PACS Group, Inc.

Hello and welcome to PACS Group's first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After today's presentation and remarks, there will be an opportunity to ask questions. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, you may press star too. The call is being recorded, and a replay of the call will be available on the PACS Group's Investor Relations website about an hour after the completion of this call. I'd now like to turn the conference over to Derek Apt, Chief Financial Officer. Please go ahead.

Thank you, and good afternoon, everyone. Thank you for joining us for our first quarter 2024 earnings call. I'm joined today by Jason Murray, our chairman and CEO, and Josh Jergensen, president and COO. Before we begin the prepared remarks, we'd like to remind you that yesterday Pax Group issued a press release announcing its first quarter 2024 results. An investor presentation was published and is available on the investor relations section of pax.com. I'd also like to remind everyone that during the course of today's conference call, we'll discuss certain forward-looking information. Any forward-looking statements made today are based on management's current expectation, assumptions, and beliefs about our business and the environment in which we operate. These statements are subject to risk and uncertainties that could cause actual results to materially differ from those expressed or implied on today's call. In addition to any risk highlighted during this call, you should carefully consider other important risk factors and disclosures that may affect PACS Group's future results as described in our quarterly report on Form 10-Q for the period ended March 31, 2024. and are other reports filed with or furnished to the SEC. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for more complete discussion of factors that could impact our results. Expect, as required by federal securities law, PACS Group and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances, or for any other reason. Information discussed on this call concerning PACS Group's industry competitive position and the markets in which we operate is based on information from independent industry and research organizations. Other third-party sources and management estimates, which are derived from publicly available information released by independent industry analysts and other third-party sources, as well as data from PACS Group's internal research, and are based on reasonable assumptions and computations made upon reviewing such data. and our experience and knowledge of our industry and markets. By definition, assumptions are subject to uncertainties and risk, which could cause results to differ materially from those expressed in the estimates. During this call, we will discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA. These non-GAAP financial measures should be considered as a supplement to and not a substitute for measures period in accordance with GAAP. For reconciliation of non-GAAP financial measures discussed during this call to the most directly comparable GAAP measures, 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 PAX Group's website. I'll now turn the call over to Jason.

Yeah, thanks, Derek, and thank you all for attending. As many of you are aware, this is our first earnings call. We are very appreciative of those who have trusted in us and in our ability to execute on our mission as a company. We believe strongly in and are committed to our mission of delivering better post-acute clinical care across the country. We recognize the honor and privilege it is to take care of America's most vulnerable, and we take that responsibility very seriously. We're proud of the work our 34,000 employees across the country provide each day, and we're inspired by their commitment to quality and excellence. They are the foundation of our success. We had a very strong quarter, both clinically and financially, thanks to the hard work of our teams around the country. Our local leaders remain laser focused on our clinical measures and clinical outcomes, which have helped drive our overall performance. I'd like to share just a couple quick anecdotes that illustrate our facility's dedication to quality. First, in March of this year, our Santa Rosa post-acute facility in California had its first annual survey since early in the pandemic. They passed with zero regulatory deficiencies and a follow-up CMS survey confirmed those remarkable results. Additionally, Presidential Post-Acute in Marion, Ohio has now had three annual surveys in a row without a single deficiency and has gone almost five years with only one survey deficiency. As some of you may know, a zero-deficiency annual survey is a relatively rare achievement, and it's a testament to a lot of hard work and commitment by the staff. So we're very proud of the staff of Santa Rosa and Presidential and for the dedication they have to their residents. And so these are just a few of many examples throughout our company that point to the commitment of our teams to patient safety, clinical excellence, and operational integrity. Clinically, our teams continue to excel in caring for their residents. This is illustrated by 158 of our skilled nursing facilities having achieved a four or five star CMS quality measure rating. Our facilities and teams are always committed to working towards a five star quality rating. This kind of effort is the most important factor in our financial strength and revenue growth year over year of 32% or $226.5 million. Our revenue was driven higher by several factors when compared with the same quarter last year. In addition to increasing occupancy, we also saw revenue per patient day increases. For example, our average daily Medicare rates increased by 11% for the three months ended March 31st, 2024, compared to the first quarter of 2023. And our average Medicaid rates over the same time period increased 5.3% due to state reimbursement increases and our participation in supplemental Medicaid payment and quality improvement programs. Both increases come from our efforts to keep healthcare local by recognizing and serving patients' acuity needs locally. This also allows us to properly meet the continuing shift of higher acuity patients being discharged from acute care settings into skilled nursing facilities. Outlook for continued growth remains strong with a robust acquisition pipeline and continued improvement both clinically and financially in the operations we've recently acquired. As many of you know, the demographics remain strong for increased demand for skilled nursing care across the country. We'll continue to seek out the right facilities and the right markets for acquisition to expand our operational reach. And skilled nursing care represents approximately 43% of total CMS spending on post-acute care, and we're confident we can continue to play a vital role in our country's healthcare continuum. So next, as we turn to the CMS new minimum staffing rule, we support CMS's intent to enhance quality care for its seniors as it aligns directly with our mission as a company to provide better clinical outcomes to our patients across the country. However, we do share the sentiment, as many in the industry, that the rule in its current form presents a number of significant challenges to the industry, particularly for the many smaller providers who make up the majority of the nursing homes in our country. The way we see it, there are two major hurdles with the current staffing mandate that need to be overcome. First, there's a significant lack of caregivers to fulfill the workforce shortage within the skilled nursing sector. Data shows almost 250,000 nursing home workers left the industry during the pandemic, and while some have returned, the industry is still about 125,000 workers short. Second, without additional funding, the mandate will impose significant cost burden, which many providers will be unable to shoulder. In light of the legislative and other opposition to the new rule, we can't predict whether the new staffing requirements will, in fact, ultimately take effect in their current form. Our operating teams are planning for and taking the necessary steps to prepare. Keep in mind that the new minimum requirements are scheduled to take effect two to three years from now. So with that said, assuming the new rule is ultimately implemented in its current form, we believe we are in a good position as a company to adapt to the requirements. Due to our operating model and caring for so many higher acuity patients, the majority of our facility staff over the 3.48 nursing hours per patient day, which is a key metric adopted by CMS in the new rule. It's also worth noting that currently a significant number of our operations are in California, where existing minimum staffing requirements are in many ways already similar to the new federal rules. Turning to growth prospects, we are continually evaluating new markets where we feel our model will add value to the local healthcare system. Our leadership model allows us to be nimble and ensure we're prepared to flex and adapt in order to support expansion in existing and new markets while maintaining sound clinical care and business performance. To support future growth, we continue to focus efforts on a robust administrator and training program where we have a pool of talent ready to take on leadership roles at new facilities quickly. The IT program success includes roughly 200 PACs AITs hired since our founding. with 157 of those still employed with us in licensed administrator or other leadership positions, a retention rate of about 75%, which we're very proud of. And we currently at the moment have 35 AITs in our program to help facilitate further strengthening existing facilities and to support our growth. So in addition to training new leaders, the PACS leadership model allows our local leaders to make operational decisions as close to our patients and employees as possible, which is ultimately better for the residents and the communities in which they live. With support from PACS services, our back office clinical compliance and business support team, our teams are able to stay laser focused on providing quality clinical care while creating a culture that attracts the best employees to our sector. And PACS uses several technology and data-enabled resources that allow our clinicians and administrators to make decisions more quickly with a higher positive impact on our patient care. The real-time data guides our local teams to prioritize factors that in the end lead to more consistent clinical outcomes and better financial performance. So as we've been able to focus on improving key clinical and operational metrics, our overall CMS star rating has improved across the portfolio and readmissions back to the hospitals have declined. This has resulted in our ability to attract and care for higher acuity patients, which is reflected in our average skilled mix of 32.5% in our mature facilities in Q1 of 2024. So we look forward to the rest of 2024, the improvements we have planned, and the growth opportunities that we see. The quality of our people helps ensure we stay in strong business position moving forward. With that, I'll turn the call back over to Derek to cover our financial highlights for the quarter.