PACS Group, Inc.

Hello and welcome to PACS Group's second quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After today's presentation, there will be an opportunity to ask questions. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. Speakers on today's call are Jason Murray, Pax Group's Chief Executive Officer, Carey Hendrickson, Chief Financial Officer, Josh Jergensen, President and Chief Operating Officer, and Ryan Welch, Director of Corporate Finance. The call today is being recorded and a replay of the call will be available on the Pax Group Investor Relations website an hour after the completion of this call. A replay of the webcast will be available for 30 days. Information to access the replay is listed in yesterday's press release, which is available on our website under the Investor Relations section. Before we begin, I would like to remind everyone that during today's call, we'll be making forward-looking statements regarding future events and financial performance. I'd now like to turn the conference over to Ryan Welch, Director of Corporate Finance. Please go ahead.

Thank you and good morning, everyone. Thank you for joining us for our earnings call. Before we begin the prepared remarks, we would like to remind you that yesterday, Pax Group issued a press release announcing its second quarter 2026 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 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 10-K for the year ended December 31, 2025 and our other SEC violence. During this call, we will discuss certain non-GAAP financial measures, including adjusted net income, adjusted earnings per share, 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.

Thanks Ryan and thanks everyone for joining us this morning. We're pleased to report another strong quarter for PACS and to close out the first half of 2026 with continued momentum across the organization. Building on the strong start we delivered in the first quarter, our second quarter results reflect the sustainability of our operating model, the continued execution of our teams, and the meaningful progress we're seeing across facilities at every stage of our maturity cohorts. Throughout the first half of the year, our teams remain focused on strengthening performance across the existing portfolio, advancing recently acquired facilities toward mature operating levels and continuing to invest in the people and infrastructure required to support our growth. That focus is showing up in our results. Our existing portfolio continues to perform very well. Quality outcomes are improving and the strength of our leadership bench and balance sheet is allowing us to pursue the next phase of growth from a position of strength. Revenue increased 9.1% in the second quarter, while adjusted EBITDA grew 25% compared to the prior year. That relationship is important because it demonstrates that the growth we are generating is translating into meaningful margin improvement as our facilities mature, occupancy increases, patient mix strengthens, and our teams continue to operate with discipline. Just as importantly, the performance this quarter was driven by the existing portfolio. Our same-store facilities delivered revenue growth of 5.8%, while same store occupancy increased by 150 basis points. Across the broader portfolio, overall occupancy increased by 180 basis points and skilled mix improved by 100 basis points compared to 2025. We believe these results provide continued evidence of the organic growth embedded within our portfolio and the strength of our locally led, centrally supported operating model. At the June 30th, PACS operated 324 healthcare facilities across 17 states with 35,631 total beds, including 32,790 skilled nursing beds and 2,841 assisted living beds. Across this platform, our teams care for more than 31,900 patients each day, supported by approximately 48,000 employees. Our scale provides meaningful geographic diversity, leadership depth, and access to clinical and operational resources. However, we believe the more important differentiator is how that scale is organized. Healthcare is local. Our administrators and facility leadership teams are empowered to make decisions closest to the patient where they can have the greatest impact. PACS services and our regional teams provide the technology, systems, and clinical resources, compliance framework, and administrative support that allow these local leaders to operate effectively and consistently. This structure enables PACS to retain the responsiveness and accountability of a locally operated healthcare organization while benefiting from the infrastructure and resources of a scaled national platform. Across the portfolio, facilities continue to progress through our integration lifecycle. At the end of the quarter, our skilled nursing portfolio included 184 mature facilities, 100 ramping facilities, and six new facilities. This mix reflects the significant progress we've made integrating the facilities acquired during our 2024 expansion. As facilities gain tenure within the PACS model, our local and regional teams remain focused on strengthening leadership, implementing our clinical and operating systems, and building trusted relationships within their healthcare communities. We continue to believe that this progression represents an important source of organic growth within our existing portfolio and demonstrates the scalability of our operating model. We are also encouraged by the continued improvement in quality across our facilities. At the end of the second quarter, 239, or 83.6% of our skilled nursing facilities with reported CMS quality measure ratings were rated four or five stars. Our mature facilities achieved an average CMS quality measure rating of 4.5, meaningfully above the industry average of 3.7. We are proud of these important clinical measures, which are the product of the disciplined execution of our caregivers, administrators, and clinical leaders and regional teams every day. We believe these results distinguish PACS as a leader in clinical quality and reinforce our long-held view that delivering exceptional patient outcomes is not separate from financial success. It is one of the primary drivers. When a facility delivers strong clinical outcomes, it builds trust with hospitals, payers, patients, and families. That trust supports admissions, occupancy, patient mix, and ultimately the long-term financial performance of the facility. We believe this creates a virtuous cycle centered on delivering excellent care. To bring that model to life, I'd like to highlight the progress made at one of our facilities in California. PACS acquired this large skilled nursing facility while it was already designated as a special focus facility. a designation reserved for nursing homes with a history of significant quality concerns and regulatory noncompliance. The facility's regulatory history and special focus designation were significant enough that many potential operators chose not to pursue what was otherwise a highly attractive portfolio transaction. PACS viewed the opportunity differently. We believe our operating model is uniquely designed to improve clinically and operationally challenged facilities, allowing us to pursue opportunities that others often cannot. We recognize both the challenge and the importance of preserving access to care for a uniquely vulnerable patient population, and we committed the resources necessary to execute a long-term turnaround. The facility is specifically designated to serve behavioral health patients and includes a fully secured unit, allowing it to care for some of the most fragile and clinically complex patients in the community. Many residents live with serious mental illness. only a small percentage of active family involvement and many entered the facility following periods of housing instability or homelessness. The facility had experienced years of operational instability, repeated leadership turnover, and an extensive history of regulatory deficiencies prior to our acquisition. While meaningful improvements have been made over time, it had been unable to demonstrate the sustained performance necessary to graduate from the special focus facility program. The severity of the situation became clear in March of 2025 when the facility received written notice of the potential termination of its Medicare and Medi-Cal provider agreements. At one point, CMS communicated in writing its intent to decertify the facility, underscoring both the seriousness of the challenges and the amount of work that still remained. Such an action would have displaced more than 250 highly vulnerable residents and created significant uncertainty for the facility's more than 500 employees. Rather than stepping back, the local leadership team supported by PAC Services intensified its efforts with a clear objective, elevate the quality of care, create organizational stability, preserve this critical community resource, and successfully graduate the facility from the special focus facility program. The turnaround required more than new procedures. It required a fundamental cultural transformation. The leadership team aligned employees around a shared purpose, established clear expectations, reinforced accountability and committed to delivering consistent, high-quality care across every department. With close support from the clinical, operational, and regulatory expertise of PAC Services and through ongoing collaboration with CMS and the California Department of Public Health and other technical assistance partners, the team strengthened systems, processes, and clinical outcomes across the organization. Those efforts culminated on June 29, 2026, when the facility successfully graduated from the Special Focus Facility Program. This outcome represents far more than a regulatory milestone. It reflects years of commitment from local caregivers and PAC support teams who refused to accept that the facility's challenges were insurmountable. Most importantly, it preserves continuity of care in a highly vulnerable resident population and protected an essential healthcare resource within the community. We believe this example reflects what our model is designed to accomplish. step into difficult situations, establish strong local leadership, provide the necessary clinical and operational support, create accountability throughout the organization, and drive sustainable improvement over time. We are proud of the facility's team and grateful for the discipline, resilience, and commitment they demonstrated throughout the process. The strength of our operating platform and leadership bench also gives us confidence as we return to a more active period of acquisition growth. As previously announced, PACS entered into a definitive agreement to acquire the operations of 34 skilled nursing facilities from Aduro Healthcare. The portfolio includes 3,633 skilled nursing beds across Texas, Montana, South Dakota, North Dakota, New Mexico, and Utah. On August 1st, we closed on the operations of the first 20 facilities in Texas. We currently expect the remaining facilities to close during the third and fourth quarters. The transaction adds significant density in Texas where we can leverage established regional leadership, clinical resources, and referral relationships and operating infrastructure. It also expands our presence across several existing and adjacent markets and creates an opportunity to apply the PACS operating model across a meaningful group of facilities. Our acquisition strategy remains highly disciplined. We focus on opportunities where we can recruit and deploy strong local teams, invest in operational excellence, improve clinical quality, and create meaningful long-term value through the support and resources of PAC services. We believe this transaction is consistent with that approach and provides an opportunity to create additional clinical and financial value over time. Our existing portfolio remains the primary driver of our earnings growth. The strength of that performance together with our leadership depth and operating capabilities positions us to pursue disciplined acquisitions that can create additional clinical and financial value over time. Before I turn the call over, I'd like 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're unable to estimate the timing of resolution, we remain confident in our ability to navigate these matters responsibly and thoughtfully, just as we have navigated other challenges throughout our history. Importantly, the investments we've made to strengthen our organization, enhance our infrastructure, and reinforce our compliance and reporting processes have positioned the company well for the future. Our focus remains squarely on executing our strategy, supporting our local leaders and caregivers in delivering high-quality care while continuing to build value for our stakeholders. With that, I'll turn the call over to Kerry.