PACS Group, Inc.

Greetings. Welcome to PACS Group fourth quarter full year 2025 earnings conference call. At 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, please press star and the number zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to Mark Hancock, Executive Vice Chairman, and Interim Chief Financial Officer. Thank you, and you may begin.

Thank you, and good afternoon, everyone. Thank you for joining us for our earnings call. Before we begin the prepared remarks, we would like to remind you that this afternoon, Pax Group issued a press release announcing its fourth quarter and full year 2025 results. An investor presentation was published and is available on the investor relations section of Pax.com. I'd like to remind everyone that during the course of today's conference call, we will discuss certain forward-looking information, including 2026 guidance for revenue and adjusted EBITDA that is based on our current expectations, assumptions, and beliefs about our business. Any forward-looking statements are subject to risk. 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 2025 Form 10-K 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 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 Murray.

Thanks, Mark, and thank you all for joining us today. Today marks a very important milestone for PACS as we report our fourth quarter and full year 2025 results. This filing reflects a full year of performance as a scale public company and highlights the significant progress we've made across the organization. We're especially proud to reach this point while delivering record performance. which is a testament to the strength of our platform, the dedication of our teams, and our continued focus on operational excellence. The past year required significant focus and discipline across the organization as we continued to scale following the transformative growth of 2024. As our footprint expanded, we enhanced our infrastructure, systems, and compliance structure to support a larger and more complex platform. We believe that work further positions PACs for sustainable growth as a public company. And as we enter 2026, we do so optimistically and expect a continued steady reporting cadence and discipline execution that defines our operating model. Operationally 2025 was defined by integration and performance. Following the transformative acquisition activity in 2024, our primary focus was successfully assimilating those facilities into the PACS operating model and driving measurable improvement across our expanded footprint. At the same time, we executed on eight additional strategic acquisitions in 2025, all within our existing markets, further increasing density and deepening local scale. At the center of our performance remains our locally led, centrally supported operating model. Our administrators and local leadership teams are empowered to make clinical and operational decisions closest to the patient where they matter most. At the same time, PAC Services provides the centralized support infrastructure, including accounting, compliance, HR, IT, and regulatory expertise. This structure allows our teams to remain laser-focused on patient outcomes. This coordinated structure allows us to move with agility at the bedside while maintaining consistency, discipline, and accountability across the company. From a clinical standpoint, we continue to see encouraging trends in quality ratings, occupancy, and skill mix across the portfolio. Our mature facilities are operating at strong occupancy levels and facilities acquired in 2024 continue progressing through integration and stabilization as they adopt our clinical systems and operating processes. We view this as a meaningful organic growth opportunity within our existing platform. As of December 31, 2025, PACS operates 321 facilities across 17 states, caring for more than 31,700 patients daily and supported by over 47,000 dedicated team members. The breadth of our platform provides geographic diversity, payer diversification, and leadership depth. Just as importantly, our continued investment in our administrator and training program, along with our regional leadership development, ensures that growth is supported by a strong and scalable bench of highly skilled operators. Capital allocation remained disciplined throughout the year. After a period of significant expansion in 2024, our focus in 2025 shifted toward optimizing the performance of those acquired assets while selectively increasing real estate ownership within our portfolio. Importantly, we maintain a strong balance sheet through this growth cycle, ending the year with net leverage of approximately 0.3 times. We believe this positioning enhances durability and flexibility as we look ahead allowing us to invest in organic initiatives, pursue selective acquisitions, and support long-term shareholder value without compromising financial strength. We also believe our positioning within the broader skilled nursing landscape remains compelling. Demographic trends continue to point towards sustained growth in the aging population and increasing demand for post-acute services. At the same time, the industry remains fragmented, and many facilities operated by smaller or independent providers We believe our scale, operating model, and strengthened infrastructure positions us to serve as a responsible consolidator over time while continuing to elevate quality across the communities we serve. As we look ahead to 2026, our priorities are clear. Continue integrating and optimizing our expanded portfolio, invest in our people and clinical capabilities, and allocate capital with discipline as we evaluate a robust pipeline of potential acquisition opportunities. We believe the foundation we built operationally, financially, and organizationally supports sustainable performance and long-term value creation. Most importantly, our confidence comes from our people. The dedication of our frontline caregivers, facility leaders, and PAC service teams drives our results every day. Their commitment to delivering high-quality care in every community we serve gives us strong conviction in the path forward. We continue to prioritize exceptional clinical outcomes across both our mature and newly integrated facilities. And that focus is reflected in our quality ratings across the portfolio. Based on CMS quality measure star ratings, 207 of our facilities, representing 73.4% of our skilled nursing portfolio, are rated four or five stars in CMS quality measure. For the full year 2025, our average CMS QM star rating in our mature facilities was 4.4. up from 4.3 in 2024 and meaningfully above the industry average of approximately 3.5. While one-tenth increase may not appear modest numerically, at this level of performance, we believe it represents measurable improvement in patient outcomes, clinical processes, and consistency of care across hundreds of facilities. These are not abstract statistics. They represent people. They represent better recovery rates, improved infection control, stronger care coordination, and ultimately better experience for our residents and families we serve. We view this sustained improvement as a meaningful indicator of the consistency of our operating model and the effectiveness of our clinical leadership at the local level. To bring this progress to life, we'd like to highlight a couple of examples that demonstrate how our teams execute at the facility level, whether through measurable improvements in CMS QM star ratings or zero-deficiency surveys. These examples reflect a broader pattern across our organization and reinforce the strength of our clinically-driven approach. One example is from one of our facilities in Kentucky. At the beginning of 2025, this facility held a two-star CMS quality measure rating. Rather than accept that as baseline, the local leadership team came together at the start of the year and set a clear objective, materially improve clinical performance and elevate the standard of care within the building. They began by analyzing each component that drives the CMS quality measure start calculation, identifying the areas where focused execution could have the greatest impact. From there, the team developed targeted action plans and accountability structures around those priorities. This was not a broad initiative. It was deliberate. data-driven and owned by the administrator and the interdisciplinary team on site. For example, to strengthen fault prevention and safety, the team identified residents at high risk, implemented structured rounding protocols, enhanced cross-department communication, and instituted daily, weekly, and monthly performance reviews to monitor progress and refine processes. Fault prevention became a constant topic of conversation throughout the facility. The same disciplined approach was applied to pressure ulcer prevention, mobility preservation, medication management, and discharge planning. The results reflected measurable improvement across multiple CMS quality measure star categories during the reporting period, including reduction in falls with major injury, pressure ulcers, and functional decline, along with meaningful improvement in discharge outcomes and medication management practices. By the end of 2025, this facility achieved a five-star CMS quality measure rating. moving from two stars to five stars within a single year. Importantly, this progress was driven by empowered local leadership, supported by the resources, reporting tools, and compliance infrastructure provided by PAC services. This is our model in action, local teams owning outcomes with the systems and support necessary to execute consistently and sustainably. A second example of execution across our platform is reflected in our survey performance. During 2025, we had a number of highly successful surveys across our portfolio with seven total zero deficiency surveys. In today's regulatory environment, particularly in skilled nursing, completing a standard survey with zero deficiency is a meaningful accomplishment. It reflects consistent compliance across clinical, operation, documentation, life safety, infection control, and interdisciplinary care coordination. These outcomes are not the result of isolated preparation for survey week. They are the product of disciplined systems, internal auditing, and leadership accountability embedded in our operating model. Zero-deficiency surveys signal strong regulatory execution, reduced compliance risk, and the culture that prioritizes quality and consistency every day. One example we would like to highlight is a facility located in Oceanside, California. This facility is a new build that received its certificate of occupancy in January 2024 and represents the first newly built ground up skilled nursing facility in San Diego County in many, many years. That alone reflects both the regulatory complexity of California and the level of commitment required to thoughtfully add new high quality capacity to a community. Before generating revenue, we invested meaningfully in licensing preparation, staffing, equipment, and clinical infrastructure to ensure the facility opened with a fully trained team and operational readiness from day one. In total, we deployed millions of dollars in spending pre-revenue as part of that commitment. In April 2025, this facility completed its initial certification survey with zero deficiencies, an outcome that speaks to the rigor of our preparation and the strength of our clinical systems. Since opening, census has steadily increased and the facility reached profitability within its first year of operation. In 2025 alone, this facility saw over 250 admissions from acute hospital partners across San Diego County, reflecting both clinical capability and growing trust within the local healthcare ecosystem. While acquisitions remain our primary growth strategy, we have now completed eight de novo projects since the inception of our company. Our facility in Oceanside reflects our long-term approach, invest ahead of revenue, build the team first, establish clinical excellence, and allow census and profitability to follow. The fact that this facility achieved a deficiency-free survey following new construction and licensure reinforces the effectiveness of our locally-led, centrally-supported model, even in newly-developed operations. Taken together, these outcomes reflect disciplined execution across our platform. Our operating model is intentionally structured to drive measurable improvement over time, and 2025 has provided clear evidence of that execution at scale. Whether newly developed, recently integrated, or long established, our facilities continue progressing across key clinical and regulatory metrics, including CMS QM star ratings, survey performance, and quality measures. reinforcing our belief that disciplined local leadership supported by PAC services produces sustained results. We believe our performance in 2025 reflects both sustained operational strength and the continued evolution of a significantly expanded platform. Over the last 15 months, we have integrated a substantial number of facilities acquired in 2024, strengthened our density and key markets, and continued delivering high occupancy and clinical consistency across our mature portfolio. At the same time, we've continued enhancing our systems and processes to support a larger and more complex organization, reinforcing the foundation required to operate at scale as a public company. Consistent with that disciplined approach, during 2025, we deployed capital selectively, completing the acquisition of eight additional facilities, all within existing markets where we believe we have strong operational infrastructure and leadership support. Today, our portfolio includes 35,379 total operating beds, which 32,854 skilled nursing beds and 2,525 are assisted living beds, which span across 17 states, reflecting a scaled and geographically diversified footprint. Portfolio performance remains strong. Total occupancy stands at 89.1%, with our mature facilities delivering exceptional 94.9% occupancy up from 94.4% last year. Within our cohort framework, facilities are categorized as new during their first 18 months under our ownership and as ramping from months 19 through 36 as they progress toward mature status. Occupancy within these cohorts reflects the continued integration and stabilization of facilities acquired over the past several years. A number of those acquisitions entered our portfolio at materially depressed occupancy levels, often representing communities where others were unwilling or unable to invest the operational focus required to improve performance. We act opportunistically in those situations, confident in our ability to apply the PACS operating model, strengthen clinical execution, and rebuild trust within the local healthcare ecosystem. As those facilities continue integrating and advancing toward mature status, we expect steady improvement in occupancy and skilled mix over time. Our locally led, centrally supported model remains foundational to driving occupancy and clinical performance. By matching patient acuity with the appropriate clinical capabilities at each facility, our teams are well positioned to meet the increasing complexity of patients being discharged from acute settings. As hospitals continue to rely on skilled nursing providers to manage higher acuity populations, we believe our structure and scale position us to serve as a trusted partner in that continuum. A critical component of sustaining this performance is leadership development. Through our administrator in training or AIT program, we continue building a scalable bench of highly skilled operators prepared to step into leadership roles across both existing and newly acquired facilities. We currently have 38 AITs in the program. reinforcing our ability to integrate acquisitions efficiently and maintain operational continuity as we grow. Importantly, we have strong retention within this program, and many of our AITs go on to serve as licensed administrators, regional vice presidents, and in other senior leadership positions with impacts. This consistent investment in leadership depth remains a key differentiator in our model. Now, as we close 2025 and look ahead to 2026, we do so with confidence and momentum. We believe the integration work of this past year, the clinical progress across our portfolio, and the strength of our balance sheet collectively position us well for the next phase of growth. In January, we announced the acquisition of three additional facilities, two in Alaska and one in Idaho, including the purchase of the underlying real estate for the two Alaska properties. We view these transactions as a continuation of our disciplined growth strategy, expanding within markets we understand while selectively increasing real estate ownership in a manner that strengthens long-term alignment and financial flexibility. With a fully integrated platform, a strong capital position, and a return to a normal reporting cadence, we believe we are well positioned to execute consistently and thoughtfully in 2026. The depth, resilience, and commitment of our people continue to give us a competitive advantage that cannot be easily replicated. So with that, I'll now turn the call back to Mark to walk through our financial results and guidance in more detail. Thank you, Jason.