whichever vendor the state has mandated. In both cases, we have built interfaces between the EVV vendor and our clinical scheduling, documentation, and billing systems utilized in the respective branch and corporate locations. To the extent that our EVV vendors fail to support these processes, our internal operations could be negatively affected. To the extent that states fail to properly implement EVV, or that we fail to comply with new EVV data collection and submission requirements, our internal operations could be negatively affected. Our inability to collect and submit the data required by EVV regulations could negatively impact our ability to retain previously received payments or could subject us to future payment delays, which could have a material adverse effect on our business, financial position, results of operations and liquidity.

As with many technological innovations, artificial intelligence (“AI"”) presents promiseopportunities but also risks and challenges that could adversely affect our business. Sensitive, proprietary, or confidential information of the Company, our patients, employees and business partners could be leaked, disclosed, or revealed as a result of or in connection with the use of generative AI technologies by our employees or vendors.vendors, whether authorized or unauthorized. Any such information input into a third-party generative AI or machine learning platform could be revealed to others, including if information is used to train the third party's generative AI or machine learning models. Additionally, where a generative AI or machine learning model ingests personal information and makes connections using such data, those technologies may reveal other sensitive, proprietary, or confidential information generated by the model. Moreover, generative AI or machine learning models may create incomplete, inaccurate, or otherwise flawed outputs, which may appear correct. Due to these issues, employees or vendors who use these models could make flawed decisions that could result in adverse consequences to us, including exposure to reputational and competitive harm, customer loss, and legal liability. We arehave currently in the process of developingimplemented an AI Use Policy to protect both employees and the Company via restrictions and safeguards on entering Company data or information into a generative system, as well as disclaimers and limitations about relying on outputs from such systems.

Changes in payment methodologies by third-party payers could have a material adverse effect on our financial position, results of operations and cash flow. OnFor example, on November 7,28, 2024,2025, CMS released its final rule for fiscal year 20252026 announcing policy changes under the Home Health Prospective Payment System (the “20252026 HH Rule”). With respect to Medicare reimbursement rates, the 20252026 HH Rule implements a home health payment increasedecrease of 0.5%.1.3%. This reflects a market basket increase of 3.2% and an outlier payment increase of 0.4% offset by a productivity adjustment of -0.5% and a PDGM behavioral assumption adjustment of -1.8%.-0.8%. Any significant future significant 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.

Providing quality patient care is fundamental to our business. We believe that hospitals, physicians and other referral sources refer patients to us in large part because of our reputation for delivering quality care.care, Clinicalas clinical quality ishas becomingbecome increasingly important within our industry. EffectiveFor example, effective October 2012, Medicare imposedbegan imposing a financial penalty upon hospitals that have excessive rates of patient readmissions within 30 days from hospital discharge. We believe this regulation provides a competitive advantage to home health providers who can differentiate themselves based upon quality, particularly by achieving low patient acute care hospitalization readmission rates and by implementing disease management programs designed to be responsive to the needs of patients served by referring hospitals. We are focused intently upon improving our patient outcomes, particularly our patient acute care hospitalization readmission rates. If we should fail to attain our goals regarding acute care hospitalization readmission rates and other quality metrics, we expect our ability to generate referrals would be adversely impacted, which could have a material adverse effect upon our business and consolidated financial condition, results of operations and cash flows. Additionally, Medicare has established consumer-facing websites, Home Health Compare and Hospice Compare, that present data regarding our performance on certain quality measures compared to state and national averages. If we should fail to achieve or exceed these averages, it may affect our ability to generate referrals, which could have a material adverse effect upon our business and consolidated financial condition, results of operations, and cash flows.

If the demand for home health and/or hospice services continues to exceed the supply of available and qualified personnel, we and our competitors may be forced to offer higher compensation and other benefits to attract and retain them. SinceIn therecent COVID-19 pandemic in 2020, we experienced increased caregiver recruitment and retention costs, including hiring and retention incentives, as well as higher base compensation rates as we passed reimbursement rate increases from our payers through to our caregivers. While the impacts of the COVID-19 pandemic on us began to subside in the second quarter of fiscal year 2022,years, the labor markets remainedhave been challenging as a result of both shortages in workforce and inflationary wage pressures, which have constrained our ability to recruit and retain caregivers to meet patient demand. For example, recruitment of qualified caregivers in our private duty services businesses ishas been and remains highly competitive. The majority of our HHH and PDN caregivers are licensed practical nurses (“LPN”) and we compete for this labor pool both with competitors in our private duty services industry as well as other healthcare organizations outside our industry, including hospitals. Hospitals and other healthcare providers have expanded LPN utilization in their labor pools. Even if we were to offer higher compensation and other benefits, there can be no assurance that these individuals will choose to join or continue to work for us. In addition, if we expand our operations into geographic areas where healthcare providers historically have been unionized, as we did with our expansion to New Mexico as a result of the acquisition of Thrive Skilled Pediatric Care, LLC (“Thrive”) during fiscal year 2025, or if any of our employees become unionized, being subject to a collective bargaining agreement may have a negative impact on our ability to timely and successfully recruit qualified personnel and may increase our operating costs. We currently have no union employees, so an increase in labor union activity could have a significant impact on our labor costs. Furthermore, the competitive market for this labor force has created turnover as many seek to take advantage of the supply of available positions, each offering new and more attractive wage and benefit packages. In addition to the wage pressures inherent in this environment, the cost of training new employees amid the turnover rates may cause added pressure on our operating results. If our labor costs continue to increase, we may not experience reimbursement rate or pricing increases to offset these additional costs. Our ability to pass along increased labor costs is limited, which could significantly affect our business and consolidated financial condition, results of operations, and cash flows.

While we believe that our services are not typically sensitive to general declines in the federal and state economies, the erosion in the tax base caused by a general economic downturn can cause restrictions on the federal and state governments’ abilities to obtain financing and a decline in spending. In the wake of the 2008 economic recession, most states faced unprecedented declines in tax revenues and, as a result, record budget gaps. If the economy were to contract into a recession (for example, as a result of continuing adverse macro economic conditions, a public health emergency, inflation or as a resultgeopolitical of the recent significant increase in prevailing interest ratesconflict), our government payers or other counterparties that owe us money could be delayed in obtaining, or may not be able to obtain, necessary funding and/or financing to meet their cash flow needs. As a result, we may face increased pricing pressure, termination of contracts, reimbursement rate cuts or reimbursement delays from Medicare and Medicaid and other governmental payers, which could adversely impact our business and consolidated financial condition, results of operations, and cash flows.

Though we have taken steps to protect the safety and security of our information systems and the patient health information and other data maintained within those systems, there can be no assurance that our safety and security measures and disaster recovery plan (and those of our third-party service providers) will prevent damage to, or interruption or breach of, our information systems and operations. See also “—Failure to maintain the security and functionality of our information systems, or to defend against or otherwise prevent a cybersecurity attack or breach, could adversely affect our business, financial position, results of operations and liquidity.” Our IT and information systems may fail to operate properly (for example, by capturing patient data erroneously) or become disabled as a result of events that are beyond our control. For example, our information systems are vulnerable to damage or interruption from fire, flood, earthquake, terrorist attacks, natural disasters, power loss, telecommunications failure, break-ins, attacks from malicious third parties, improper operation, computer viruses, unauthorized entry, data loss, cybersecurity attacks, acts or war and similar events. Some of our systems are not fully redundant, and our disaster recovery planning may not be sufficient for all eventualities. Additionally, because the techniques used to obtain unauthorized access, disable, or degrade service, or sabotage systems change frequentlyfrequently, including as the result of the evolving use of artificial intelligence, and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures. Any such failure of IT and information systems could adversely affect our reputation, our ability to effect transactions and service customers and merchants, disrupt our business or result in the misuse of patient or patient data, financial loss or liability to our patients, the loss of a supplier or regulatory intervention or reputational damage. Problems with, or the failure of, our technology and systems or any system upgrades or programming changes associated with such technology and systems could have a material adverse effect on data capture, medical documentation, billing, collections, assessment of internal controls and management and reporting capabilities, as well as on our business, financial position, results of operations and liquidity.

If any of our home health or hospice agencies fail to comply with the conditions of participation in the Medicare program, that agency could be terminated from Medicare, which could adversely affect our revenueresults of operations and netcash income.flow.

Our home health and hospice agencies must comply with the extensive conditions of participation in the Medicare program. These conditions generally require our home health and hospice agencies to meet specified standards relating to personnel, patient rights, patient care, patient records, administrative reporting and legal compliance. If a home health agency or hospice fails to meet any of the Medicare conditions of participation, that home health agency or hospice may receive a notice of deficiency from the applicable surveyor or accreditor. If that home health agency or hospice then fails to institute a plan of correction to correct the deficiency within the time period provided by the surveyor or accreditor, that home health agency or hospice could be terminated from the Medicare program. We respond in the ordinary course to deficiency notices issued by surveyors or accreditors. Any termination of one or more of our home health or hospice agencies from the Medicare program for failure to satisfy the Medicare conditions of participation could adversely affect our revenueresults of operations and netcash income.flow.

In addition, the Senior Secured Credit Facilities and Revolving Credit Facility contain customary restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Those covenants include restrictions on our ability to, among other things, incur additional indebtedness, incur liens, pay dividends and make other payments in respect of capital stock, make acquisitions, investments, loans and advances, transfer or sell assets and enter into certain transactions with our affiliates, and in certain circumstances, including if our Revolving Credit Facility becomes more than 30% utilized and we exceed our maintenance leverage covenant,circumstances restrict our access to borrowings under our Revolving Credit Facility. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all our debt under the Senior Secured Credit Facilities. Our Securitization Facility contains certain restrictive covenants including a cash dominion provision which may limit our access to certain operating cash accounts in the event of default. Any such event of default or acceleration could have a material adverse effect on our business and consolidated financial condition, results of operations, and cash flows.

Our variable rate debt instruments are primarily indexed to the secured overnight financing rate (“SOFR”) and have a SOFR floor of 50 basis points. Our outstanding variable rate indebtedness at DecemberJanuary 28,3, 20242026 was $1,474$1,487 million. While we have interest caps and interest rate swap agreements currently in place that protect us from exposure to increases in SOFR above 2.96%, to the extent we incur variable rate debt in excess of aggregate notional amount of such instruments or are unable to obtain similar coverage following expiration of such instruments, we may be unable to mitigate our interest rate risk. BeginningIn inrecent early 2022, in response to significant and prolonged increases in inflation,years, the U.S. Federal Reserve Board raised interest rates eleven times during 2022 and 2023, which has increased the borrowing costs on our variable rate debt. The Federal Reserve Board then paused rate increases in the fourth quarter of 2023 following the deceleration of inflationary growth. During that same period theBoard, European Central Bank and the Bank of England similarlyhave raised interest rates and implemented fiscal policy interventions responsive to high levels of inflation and recession fears.fears, Thewhich has increased the borrowing costs on our variable rate debt. Although the Federal Reserve Board cut interest rates in September 20242025, October 2025 and December 2024,2025, and it may seek to further reduce interest rates,increaserates, increase interest rates or maintain current interest rates.rates, Thethe timing, number and amount of any future interest rate changes are uncertain, and there can be no assurance that rates will continue to decrease at a rate currently predicted or at all, which would in turn negatively impact our borrowing costs. Any future additional federal fund rate increases could make our financing activities, including those related to our acquisition activity, more costly and limit our ability to refinance existing debt when it matures or pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness. If interest rates increase, our debt service obligations on our variable rate indebtedness would likewise increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease, which could have a material adverse effect on our overall financial condition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Indebtedness”.

We regularly evaluate opportunities to acquire other companies and have undertaken, and may in the future undertake,undertaken strategic and accretive acquisitions.acquisitions, such as our acquisition of Thrive during fiscal 2025, and may continue to undertake such acquisitions in the future. To the extent our growth strategy includes strategic and accretive acquisitions, we cannot assure you that we will successfully identify suitable acquisition candidates, obtain financing for such acquisitions, if necessary, consummate such potential acquisitions or efficiently integrate any acquired entities or successfully expand into new markets as a result of our acquisitions. If we are unable to successfully execute on such a strategy in the future, our growth could be limited.

Upon consummation of an acquisition, the integration process could divert the attention of management, and any difficulties or problems encountered in the transition process could have a material adverse effect on our business, financial condition or results of operations. In particular, the integration process may temporarily redirect resources previously focused on reducing cost of services, resulting in lower gross profits in relation to sales. The process of combining companies could cause the interruption of, or a loss of momentum in, the activities of the respective businesses, which could have an adverse effect on their combined operations. Additionally, in some acquisitions, we may have to renegotiate, or risk losing, one or more third-party payer contracts. We may also be unable to immediately collect the accounts receivable of an acquired entity while we align the payer payment systems and accounts with our own systems. Finally, certain transactions can require licensure changeschanges, including as a result of expanding into new markets, which, in turn, result in disruptions in payment for services.

We may also make strategic divestitures from time to time. With respect to any divestiture, we may encounter difficulty finding potential acquirers or other divestiture options on favorable terms. Any divestiture could affect our profitability as a result of the gains or losses on such sale of a business or service, the loss of the operating income resulting from such sale or the costs or liabilities that are not assumed by the acquirer (i.e., stranded costs) that may negatively impact profitability subsequent to any divestiture. The CompanyWe may also be required to recognize impairment charges as a result of a divestiture.

The nature of our business subjects us to inherent risk of professional liability and substantial damage awards. Healthcare providers have become subject to an increasing number of legal actions alleging malpractice or related legal theories in recent years, many of which involve large monetary claims and significant defense costs. In general, we coordinate care for medically fragilecomplex children and adults and end-of-life care for adults through our own network of full time and part-time employed clinicians, including registered nurses, licensed practical nurses, licensed therapists, certified nursing assistants, home health aides, therapy assistants and other similar providers. Although we carefully screen all of the providers in our network and actively remove those that fall below a certain quality threshold, we cannot be certain that a provider will not incur tort liability, including medical malpractice, in treating one of our referred patients. As the referring party in such a case, we could be found negligent if our screening and monitoring procedures are deemed inadequate. The nurses and other healthcare professionals we employ could be considered our agents and, as a result, we could be held liable for their medical negligence.

Our balance sheet includes a significant amount of goodwill and intangible assets. Goodwill and intangible assets, net, together accounted for approximately 69%60% of total assets on our balance sheet as of DecemberJanuary 28,3, 2024.2026. The impairment of a significant portion of these assets would negatively affect our financial condition or results of operations. We regularly evaluate whether events and circumstances have occurred indicating that any portion of our intangible assets and goodwill may not be recoverable. When factors indicate that intangible assets and goodwill should be evaluated for possible impairment, we may be required to reduce the carrying value of these assets. During fiscal year 2023, we performed an interim impairment assessment as of September 30, 2023. We identified that the carrying value of the HHH reporting unit exceeded its estimated fair value. As such, we determined that theNo goodwill associated with the reporting unit was impaired and recorded an impairment charge, net of tax effect, of approximately $105.1 million to reduce goodwill associated with the reporting unit. No additional impairment was taken during our annual impairment assessment during the fourth quarter of fiscal year 2023, and no impairment expense was recognized during our annual goodwill impairment assessment during fiscal year 2024.2024 or fiscal year 2025. We cannot currently estimate the timing and amount of any future reductions in carrying value.

Our operations are directly affected in the short-term by the weather conditions in certain of our regions of operation, particularly along coastal areas in the United States, which may be subject to hurricanes.hurricanes Weatherand conditions,tropical storms. Other weather conditions or natural disasters, including tornadoes, significant rain, snow, sleet, freezing rainsleet or ice, orwildfires, otherfloods factorsand beyond our control, such as wildfires,earthquakes could disrupt patient scheduling, displace our patients and caregivers or force certain of our facilities to close temporarily or for an extended period of time, thereby reducing patient volumes. Therefore, our business is sensitive to the weather conditions of these regions. Moreover, physical effects of climate change such as increases in temperature, sea levels, the severity of weather events and the frequency of natural disasters, such as hurricanes, tropical storms, tornadoes, wildfires, floods and earthquakes, among other effects, could disrupt our operations. While we have disaster recovery systems and business continuity plans in place, any disruptions in our disaster recovery systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively monitor and control our operations. Although we maintain insurance coverage, we cannot guarantee that our insurance coverage will be adequate to cover any losses or that we will be able to maintain insurance at a reasonable cost in the future. Accordingly, our operating results may vary from quarter to quarter, depending on the impact of these weather conditions, and if our losses from business interruption or property damage that result from such weather conditions exceed the amount for which we are insured, our results of operations and financial condition would be adversely affected.

We may be more vulnerable to the effects of a public health catastropheemergency than other businesses due to the nature of our patients, and a regional or global socio-political orany other catastrophicunforeseen eventevents couldmay severelyalso disrupt our business.

We believe that theThe majority of our patients are individuals with complex medical challenges, many of whom may be more vulnerable than the general public during a pandemic or other public health catastrophe.emergency. Our employees are also at greater risk of contracting contagious diseases due to their increased exposure to vulnerable patients. For example, if another pandemic were to occur, we could suffer significant losses to our consumer population or a reduction in the availability of our employees and, at a high cost, be required to hire replacements for affected workers. Enrollment for our services could experience sharp declines if families decide healthcare workers should not be brought into their homes during a health pandemic. Local, regional or national governments might limit or ban public interactions to halt or delay the spread of diseases causing business disruptions and the temporary closure of our centers. Accordingly, certain public health catastrophesemergencies could have a material adverse effect on our business and consolidated financial condition, results of operations, and cash flows.

Other unforeseen events, including acts of violence, war, terrorism and other international, regional or local instability or conflicts (including labor issues), embargoes, natural disasters such as earthquakes, whether occurring in the United States or abroad, could also restrict or disrupt our operations. Enrollment in our Support Services or day health centers, for example, could experience sharp declines as patients and their families may avoid venturing out in public as a result of one or more of these events.

In general, under Section 382 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (“NOLs”) and interest expense carryovers to offset future taxable income. A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. As of DecemberJanuary 28,3, 2024,2026, we had $0.3$33.2 million of U.S. federal net operating loss carryforwards and $366.4$376.5 million of state and local net operating loss carryforwards. In addition, as of DecemberJanuary 28,3, 2024,2026, we had an interest expense carryover of $343.3$371.6 million for federal purposes and instate some states.purposes. Our ability to utilize NOLs and our interest expense carryovers may be currently subject to limitations due to prior ownership changes. In addition, future changes in our stock ownership, some of which aremay be outside of our control, could result in an ownership change under Section 382 of the Code, further limiting our ability to utilize NOLs or interest expense carryovers arising prior to such ownership change in the future. There is also a risk that due to statutory or regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. We have recorded a full valuation allowance against the majority of our interest expense carryover deferred tax assetsasset. attributableAdditionally, towe ourhave federalrecorded anda valuation allowance against certain state and federal NOLs anddetermined interestnot carryovers.to be more likely than not to be utilized in the future.

Federal and state governments continue to pursue intensive enforcement policies resulting in a significant number of investigations, inspections, audits, citations of regulatory deficiencies, and other regulatory sanctions including demands for refund of overpayments, terminations from the Medicare and Medicaid programs, bans on Medicare and Medicaid payments for new admissions, and civil monetary penalties or criminal penalties. We see the possibility of audits under CMS programs, such as the CMS RAC program, the CMS TPE program, the UPIC programprogram, andas well as other federal and state audits evaluating the medical necessity of services to further intensify the regulatory environment surrounding the healthcare industry as third-party firms engaged by CMS and others conduct extensive reviews of claims data and medical and other records to identify improper payments to healthcare providers under the Medicare and Medicaid programs. If we fail to comply with the extensive laws, regulations and prohibitions applicable to our businesses, we could become ineligible to receive government program reimbursement, suffer civil or criminal penalties, or be required to make significant changes to our operations. In addition, we could be forced to expend considerable resources responding to investigations, audits or other enforcement actions related to these laws, regulations or prohibitions. Failure of our staff to satisfy applicable licensure requirements, or of our home health and hospice operations to satisfy applicable licensure and certification requirements could have a material adverse effect on our business, financial position, results of operations and liquidity.

Numerous other federal and state laws protect the confidentiality, privacy, availability, integrity and security of PHI. For example, various states, such as California, Massachusetts, and Washington have implemented privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of personally identifiable information, including PHI. These laws in many cases are more restrictive than, and may not be preempted by, the HIPAA rules and may be subject to varying interpretations by courts and government agencies, creating complex compliance issues and potentially exposing us to additional expense, adverse publicity and liability. We also expect that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions. The U.S. Congress has considered, but not yet passed, several comprehensive federal data privacy bills over the past few years, such as the CONSENT Act, which was intended to be similar to the landmark 2018 European Union General Data Protection Regulation. We expect federal data privacy laws to continue to evolve.

At the state and local level, there is increased focus on regulating the collection, storage, use, retention, security, disclosure, transfer and other processing of confidential, sensitive and personal information. InFor recentexample, years,California we have seen significant changes to data privacy regulations across the U.S., including the enactment ofpassed the California Consumer Privacy Act of 2018 ("the “CCPA"”), which went into effect on January 1, 2020. The CCPA creates new consumer rights, and corresponding obligations on covered businesses, relating to the access to, deletion of and sharing of personal information collected by covered businesses, including a consumer’s right to opt out of certain sales of the consumer's personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. It remains unclear how various provisions of the CCPA will be interpreted and enforced. Additionally, the California Privacy Rights Act (the “CPRA”) which significantly modifiedexpanded the CCPA, including by expanding consumers’privacy rights of California residents with respect to certainthe sensitivecollection and disclosure of personal information.information Theand CPRA also createscreated a new stateregulatory agency that will be vested with authority to implement and enforce thethese CCPA and the CPRA.regulations. New legislation proposed or enacted in various other states will continue to shape the data privacy environment nationally. Certain state laws may be more stringent or broader in scope, or offer greater individual rights,nationally with respect to confidential, sensitive and personal informationinformation, thanthereby federal,further internationalincreasing orthe other state laws,complexity and suchcost lawsof may differ from each other, which may complicateour compliance efforts.

We have approximately 800 million shares of authorized but unissued common stock. Our Second Amended and Restated Certificate of Incorporation (the “Amended Charter”) authorizes us to issue shares of our common stock and preferred stock for consideration and on the terms and conditions established by our Board of Directors in its sole discretion, whether in connection with acquisitions or otherwise. Issuance of common stock or preferred stock would reduce your influence over matters on which our shareholders vote, and, in the case of preferred stock, would likely result in your interest in us being subject to the prior rights of holders of that preferred stock, if any. Shares of our common stock reserved for future issuance under our 2021 Stock Incentive Plan and 2021 Employee Stock Purchase Plan (together, the “Incentive Plans”) will become eligible for sale in the public market once those shares are issued, subject to provisions relating to vesting requirements, and in some cases limitations in connection with our Amended and Restated Registration Rights Agreement or our Amended and Restated Stockholders Agreement. We have filed registration statements on Form S-8 under the Securities Act to register shares of our common stock issuable pursuant to the Incentive Plans. InWe thealso future,have, weand may alsocontinue to, issue securities in connection with acquisitions.acquisitions, Theas we did with respect to our acquisition of Thrive in 2025, and the number of shares of our common stock issued in connection with an acquisition could constitute a material portion of our then-outstanding shares of common stock. Any issuance of additional securities in connection with acquisitions may result in additional dilution to our stockholders and may have an adverse effect on the market price of shares of our common stock. We have a currently effective shelf registration statement on Form S-3 on file with the SEC (File No. 333-281982), which allows us to offer and sell, from time to time, up to $400.0 million of any combination of common stock, debt securities, warrants, rights and units. If we offer and sell any shares of common stock under the Form S-3, it would dilute the percentage ownership held by existing holders of our common stock.

Because we qualify as a “controlled company” under the corporate governance rules for publicly listed companies, we are not required to have a majority of our Board of Directors be independent under the applicable rules of Nasdaq, nor are we required to have a compensation committee or a corporate governance and nominating committee comprised entirely of independent directors. Our Board of Directors is permitted to not be composed of a majority of independent directors. We currently rely on the exemption to the requirement that our director nominations be made, or recommended to our full Board of Directors, by our independent directors or by a nominations committee that consists entirely of independent directors. Should the interests of Bain Capital L.P. or J.H. Whitney Capital Partners (collectively, our “Sponsors”) or their respective affiliates (the “Sponsor Affiliates”), who, as of DecemberJanuary 28,3, 2024,2026, collectively own 70.4%57.7% of our outstanding common stock, differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance rules for publicly listed companies. Our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.

The Sponsor Affiliates collectively own approximately 70.4% of our common stock as of December 28, 2024. Our Sponsors are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. One or both of our Sponsors may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. So long as our Sponsors, or funds controlled by or associated with our Sponsors, continue to own a significant amount of the outstanding shares of our common stock, even if such amount is less than 50%, our Sponsors will continue to be able to strongly influence us. Our Amended Charter provides that none of our Sponsors or any of their affiliates will have any duty to refrain from (i) engaging in a corporate opportunity in the same or similar lines of business in which we or our affiliates now engage or propose to engage or (ii) otherwise competing with us or our affiliates.

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. Our “fiscal year 2022” refers to the 52-week fiscal year ended on December 31, 2022.

The following table summarizes the revenues generated by each of our segments for the fiscal years ended January 3, 2026 and December 28, 2024 and December 30, 2023:

Private Duty Services predominantly includes private duty nursing services (“PDN Services”) services,, as well as pediatric therapy services.services Our(“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 ourPDN PDNServices patients to continue to receive our services into adulthood, as approximately 30% of our PDN Services patients are over the age of 18.

Our PDN servicesServices involve the provision of clinical and non-clinical hourly care to patients in their homes, which is the preferred setting for patient care. PDN servicesServices 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 fragilecomplex children and adults with a wide variety of serious illnesses and conditions. Patients who typically qualify for our PDN servicesServices include those with the following conditions:

Our PDN servicesServices include:

In-home skilled nursing services to medically fragilecomplex children and adults;

ThroughTherapy our pediatric therapy services, weServices 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. OurTherapy therapy servicesServices include physical, occupational and speech services. We regularly collaborate with physicians and other community healthcare providers, which allows us to provide more comprehensive care.

Our Home Health and Hospice segment predominantly includes home health services,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.

OurHH home health servicesServices involve the provision of in-home services to our patients by our clinicians, whowhich 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. OurHH home health servicesServices include: in-home skilled nursing services; physical, occupational and speech therapy; medical social services and aide services.

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 becauseas we believe it is a leading indicator of our growth. We measure home health admissions by reimbursement structure, separating them into home health episodic admissionsadmissions, which are reimbursed for a fixed duration of care (typically 30 days), and fee-for-service admissions (other admissions),admissions, which primarily follow a per-visit reimbursement model. This allows us to better understand the payerpayor mix of our home health business.

Fiscal Year Ended DecemberJanuary 28,3, 20242026 Compared to the Fiscal Year Ended December 30,28, 20232024

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

Represents the change in margin percentage yearperiod over year.period.

Represents home health episodic and fee-for-serviceother admissions.

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, as compared to an operating income of $8.1 million, or 0.4% of revenue, for the fiscal year ended December 30, 2023, an increase of $131.7$116.7 million.

The change in operating income for fiscal year 20242025 primarilywas resultedpositively fromimpacted theby $105.1an millionincrease inof non-cash impairment charges recorded during fiscal year 2023, and a $48.3$153.3 million, or 20.6%, increase54.2% in Field contribution as compared to fiscal year 2023.2024. The $48.3$153.3 million increase in Field contribution resulted from a $129.3$408.7 million, or 6.8%,20.2%, increase in consolidated revenue and a 1.6%3.9% improvement in Field contribution margin to 17.9% for fiscal year 2025 from 14.0% for fiscal year 2024 from 12.4% for fiscal year 2023.2024. The primary drivers of our higher Field contribution margin over the comparable fiscal year period was a 1.6%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 from 19.0% for fiscal year 2023.2024.

The $123.6following items primarily contributed to the $116.7 million decreaseincrease in netoperating lossincome over the comparable fiscal year periods, was primarily driven by the following:

the previously discussed $131.7$153.3 million increase in operatingField incomecontribution; and ana aggregate $15.7$3.4 million decrease in valuationother lossesoperating on interest rate derivatives and increase in net settlements received from interest rate derivative counterparties over the comparable periodsexpense; offset by a $20.5$37.9 million increase in incomecorporate tax expenseexpenses; and a $3.2$2.3 million increase in interestacquisition-related expense, net of interest income.costs.

athe $115.8previously million,discussed or$116.7 7.6%million increase in PDSoperating revenueincome;

a $0.8$366.5 million, or 0.4%, decrease in HHH revenue; and a $14.3 million, or 9.1%,22.4%, increase in MSPDS revenue.revenue;

Our PDS segment revenue growth of $115.8$366.5 million, or 7.6%,22.4%, for the fiscal year ended DecemberJanuary 28,3, 20242026 was attributable to an increase in volume of 4.4%11.0% and an increase in revenue rate of 3.2%.11.4%. The increase in PDS volume on a year over year basis was primarily attributable to growth in demand for non-clinical services.services and volume from the Thrive acquisition, which was completed on June 2, 2025.

The 3.2%11.4% increase in PDS revenue rate for the fiscal year ended DecemberJanuary 28,3, 2024,2026, as compared to the fiscal year ended December 30,28, 2023,2024, resulted primarily from the following: (i) reimbursement rate increases issued by various state Medicaid programs and managedManaged Medicaid payers; (ii) higher reimbursement rates associated with volumes attributed to the Thrive acquisition; and increases(iii) inimproved value-basedcollections payments,on offsetfully byreserved increasesaged in implicit price concessions.receivables.

Our MSHHH segment revenue growth of $14.3$30.8 million, or 9.1%,14.1%, for the fiscal year ended DecemberJanuary 28,3, 2024,2026 asresulted comparedprimarily to the fiscal year ended December 30, 2023, was attributable to 5.5% volume growth combined withfrom an increase in revenuetotal rateepisodes and an increase of 3.6%3.5% in home health revenue per completed episode due to improvements in patient mix over the comparable fiscal year period.

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, as compared to $1,299.8 million for the fiscal year ended December 30, 2023, an increase of $89.2$233.8 million, or 6.9%.16.8%. This increase resulted from the following segment activity:

a $12.5$13.0 million, or 10.9%,12.8%, decreaseincrease in HHH cost of revenue; and a $6.6$1.5 million, or 7.2%,1.6%, increase in MS cost of revenue.

The 8.7%18.4% increase in PDS cost of revenue for the fiscal year ended DecemberJanuary 28,3, 20242026 resulted from the previously described 4.4%11.0% increase in PDS volume for the fiscal year ended DecemberJanuary 28,3, 20242026 and a 4.3%7.4% increase in PDS cost of revenue rate. The 4.3%7.4% increase in cost of revenue rate primarily resulted from higher caregiver labor costs, including pass-through of reimbursement rate increases.increases and slightly higher general and professional liability expense over the comparable period.

The 10.9%12.8% decreaseincrease in HHH cost of revenue for the fiscal year ended DecemberJanuary 28,3, 20242026 was driven primarily by ahigher declinehome inhealth HHHtotal non-episodicepisodes volumesover andthe improvementscomparable in HHH caregiver utilization.period.

The 7.2%1.6% increase in MS cost of revenue for the fiscal year ended DecemberJanuary 28,3, 20242026 was driven primarily by the previously described 5.5% growth in MS volumes during fiscal year 2024 and a 1.7%2.7% increase in cost of revenue rate.rate, partially offset by a decline in volume of 1.1% over the comparable period.

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. “Fiscal year 2026” refers to the 52-week fiscal year ending on January 2, 2027. “Fiscal year 2025” refers to the 53-week fiscal year ended on January 3, 2026. The “three-month period ended AprilJuly 4, 2026”, or “firstsecond quarter of 2026” refers to the 13-week fiscal quarter ended on AprilJuly 4, 2026. The “three-month period ended MarchJune 29,28, 2025” or “firstsecond quarter of 2025” refers to the 13-week fiscal quarter ended on MarchJune 28, 2025. The "six-month period ended July 4, 2026", or "first six months of 2026", refers to the period from January 4, 2026 through July 4, 2026. The "six-month period ended June 28, 2025", or "first six months of 2025", refers to the period from December 29, 2024 through June 28, 2025.

The following table summarizes the revenues generated by each of our segments for the three-month periods ended AprilJuly 4, 2026 and MarchJune 29,28, 2025, respectively:

AgreementAcquisition to Acquireof Family First Homecare

On MarchJune 12,1, 2026, the Company announcedcompleted thatthe itacquisition had entered into a definitive agreement to acquireof 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.Carolina. The purchaseCompany pricepaid $173.7 million in cash as consideration, after customary adjustments for working capital and other items, funded with cash on hand. The operating results of Family First Holding, LLC subsequent to the acquisition isdate $175.5are millionincluded 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 SecuritizationPDS Facility.operating segment.

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-typically 30 days),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.

Three-Month Period Ended AprilJuly 4, 2026 Compared to the Three-Month Period Ended MarchJune 29,28, 2025