PACS Group (NYSE:PACS) reported first-quarter financial results on Tuesday. The transcript from the company’s first-quarter earnings call has been provided below.
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The full earnings call is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=d7NGTHuZ
Summary
PACS Group reported Q1 2026 revenue of $1.42 billion, an 11% increase year-over-year, with a net income of $80.7 million, reflecting a significant growth from the previous year.
The company operates 323 facilities across 17 states with a focus on operational consistency and strategic growth through integration and capital allocation.
PACS Group increased its adjusted EBITDA guidance for 2026 to $605 million-$625 million, driven by strong performance, and removed assumptions for future acquisitions from its guidance.
Operational highlights include high occupancy rates, improved clinical outcomes, and strategic hiring through its administrator training program to support growth.
Management emphasized ongoing investments in leadership development and infrastructure, with a focus on maintaining high-quality care and strategic acquisitions.
Full Transcript
OPERATOR
Greetings and welcome to the PACS Group Q1 2026 earnings call. this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, press Star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ryan Welch, Director of Corporate Finance. Thank you. You may begin.
Ryan Welch (Director of Corporate Finance)
Thank you and good morning everyone. Thank you for joining us for our conference call. Before we begin the prepared remarks, we would like to remind you that yesterday PAX Group issued a press Release announcing its first quarter 2026 results. An investor presentation was published and is available on the Investor relations section of PACSGroup.com I’d also like to remind everyone that during the course of today’s conference call we will discuss certain forward looking information, including Our expectations for 2026 Revenue and adjusted EBITDA that is based on our current expectations, assumptions and beliefs about our business. Any forward looking statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied. On today’s call, you should carefully consider the risk factors that may affect our future results as described in our annual report on Form 10K for the year ended December 31, 2025 and our other SEC filings. During this call we will discuss certain non GAAP financial measures, including adjusted ebitda, Adjusted EBITDAR and Net Leverage. These non GAAP financial measures should be considered as a supplement to, and not a substitute for measures prepared in accordance with GAAP. For a reconciliation of non GAAP financial measures discussed during this call to the most directly comparable GAAP measure, please refer to the Earnings release and the appendix included in the investor presentation, which are both published and available on the Investor Relations section of PACS Group’s website. I’ll now turn the call over to Jason Murray, Chairman and CEO.
Jason Murray (Chairman and CEO)
Thanks Ryan and thank you all for joining us this morning. We’re very pleased to report a strong start to 2026 with continued operational consistency across our platform and measurable progress across the facilities we’ve integrated over the past several years. Our performance this quarter reflects both the durability of our operating model and the continued execution of our teams across the organization, as well as the strength of the foundation we built throughout 2025. As we enter 2026, our priorities remain consistent drive performance across our existing portfolio, continue advancing facilities through their integration, life cycle and and allocate capital in a disciplined manner. We are seeing that play out across the platform as of March 31, 2026, PACS operates 323 facilities across 17 states with approximately 35,500 total beds, including roughly 32,700 skilled nursing beds and 2,700 assisted living beds. Across this platform, we are caring for approximately 31,900 patients daily. We believe the scale and geographic diversity of our platform combined with the consistency of our operating model position us to deliver reliable performance while continuing to grow thoughtfully over time. In addition, our density within key markets continues to improve, allowing us to leverage local leadership, clinical resources and referral relationships more effectively as we scale. We believe this localized scale is an important driver of both operational consistency and long term growth. Our mature facilities continue to operate at high levels of occupancy and clinical consistency, providing a stable base of strong performance. While our ramping facilities are progressing as expected as they adopt PACS, clinical systems and operating processes and move toward mature levels of occupancy and skilled mix. We continue to view this progression from new to ramping to mature as a meaningful and embedded source of organic growth within our existing portfolio. We recognize that there has been ongoing discussion around managed care providers potentially reducing admissions into skilled nursing facilities. While we continue to monitor the evolving landscape closely, we have not seen those concerns impact our business and our operating metrics. Admission trends and skill mix, which includes managed care, remain very strong across the portfolio as evidenced in our first quarter results. More importantly, we believe high quality operators with strong clinical outcomes, reliable discharge partnerships and proven patient care capabilities will continue to play an essential role in the post acute continuum. Our focus on quality and execution positions us well to continue earning the trust of hospitals, payers, patients and families regardless of broader market noise. From a clinical perspective, we remain encouraged by the consistency of outcomes across our facilities. As of the end of the first quarter, 222 of our facilities are rated 4 or 5 stars under CMS Quality Measure ratings, up from 207 at the end of 2025. Among our mature facilities, our average CMS Quality Measure star rating remains 4.4, consistent with the prior quarter and meaningfully above the industry average of 3.6. While these improvements may appear incremental at this level of performance, we believe they reflect continued consistency and clinical execution, patient outcomes and operational discipline across a large and growing platform. At the center of that performance remains our locally led, centrally supported model. Our facility leaders are empowered to make decisions at the point of care where they can have the greatest impact on patient outcomes, while PAC Services provides the infrastructure, systems and support necessary to drive consistency, accountability and compliance across a growing and increasingly complex organization. We believe this structure allows us to deliver both strong and repeatable results even as we continue to scale the platform. A key component of sustaining this performance is our investment in leadership development. Through our administrator and training program, we continue to build a scalable bench of operators prepared to step into leadership roles across both existing and newly acquired facilities. We currently have 40 AITs in the program, which we believe is an important indicator of our ability to integrate facilities effectively and maintain operational continuity as we grow. Just as importantly, that investment ensures we have the right leadership in place when facilities required focused operational and clinical improvement across our portfolio. We continue to see examples of how disciplined leadership supported by our operating model can drive meaningful improvement in both clinical and financial performance over relatively short periods of time. To bring that to life, I’d like to highlight one of our facilities in Arizona. This facility was acquired in 2023 and entered our portfolio with significant operational and clinical challenges. Subsequently, the facility was designated as a Special Focus Facility. After failing a Special Focus survey with more than 20 deficiencies including high severity findings, new administrative and clinical leadership was put in place supported by additional pacs clinical resources and PACS services, and the team implemented targeted changes across key areas of clinical performance and operational execution. Importantly, this required more than process changes. It required a fundamental shift in culture. The team moved from reacting to deficiencies to owning outcomes with a clear focus on accountability, consistency and system level improvement. The results have been significant. In subsequent surveys, deficiencies were reduced to fewer than five, all within acceptable thresholds under the Special Focus Program requirements. As a result of that progress, the facility has now successfully graduated from the Special Focus Facility program. At the same time, the facility has maintained occupancy above 90% and continues to demonstrate improving financial and clinical performance. We believe this example reflects what our model is designed to do identify operational opportunities, install strong local leadership supported by PAC services, and drive measurable improvement over time. Stepping back, we believe the performance we are seeing across the platform reflects the continued maturation of a significantly expanded portfolio combined with ongoing investment in our people, systems and infrastructure. We also believe our positioning within the broader skilled nursing landscape remains compelling. Demographic trends continue to support long term demand and the industry remains highly fragmented, which we believe creates opportunities for operators with scale, clinical capability and disciplined execution. As we look ahead, we remain focused on continuing to drive performance within our existing portfolio, advancing our facilities through the integration life cycle and allocating capital in a disciplined manner. I’d like to take a moment to briefly address our previously disclosed government investigations. These matters continue to progress through the normal course and we remain fully cooperative and engaged with the government throughout the process. While we were unable to estimate the timing of resolution at this stage, we are confident in our ability to navigate these matters responsibly and thoughtfully, just as we have navigated other challenges throughout our company’s history. Importantly, we believe the work we have done to strengthen our organization, enhance our infrastructure, and reinforce our compliance and reporting processes has positioned the company well for the future. Our focus remains firmly on executing our strategy, supporting our local leaders and caregivers, and continuing to build a stronger, more
Carey Hendrickson
resilient organization for the long term. Before Turn the call over, I’d like to take a moment to address the leadership transition we announced a few weeks ago. We’re excited to welcome Carey Hendrickson, our new Chief Financial Officer. Carey brings a strong background in healthcare and many years of experience as a public company CFO. We are confident he will play an important role as we continue to scale the organization. At the same time, I want to recognize and thank Mark Hancock, our co founder and longtime CFO who will be retiring from his role. Mark and I started the company in 2013 with a shared vision which was to build a lasting healthcare organization that delivers high quality care, supports the people doing the work every day, and create long term value across the communities we serve. What we’ve built since then is a direct reflection of that vision and of Mark’s leadership. From the early days of the company through the growth and scale we see today, Mark has been instrumental in shaping not just the financial foundation of PACs, but the culture, the discipline and the long term mindset that define how we operate. On a personal level, I’m incredibly grateful for the partnership Mark and I have had over the years and for the role Mark has played in building PACs into what it is today. With that, I’ll turn it over for Mark for a few words. Thanks Jason. It’s truly been an incredible journey building PACs over the past many years and I’m very proud of what this team has accomplished. When we first started this company in 2013, our goal was to build a legacy healthcare company that provided a better experience for everyone involved. Something within durable foundational strength that would last far beyond mine or anyone’s respective individual involvement. An organization focused on delivering high quality care, supporting our teams and making a meaningful difference in the community that we serve. It’s been rewarding to see that vision take shape and continue to grow over that time. What stands out the most to me is the people. The strength of pacs has always come from the individuals across the organization who show up every day focused on doing the right thing for patients and for each other. That’s what has allowed this company to scale while maintaining consistency and discipline. I’m confident that PAX is well positioned for continued success. The foundation is strong, the leadership team is in place and I have full confidence in Kerry as he steps into the CFO role. I’m truly grateful for the opportunity to have been a part of the day to day journey and look forward to continuing to work with PAC’s board of directors as Vice Chairman. Strong governance, risk management, financial oversight and strategy are all critically important to me for creating shareholder value that is sustainable over the long term. With that, I’ll turn it over to Kerry. Thank you Mark. I appreciate the opportunity to step into this role and build on the strong financial foundation that’s been established. One of the things that attracted me to PACSs was the strength of the operating platform and the consistency of outstanding execution and and that certainly played out in the first quarter. For the first quarter of 2026 our revenue was $1.42 billion representing 11% growth year over year. Our net income totaled $80.7 million, an increase of $52.3 million from $28.5 million in the first quarter of last year. Our adjusted EBITDA was $170.4 million which was an increase of $72.8 million, were 75% over the prior year and our adjusted EBITDAR was $265.9 million and diluted earnings per share for the quarter was $0.50 up from $0.17 in the prior year. Truly outstanding performance in the first quarter. That performance in the first quarter reflects our continued strength across our portfolio driven by stable occupancy, improving skilled mix and continue to press progression across our ramping facilities. Importantly, we saw consistent execution across both our mature and our recently integrated operations. Adjusted EBITDA for the quarter included approximately $16.3 million of net EBITDA benefit from payments that we received under California’s Workforce and Quality Incentive Program or WQIP quip, which is a direct result of the outstanding performance of our facilities in California. W EQUIP is a performance based program focused on quality of care, workforce investment and health outcomes. Even excluding this WQIP benefit, our adjusted EBITDA increased $57 million year over year in the first quarter of the prior year. These payments were not included in our original guidance due to the uncertainty around the timing and the amount As a reminder, as it currently stands, the WIP program has been discontinued as of the end of 2025. The payment we received in the first quarter of 2026 was the last payment related to the 2024 program year. We expect two additional payments tied to the 2025 program year, with at least one of those anticipated to be received sometime in 2026 and then the other payment expected in late 26 or early 27. Again, due to the uncertainty and timing and the amount, the WQIP payments we received in 1Q26 were not included in our original guidance and will continue to treat these future expected payments in the same way, excluding them from guidance. While it remains unclear whether WQIP will be continued to replace, we, along with others in the State of California, are actively advocating for a successor program that aligns reimbursement with quality. You notice in the release that we included same store metrics for the first time, which we believe will provide additional insight into the underlying health of the business and it will further highlight the consistency of our operating performance on a same store basis, which includes 284 skilled nursing facilities in operations since the beginning of 2025. Our revenue increased 8% year over year in the first quarter. This growth was driven by occupancy improvement from 89.6% to 90.8% along with gains in skilled mix across both revenue and patient days. Total occupancy for all facilities for the quarter was 90.9% compared to 89.2% the prior year and continuing to significantly outPACSe …
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