Pennant Group, Inc.PNTG
Pennant Group, Inc. Stock Compensation Disclosure
OPTIONS AND AWARDS
Outstanding options and restricted stock awards of the Company were granted under the Amended and Restated 2019 Omnibus Incentive Plan (the “Amended and Restated Plan”) and Long-Term Incentive Plan (the “LTIP”), (together referred to as the “Pennant Plans”). During the second quarter of 2025, the Company’s stockholders approved the Amended and Restated Plan, which increased the total number of shares authorized for issuance under the 2019 Omnibus Incentive Plan (the “Predecessor Plan”). Including the shares rolled over from the Predecessor Plan, the Amended and Restated Plan provides for the issuance of 3,293 shares of common stock.
Under the Pennant Plans, stock-based payment awards, including employee stock options, restricted stock awards (“RSA”), and restricted stock units (“RSU” and together with RSA, “Restricted Stock”) are issued based on estimated fair value. The following disclosures represent share-based compensation expense relating to employees of the Company’s subsidiaries and non-employee directors who have awards under the Pennant Plans.
Share-Based Compensation
The following disclosures represent share-based compensation expense relating to the Pennant Plans, including awards to employees of the Company’s subsidiaries.
Total share-based compensation expense for all of the Pennant Plans for the years ended December 31, 2025, 2024, and 2023 were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Share-based compensation expense related to stock options | $ | 6,778 | $ | 4,944 | $ | 3,945 | |||||||||||
| Share-based compensation expense related to Restricted Stock | 748 | 561 | 712 | ||||||||||||||
| Share-based compensation expense related to Restricted Stock to non-employee directors | 1,414 | 2,276 | 712 | ||||||||||||||
| Total share-based compensation | $ | 8,940 | $ | 7,781 | $ | 5,369 | |||||||||||
Income tax benefits related to the tax deductions for share-based awards are recognized only upon the settlement of the related share-based awards. Income tax benefits for share-based awards were $730, $1,429, and $6 for the years ended December 31, 2025, 2024, and 2023.
In future periods, the Company estimates it will recognize the following share-based compensation expense for unvested stock options and unvested Restricted Stock. Total unrecognized share-based compensation as of December 31, 2025 was as follows:
| Unrecognized Share-Based Compensation Expense | Weighted Average Recognition Period (in years) | ||||||||||
| Unvested stock options | $ | 23,745 | 3.8 | ||||||||
| Unvested Restricted Stock | 2,020 | 3.1 | |||||||||
| Total unrecognized share-based compensation expense | $ | 25,765 | |||||||||
There were no modifications of awards during the years ended December 31, 2025, 2024, and 2023.
Stock Options
Under the Pennant Plans, options granted to employees of the subsidiaries of Pennant generally vest over five years at 20% per year on the anniversary of the grant date. Options expire ten years after the date of grant.
The Company uses the Black-Scholes option-pricing model to determine the grant date fair value which is used to recognize the value of share-based compensation expense for share-based payment awards under the Pennant Plans. Determining the appropriate fair-value model and calculating the fair value of share-based awards at the grant date requires considerable judgment, including estimating stock price volatility and expected option life. The Company develops estimates based on historical data and market information, which can change significantly over time.
The fair value of each option is estimated on the grant date using a Black-Scholes option-pricing model with the following weighted average assumptions for stock options granted:
| Grant Year | Options Granted | Risk-Free Interest Rate | Expected Life(a) | Expected Volatility(b) | Dividend Yield | Weighted Average Fair Value of Options | ||||||||||||||||||||||||||||||||
| 2025 | 1,214 | 4.1 | % | 6.5 | 42.1 | % | — | % | $ | 13.52 | ||||||||||||||||||||||||||||
| 2024 | 850 | 4.3 | % | 6.5 | 42.6 | % | — | % | $ | 10.88 | ||||||||||||||||||||||||||||
| 2023 | 924 | 4.2 | % | 6.5 | 41.8 | % | — | % | $ | 6.59 | ||||||||||||||||||||||||||||
| (a) | Under the midpoint method, the expected option life is the midpoint between the contractual option life and the average vesting period for the options being granted. This resulted in an expected option life of 6.5 years for the options granted. | |||||||
| (b) | Because the Company’s equity shares have been traded for a relatively short period of time, expected volatility assumption was based on the volatility of related industry stocks. | |||||||
The following table represents the employee stock option activity during the year ended December 31, 2025:
Number of Options Outstanding | Weighted Average Exercise Price | Number of Options Vested | Weighted Average Exercise Price of Options Vested | ||||||||||||||||||||
| December 31, 2024 | 3,331 | $ | 20.01 | 1,367 | $ | 20.67 | |||||||||||||||||
| Granted | 1,214 | $ | 27.73 | ||||||||||||||||||||
| Exercised | (119) | $ | 12.19 | ||||||||||||||||||||
| Forfeited | (57) | $ | 22.17 | ||||||||||||||||||||
| Expired | (2) | $ | 26.22 | ||||||||||||||||||||
| December 31, 2025 | 4,367 | $ | 22.34 | 1,811 | $ | 21.44 | |||||||||||||||||
The aggregate intrinsic value of options outstanding, vested, unvested and exercised as of and for the years ended December 31, 2025, 2024, and 2023 is as follows:
| Year Ended December 31, | |||||||||||||||||
| Options | 2025 | 2024 | 2023 | ||||||||||||||
| Outstanding | $ | 32,493 | $ | 28,471 | $ | 3,776 | |||||||||||
| Vested | 16,747 | 12,103 | 2,699 | ||||||||||||||
| Unvested | 15,746 | 16,368 | 1,077 | ||||||||||||||
| Exercised | 1,746 | 3,500 | 577 | ||||||||||||||
The intrinsic value is calculated as the difference between the market value of the underlying common stock and the exercise price of the options. During 2025, 2024, and 2023, the aggregate fair value of options that vested was $5,312, $4,069, and $3,268, respectively. There were 2,556 unvested and outstanding options at December 31, 2025. The weighted average contractual life for options outstanding, vested and expected to vest at December 31, 2025 was 7.14 years.
Restricted Stock
Under the Pennant Plans, the Company granted Restricted Stock to Pennant employees, Ensign employees, and to non-employee directors. All awards generally vest between to five years. During 2025, 2024, and 2023, the aggregate fair value of restricted awards that vested was $2,797, $5,825, and $2,483, respectively. A summary of the status of Pennant’s non-vested Restricted Stock, and changes during the year ended December 31, 2025, is presented below:
| Non-Vested Restricted Awards | Weighted Average Grant Date Fair Value | ||||||||||
| December 31, 2024 | 152 | $ | 16.27 | ||||||||
| Granted | 89 | 25.05 | |||||||||
| Vested | (114) | 20.99 | |||||||||
| Forfeited | — | — | |||||||||
| December 31, 2025 | 127 | $ | 18.17 | ||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 23, 2023 | |
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.