PACS Group, Inc.PACS
PACS Group, Inc. Stock Compensation Disclosure
STOCK AWARDS
Stock-based compensation expense consists of stock-based payment awards made to employees and directors, comprised of restricted stock units, based on their estimated fair values. Stock-based compensation expense recognized in
the Company’s combined/consolidated statements of income for the years ended December 31, 2025, 2024, and 2023 was based on the vesting of awards granted to date.
2024 Incentive Award Plan (2024 Plan)
The 2024 Plan allows the Company to make equity-based and cash-based incentive awards to its officers, employees, directors and consultants. The number of shares initially available for issuance under awards granted pursuant to the 2024 Plan (which number includes 15,390,579 shares of common stock issuable upon the vesting of restricted stock unit (RSU) awards granted in connection with the IPO) was equal to 10.25% of the number of shares of common stock outstanding immediately following the completion of the IPO (disregarding the shares issuable under the 2024 Plan). The number of shares available for issuance under the 2024 Plan increases annually on the first day of the year by an amount equal to up to 2% of the aggregate number of shares outstanding on the final day of the immediately preceding calendar year. As of December 31, 2025, the total number of shares available for issuance under the 2024 Plan was 4,552,426.
2024 Employee Stock Purchase Plan (2024 ESPP)
The number of shares initially available for issuance pursuant to the 2024 ESPP (which number included 1,501,520 shares of common stock issuable pursuant to rights granted under the plan) was equal to 1% of the number of shares of common stock outstanding immediately following the completion of the IPO (disregarding the shares issuable under the 2024 Plan). The number of shares available for issuance under the 2024 ESPP increases annually on the first day of the year by an amount equal to up to 1% of the aggregate number of shares outstanding on the final day of the immediately preceding calendar year. As of December 31, 2025 the total number of shares available for issuance under the 2024 ESPP was 3,053,295.
Restricted Stock Unit Awards
Pursuant to the 2024 Plan, the Company granted 3,362,538 and 15,409,470 RSU awards during the years ended December 31, 2025 and 2024, respectively. Awards granted to key executives at the time of the IPO vested 25% upon issuance with the remaining shares scheduled to vest in equal increments on an annual basis over the next five years. All other awards generally vest in equal increments on an annual basis over three years as the grantees meet the requisite service condition. These awards granted used the market price on the date of the respective grant date to determine the award fair value. The fair value per share of RSU awards granted during the years ended December 31, 2025 and 2024 ranged from $13.72 to $36.37 and from $21.00 to $24.85, respectively.
A summary of the status of the Company’s non-vested RSU awards for the years ended December 31, 2025 and 2024 is presented below (there was no such activity prior to the approval of the 2024 Plan, including in 2023):
| Non-Vested Restricted Stock Unit Awards | Weighted Average Grant Date Fair Value | ||||||||||
| Non-vested at January 1, 2024 | — | $ | — | ||||||||
| Granted | 15,409,470 | 21.00 | |||||||||
| Vested | (3,847,652) | 21.00 | |||||||||
| Forfeited | — | — | |||||||||
| Non-vested at December 31, 2024 | 11,561,818 | $ | 21.01 | ||||||||
| Granted | 3,362,538 | 21.79 | |||||||||
| Vested | (2,325,126) | 21.03 | |||||||||
| Forfeited | (2,342,935) | 20.38 | |||||||||
| Non-vested at December 31, 2025 | 10,256,295 | $ | 21.40 | ||||||||
During the year ended December 31, 2025, the Company granted 13,197 RSU awards to non-employee directors for their service on the Company’s board of directors from the 2024 Plan. The fair value per share of these awards were $36.37 based on the market price on the grant date.
During the year ended December 31, 2025 and 2024, the aggregate fair value of RSU awards that vested was $21,642 and $92,882, respectively. The number of RSU awards vested includes shares of common stock that the Company withheld on behalf of employees to satisfy statutory tax withholding requirements.
Stock-based compensation expense
Stock-based compensation expense recognized during the years ended December 31, 2025 and 2024 for the Company’s equity incentive plans was $54,069 and $115,544, respectively.
In future periods, the Company expects to recognize $176,719 in stock-based compensation expense for unvested RSU awards that were outstanding as of December 31, 2025. Future stock-based compensation expense will be recognized over 2.96 weighted average years for unvested RSU awards.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.