PACS Group, Inc. Q3 FY2025 earnings call

• PACS is a leading post-acute health care company focused on delivering high-quality skilled nursing care through locally operated facilities. - Mission is to be the leading provider of post-acute clinical care across the country. - In 2024, completed 106 facility acquisitions, including 94 in the second half, with the largest being the Prestige portfolio adding 53 facilities. - In 2025, continued to deploy capital, acquired 7 additional facilities, and now has a portfolio of 35,202 total operating beds across 17 states. - 192 of its facilities, representing 68.6% of the skilled nursing portfolio, are rated 4 or 5 stars based on CMS quality measure star ratings. - An example of a facility in Colorado that was on the special focus facility list was turned around, graduating from the list and achieving a 4-star overall CMS rating. - Locally led, centrally supported model empowers local leaders to make day-to-day decisions while having regional and central support systems for resources, oversight, and regulatory expertise.

PACS Group is a leading post-acute health care company. In the third quarter of 2025, the company realized $1.3 billion of revenue, a 31% increase over the same period of the prior year. Adjusted EBITDAR for the third quarter was $226.6 million, while adjusted EBITDA was $131.5 million. Net income for the same period was $52.3 million, and diluted earnings per share for the quarter was $0.32. For the first 9 months ended September 30, 2025, total revenue was $3.9 billion, a 36% increase over the same period in 2024. Year-to-date adjusted EBITDAR was $646.2 million, adjusted EBITDA was $363.0 million, net income was $131.7 million, and diluted earnings per share through the first 3 quarters was $0.80. Total facility occupancy across the portfolio was 89% for the first 3 quarters of 2025. Mature facilities achieved 95% occupancy, up from 94% last year, with skilled mix increasing from 32% to 34% in 2025. Ramping facilities reported 86% occupancy and 23% skilled mix. New facilities ended the third quarter at 81% occupancy versus 83% in 2024, while skilled mix improved to 25% from 22% last year.

• Expect annual revenue to be between $5.25 billion and $5.35 billion in 2025, with the midpoint being a 30% increase over 2024 revenue. - For the full year 2025, expect adjusted EBITDA to be between $480 million and $490 million. - These are expected to be record results for the company.

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to materially differ from those expressed or implied. - Risks as described in the 2024 Form 10-K and other SEC filings may affect future results.

Q: Can you talk about the momentum in the business, occupancy and skilled mix opportunity in new and ramping facilities, and areas of disproportionate investment?

A: Josh Jergensen said that mature facilities have strong occupancy and skilled mix. It takes time to implement and deploy policies in new and ramping facilities, but they are expected to improve towards mature facility performance. Mark Hancock added that there is embedded potential for organic growth in the new bucket.

Q: What are the 1 or 2 changes you view as most impactful regarding controls?

A: Jason Murray said that strengthening compliance within the organization is a most impactful change, which supports the locally led and centrally supported model and ensures administrators make good decisions.

Q: About year-to-date cash flow generation and M&A pipeline?

A: Mark Hancock said cash provided by operations for the first 9 months was $407 million, and ended the quarter with over $355.7 million of cash and cash equivalents. Josh Jergensen said acquisitions were strategic with 7 acquired, and they would continue to be selective but excited to increase deals while staying disciplined.

Q: Regarding long-term growth algorithm and M&A?

A: Mark Hancock said the growth models are in line with current performance, and they have historically averaged around 20 facility acquisitions per year and will continue to be selective but opportunistic.

Q: About local market strategy and referral relationships through the audit process?

A: Jason Murray said the local led, centrally supported model has strong census numbers, indicating the provider of choice in markets, and relationships continue to be strong.

Q: About M&A targets and balancing turnaround opportunities?

A: Jason Murray said they use the same disciplined structure with an investment committee to vet deals, and will continue to take deep turnarounds in a disciplined manner.