PACS

Image source: The Motley Fool. Wednesday, Aug. 5, 2026 at 11:30 a.m. ET Chairman and Chief Executive Officer - Jason Murray Chief Financial Officer - Carey Hendrickson President and Chief Operating Officer - Josh Jergensen Director of Corporate Finance - Ryan Welch Operator: Hello, and welcome to PACS Group's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Speakers on today's call are Jason Murray, PACS 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 PACS 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. Ryan Welch: 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, PACS 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 pacs.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 filings. 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. Jason Murray: 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. As of June 30, 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 life cycle. At the end of the quarter, our skilled nursing portfolio included 184 mature facilities, 100 ramping facilities and 6 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 4 or 5 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 have 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 PACS 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 PACS 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 PACS 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 facilities 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 Eduro Healthcare. The portfolio includes 3,633 skilled nursing beds across Texas, Montana, South Dakota, North Dakota, New Mexico and Utah. On August 1, 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 PACS 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 and delivering high-quality care while continuing to build value for our stakeholders. With that, I'll turn the call over to Carey. Carey Hendrickson: Thank you, Jason. We're very pleased with our second quarter performance and the strong momentum we've maintained throughout the first half of 2026. And importantly, we expect to sustain that momentum through the rest of the year. The consistency of our results reflects the strength of the PACS platform, the disciplined execution of our operations team and the meaningful earnings potential embedded across our portfolio. Our second quarter results demonstrate continued operational improvement across our existing portfolio, with strong revenue growth translating into meaningful earnings growth and margin expansion. For the second quarter of 2026, our revenue was $1.43 billion, which was an increase of $118.8 million or 9.1% growth year-over-year. Our net income was $76.4 million, an increase of $25.4 million or 50% from the second quarter of last year. Our adjusted EBITDA was $166.8 million, up $32.9 million or 25% from last year, and our adjusted EBITDAR was $261.5 million. Our adjusted EBITDA margin expanded by 150 basis points year-over-year from 10.2% to 11.7% as our revenue growth outpaced our expense growth due to same-store occupancy improvement, favorable patient mix and disciplined cost management. Beginning this quarter, you noted in the release that we introduced 2 new non-GAAP measures: adjusted net income and adjusted EPS. These metrics are widely used by our peers in skilled nursing and across the broader healthcare services sector, and we believe they provide investors with additional transparency into the underlying earnings power of the business and enhanced comparability across companies. Our adjusted net income increased 29.6% year-over-year in the second quarter, and our adjusted EPS increased 34% from $0.47 in the second quarter of last year to $0.63 in the second quarter of this year. We also included a new line below our adjusted EBITDA calculation as additional information, which notes the amount of our noncash lease expense in each period presented. Our adjusted EBITDA includes rent expense on a straight-line accrual basis, which in the second quarter of this year was $10.2 million higher than our actual cash lease expense. Looking at our same-store operating performance, our same-store portfolio includes 284 skilled nursing facilities that we operated as of the beginning of 2025. Given the significant movement of facilities that have progressed from new to ramping to mature, we believe these same-store results provide the most meaningful year-over-year view of our underlying portfolio performance. Our same-store skilled nursing revenue increased 5.8% to $1.35 billion compared with $1.27 billion in the prior year. This is consistent with our same-store revenue growth in the first quarter, which was up a similar 6.1%, excluding supplemental WQIP payments from California. Our same-store occupancy increased to 90.6% from 89.1%, which was an improvement of 150 basis points. And our same-store skilled mix increased to 29.7% from the previous 29.2%. The meaningful improvement in each of these metrics provides a clear view of the underlying strength of the existing portfolio and demonstrates that our growth continues to be supported by internally driven operating improvements. For the total skilled nursing portfolio, occupancy increased to 90.4% compared with 88.6% in the prior year. This represents an improvement of 180 basis points and remains significantly above the industry average of 79.5%. Our overall skilled mix increased by 100 basis points to 30% compared with 29% in the second quarter of 2025. As Jason noted, we ended the period with 184 mature facilities, 100 ramping facilities and 6 new facilities. As expected, our occupancy increases as we move across these cohorts, with new facilities occupancy at 78.7%, ramping facilities at 87.7% occupancy and mature facilities at 93.8% occupancy. Skilled mix was 27.2% for new facilities, 26.9% for ramping facilities and 31.9% for mature facilities. Advancing facilities through this integration life cycle represents an important source for organic growth within our existing portfolio with plenty of upside still to come, particularly from our 106 new and ramping facilities. From a cost perspective, cost of services totaled $1.09 billion, an increase of 6.7% compared with the prior year. Our general and administrative expense was $114.3 million compared with $100.3 million in the prior year. That increase reflects continued investment in the personnel, systems and compliance infrastructure necessary to support the scale and complexity of our organization, as well as higher stock-based compensation expense. Taken together, our total operating expenses increased 7.3% year-over-year. We believe these results demonstrate our ability to continue investing in the infrastructure necessary to support long-term growth while generating meaningful operating leverage across the platform. Turning to cash flow and the balance sheet. We generated $371.8 million of cash from operating activities during the first 6 months of 2026. During the second quarter, we deployed $104.3 million to acquire real estate within our operating footprint, bringing our total real estate investment to $190.8 million for the first 6 months of the year. We've exercised a few other real estate purchase options since the quarter end, and we currently own the underlying real estate associated with 64 of our operated facilities. As of June 30, we had $756.6 million of available liquidity, including $164.5 million of cash and cash equivalents. We had nothing drawn on our $600 million line of credit at June 30. We ended the quarter with net leverage of 0.1x. Our conservative leverage profile and substantial liquidity provide meaningful flexibility to invest in our existing facilities, support the integration of our newly acquired operations, selectively increase real estate ownership and pursue acquisition opportunities that meet our clinical, operational and financial criteria. We believe our ability to pursue growth, while maintaining this balance sheet position remains an important strategic advantage. Regarding our previously disclosed material weaknesses in internal control over financial reporting, we are actively advancing our remediation plan and have made substantial progress, and we expect to have them remediated by the end of the year. We're strengthening our leadership team, enhancing our compliance department and implementing additional controls across key areas of the business, particularly within our revenue processes. Importantly, our financial statements continue to be prepared in accordance with GAAP, and we believe the results that we reported this quarter fairly present the financial position and performance of the company. As we look at the back half of the year, we expect to continue to perform at a high level, and therefore, we're increasing both our full year revenue and our adjusted EBITDA guidance. As noted in our earnings release, we're increasing our full year revenue guidance to a range of $5.75 billion to $5.85 billion, which is up $100 million on both ends of the range from our previous range of $5.65 billion to $5.75 billion. At the new midpoint of $5.8 billion, our revenue guidance represents 10% growth in revenue for the full year over 2025. We're also increasing our adjusted EBITDA guidance to a range of $640 million to $660 million, which is up $35 million on both ends of the range from our previous range of $605 million to $625 million. At the midpoint of the range, this represents a 29% increase in our adjusted EBITDA over the full year 2025. Our guidance methodology remains consistent with the approach we introduced last quarter, under which we include the expected contribution from transactions that have been completed as of the date of this guidance while excluding transactions that remain pending. Our updated guidance, therefore, includes a modest contribution from the 20 Texas facilities that we acquired from Eduro on August 1, for the portion of the year in which we'll operate those facilities. However, the remaining 14 facilities associated with the Eduro transaction are not reflected in our current guidance because those acquisitions have not yet closed. We currently expect those facilities to close during the third and fourth quarters, subject to customary closing conditions and regulatory approvals. We continue to see a robust pipeline of acquisition opportunities and remain actively engaged in evaluating potential transactions that align with our strategic, operational and financial criteria. Beyond the remaining Eduro facilities, we expect to announce and close on other facilities before year-end. Overall, our updated guidance reflects confidence in the underlying performance of our existing portfolio and in our ability to integrate acquired operations while maintaining financial and operational discipline. With that, I'll turn the call back to Jason. Jason Murray: Thanks, Carey. We're pleased with our performance through the first half of the year and remain focused on carrying that momentum into the second half. And so with that, operator, we're ready with questions. Operator: [Operator Instructions] Our first question is from Benjamin Rossi with JPMorgan. Benjamin Rossi: Just regarding the updated guidance outlook, when we think about your 2026 guidance range and outlook for the back half of the year, it sounds like you're incorporating the beat in 2Q and then assuming stronger core trends. On a consolidated basis, it looks like unit costs are in check and rates are developing nicely, particularly for Medicaid. Can you just walk us through what you're seeing with your business and how trends year-to-date have given you this added confidence in your earnings growth during the back half of the year? Carey Hendrickson: Sure. Yes. Ben, we feel very good about the momentum in our business. But we do want to be disciplined in our guide. So the range reflects the continued strength we saw across all of our cohorts in the first half, including occupancy, skilled mix, quality and cash flow. We do have -- the second half includes integration activity related to the Eduro transaction. Our guidance only includes a modest contribution from those 20 Texas facilities that we closed on August 1. It doesn't include, as I mentioned, the remaining Eduro facilities that we've yet to close or any other future acquisitions. So we feel good about that guidance range, and we're just accounting for normal execution and integration considerations in that guidance. Benjamin Rossi: Got it. Okay. I guess I just want to spend some time then on the ramping cohort, in particular, during 2Q. Looked like ramping occupancy and skilled mix stood out versus my modeling. I saw some noticeable rate growth on the Medicaid side, too, within ramping that stood out compared to the rest of the group. Can you just walk through what's changed operationally across this cohort for things like facility mix, clinical programs, staffing and improvements to your referrals or rate design? And then maybe what's expected in the go-forward for this segment for the remainder of the year? Joshua Jergensen: Yes, I'll take that one. This is Josh. Thanks for the question, Ben. I appreciate you recognizing that. This is a cohort we're incredibly proud of. Obviously, the numbers have increased in this cohort. And as we would expect, as facilities mature along those cohorts, they're set up that particular way because we expect as these facilities enter ramping that they have solid facility leadership that, that leadership has started to build a reputation in the community of consistent care outcomes of quality, of customer service. And that reputation, as we often talk about, leads to an increased confidence in the consumers and our partners and our payers. And so you do see increased activity around executed managed care agreements, and we have those in place in those ramping facilities. We've proven that we can be good partners and they can rely upon us for excellent outcomes. And so you see, again, not only occupancy increase, but skilled mix increase. As those facilities also stabilize, you see stabilization in labor and overtime, double time, agency usage. And so not only do you see the expansion in revenue, but you also see expanded margin, particularly there in ramping. And so as we've seen the progress in that cohort, we're excited for that to continue as those mature even inside of that cohort. But as they move towards maturity metrics, we still see there to be substantial upside because we've seen these facilities as they get even more established in our portfolio and in their communities, that there's still upside for them to capitalize on, and we would anticipate those ramping facilities as they move towards maturity to continue along those same metrics. Operator: Our next question is from David MacDonald with Truist Securities. David MacDonald: A couple of quick questions. One, Jason, can you just talk a little bit more about when you have conversations with payers and your referral sources, just how critical the quality metrics that you guys are posting right now is in terms of either working on contracting or just kind of securing referral sources? And then I got 1 or 2 quick follow-ups. Jason Murray: Sure. Yes, Dave. Thanks for the question. Yes, it is incredibly important. I think the way that we talk about quality is that it is the fundamental basis behind our entire business thesis, right? Like we need to make sure that we are very good at providing high-quality care and high-quality outcomes. And the reason that's important is not only for the outcome of the patient, but also, it allows us to be more competitive in the way that we negotiate our managed care contracts and other payer contracts. What we have found is there are many of these different payers who have thresholds of when they will allow providers to participate in their plans, quality thresholds that is. And so if you are performing below those thresholds, then you typically are excluded from conversations around those new contracts. And so that's why it's very important for us to make sure that we're executing well on that front is because we want to have a seat at the table when we are looking at different payer contracts, and we want to make sure that we're in the best seat available when we are negotiating. And the best way that you have the ability to negotiate with our payers is, number one, quality. And then I would point to number two being density in the different markets where we operate. And so it all starts and ends with quality, though. David MacDonald: And then guys, just a couple of other ones. One, just on, kind of, automation/AI, can you give us any sense in terms of how you guys are thinking about that, maybe not in the context of direct care, but more in the context of providing more efficiency so you free up your clinical people to spend more time just on direct care? Joshua Jergensen: Dave, I think that's exactly it. There are certainly really good use cases for AI. We have to be mindful of, obviously, the compliance element, as everyone is aware that AI being integrated into healthcare. There's a number of questions around that and how it works. And so fortunately, with the additional resources we've added to our compliance team, people with specific experience around privacy and other sorts of things that matter as it relates to AI are able to help ensure that the tools that we are exploring, and some of them now using and have integrated into our systems, are keeping the organization away from any of those potential risks. But we have seen some good use cases where it's doing exactly what you mentioned. It's allowing us to identify what patients need, what level of care they need based on their history and physical that comes from a hospital. To be able to scan that information and ensure not only save time for the clinicians, but ensure that we're capturing every element of care that, that patient needs when they come into our facility. And as you do that and as you provide the care and have the clinicians that are capable to do it at a high level, your quality measures increase. The return rates to the hospitals decrease. All of the metrics that, as Jason mentioned, these payer sources are looking for, we're able to actually make improvements. We envision there to be additional ways for us to implement AI as it looks to scrubbing documentation to ensure we're documenting things correctly. And so there's just a number of opportunities and use cases. And I think you'd see consistent with PACS, and one of the things that differentiates us, is that we lean fully into technology and the uses. We've built integrated dashboards, as we've talked about historically. And so there's been a full lean-in where historically, our space hasn't seen people do that. And we would anticipate with what we've seen so far and what we continue to see into the future, an ability for us to layer these things on and make us more efficient in the way that we operate, hopefully leading to margin expansion as well and to free up clinicians so they can do what they should be doing, which is have as much touch and interaction with the patient as possible. David MacDonald: Okay. And guys, just last question. Look, obviously, the operating environment broadly across healthcare has been fairly dynamic over the last couple of years. I'm just curious, when you look at your pipeline, can you just provide us a little bit more detail? Is the breadth of the pipeline bigger than it's kind of been historically? Any chunkier assets kind of coming into the pipeline? Just any additional detail in terms of what you're seeing would be helpful. Jason Murray: Yes. I think that -- I'll take that question. This is Jason. The -- I think what we're seeing is just, again, another high level of activity with M&A. It's been very busy, especially since getting back in compliance with the SEC with our filings. We've seen more and more activity come our way. And I would characterize it, Dave, as being kind of a mixed bag of everything, from smaller one-off deals to smaller kind of regional operators to large chunky deals. We really are seeing pretty significant diversity in the types of deals that we're looking at. And so that's encouraging to us because it gives us the optionality that we would want when trying to be disciplined and strategic with -- when we're thinking about our growth. Operator: Our next question is from A.J. Rice with UBS. Albert Rice: Maybe just first to ask you about what you are seeing on the payer side, we know the Medicare rates that have been proposed. But any comment on what you're seeing on a go-forward basis in your discussions with your various states about Medicaid updates? I know in the quarter, you were up 3%. Is that sort of the rate type of dynamic you're seeing? And then managed care, there's been some discussion about managed care contracting, generally, in the industry. You had a healthy rate increase in this quarter. What are you seeing in contracting there? Joshua Jergensen: Yes. I'll maybe start, A.J., this is Josh. I'll start with just the underwriting process that we go through as we evaluate, particularly to talk about the Medicaid. We specifically identify states that we think that we have an opportunity to make improvements on Medicaid rate reimbursement. And we've been fortunate to enter a number of those states where they incentivize quality, not just in quality payments, but there's an element of the rate that includes your ability to provide quality care to your long-term population, the Medicaid base. And we've seen those increases. And it's come because of the efforts of our clinical teams, ensuring that we're capturing appropriate care, taking, generally, even on a long-term custodial basis, a more clinically acute patient and being able to be reimbursed appropriately for the services being provided to them. And so it is not a surprise to us that we've seen increase in our Medicaid rates. We've also been very active, like many other operators, in ensuring that we get in front of the individuals at the state level, making decisions on how they reimburse nursing homes. And we think we've positioned that narrative very well, that we are the lowest-cost institutional setting for people to receive care, and they can receive that care in a very quality setting. And that's what I think PACS has done to differentiate. And so we're grateful for the recognition that those people at the state level have paid attention to and ensured that they've included appropriate rate reimbursement for the services being provided. And so that 3%, we anticipate continuing to see growth in that regard. And as we underwrite new deals, we look to ensure that on the Medicaid front, we continue to see that rate expansion. On the Medicare and managed care side, like you mentioned, you see the increase. We've continued to be increased. I think at the federal level, they're seeing that nursing homes can provide care to highly acute patients who are in need of those services, and appropriately are giving us an increase yet again this year, which has been consistent for the sector. On the managed care front, Jason, I think, nailed it when he said these managed care providers more than ever are paying attention to the people that they are contracting with, the providers they're contracting with. They're looking for a couple of things. First and foremost, they're looking for quality outcomes. They're basing rate and the willingness to reimburse a certain provider in that contract based on your quality outcomes. They're also looking at density. And as we talk about growth and strategic growth in areas where we can have density, bed density, bed availability for these providers, they are very interested in ensuring that they have access for their patients with beds. And that's, again, another differentiator for PACS as we go into these contract negotiations, that we're able to negotiate favorably for us when we give them bed density combined with the quality metrics that we've seen historically. Albert Rice: Okay. That was helpful. Maybe also just to ask you on your largest expense item, what the dynamics are around labor, availability of supplies, need to rely on temporary staff and other things, wage updates. Any commentary around there and any initiatives you have underway related to labor? Joshua Jergensen: Yes. The general dynamics of the labor market are continuing to improve. And I know we referenced post-COVID, that was the most recent challenge that the industry have had. And since that point, not only across the nation for all providers, but for us specifically, we've actually seen that numerically have an impact. We don't have a major issue with job postings and responses to those job postings, which we had once upon a time. As we look at our labor, oftentimes, we measure that as a percentage of revenue. And our contract labor in Q2 was the lowest it had been in any of the past 2 years. And so as we look at those trends, we're incredibly encouraged to see that those labor dynamics are leading to increased margin expansion as our facilities continue to operate at the level that they are. Operator: Our next question is from Raj Kumar with Stephens. Raj Kumar: Maybe just trying to, kind of, parse out the 20 Eduro facilities in Texas and kind of the embedded contribution into guidance. Maybe just any helpful color around revenue and earnings contribution here in 2026. And maybe just any qualitative commentary around how those facilities, kind of, compared to your, kind of, existing 5 facilities that you've had in Texas for... Carey Hendrickson: Thank you, Raj. This is Carey. Thanks for the question. Yes, our guidance, as I noted, it includes a modest contribution from the 20 Texas facilities that we've closed so far. And I'd say it's modest because there is some integration that has to occur in the first several months of an acquisition. Revenue is contributing more than EBITDA in our guide. But the Eduro facilities still had a lot of upside, a lot of upside. And I'll let Josh actually talk about where they are now and where we think they can get to. Joshua Jergensen: Yes. This is an acquisition that we were underwriting for a while. And although there's a strong foundation in the Eduro team, maybe different than some of the acquisitions that we've done historically, where you sense more distress when you walk into these facilities, the Eduro team worked hard on prioritizing care and outcomes and actually did have positive EBITDA margins. With that being said, we still recognize that as we underwrote this deal, we saw opportunities for the uniqueness of PACS model to actually add particularly on certain KPIs. On the quality measure front, we think there's room for improvement. And as we make those improvements in quality measures, we believe that we can see expansion in both occupancy and skilled mix, particularly in these 20 facilities, as example, they run in about the mid-60% occupancy and around 10% to 11% skilled mix. And so when you compare them to other new facilities that we've taken on, they have similar metrics in that regard. And we believe as they begin to progress with the PACS' specific attention to those areas, we're going to see them move from the new and the ramping and to the mature cohorts. And so as each of you look at that and model it just like we have done, you can count on those facilities following a similar path to what you've seen historically from our acquisitions. Raj Kumar: Great. And then maybe as my follow-up, just kind of thinking about or tying the topics of quality and then reimbursement. I think Ohio had finalized the 3 calculations of some prior year quality incentive payments. So curious on any, kind of, sizing color you could kind of provide on that and whether there's [Audio Gap] kind of been baking in for those payments. Carey Hendrickson: Yes. Thank you, Raj. Yes, those payments haven't come yet, so we don't know exactly what they're going to be. We have not been accruing for them because of that very fact. We don't know how much they're going to be and we don't know when we're going to receive them. We've had some -- we thought we might have received them actually before now and the amounts have varied from time to time. So that's why we have not accrued anything for those. I would say we do expect to receive them in the second half of the year, but we've not included any of that in our guidance. So I think that would be upside to where we are. I know it would be upside to where we are because we've not included any of it in our guidance. Operator: Our next question is from Ben Hendrix with RBC Capital Markets. Benjamin Hendrix: Great. Just one more question on the new facilities in the guidance. You mentioned some integration costs. And I imagine there's more expense kind of coming on associated with those facilities. Just wanted to see if we could parse that out a little bit in terms of are we expecting a step-up in agency utilization as we bring those on versus your legacy platform? Is there any kind of degree that we have additional overhead and administrative costs and then versus costs related to local leadership change? Do you expect to have to put a meaningful portion of or replace a meaningful portion of the local leaders with some of your leaders in training? Any kind of thoughts on the geography of those costs would be great. Joshua Jergensen: Yes. Specifically, Ben, I don't see anything -- you mentioned labor. I don't see any sort of increase in agency labor. When we take on new acquisitions and this transaction, although slightly different, won't be different than how we handle these. We go in, we evaluate the teams in place. I think these teams generally have a little more strength than we've historically seen in some of the more distressed assets that we've taken on. And we are going to grow those platforms strategically to ensure that whatever we're doing that relates to census or additional labor that may be needed that, that's done very strategically prioritizing care. So we're going to go and assess the teams. We're going to deploy our systems, policies, procedures, things that we would do in any acquisition, and then we will begin building responsibly on top of that. And so specific costs outside of what Carey mentioned, just the integration of IT network and infrastructure and other things that come with any acquisition, especially large-scale that you do, I would anticipate that the operational metrics aren't going to change on the cost side substantially. I think we're going to see over time, consistent with what you've seen, new moving to ramping, ramping to mature, that these facilities are going to follow a similar track. Carey Hendrickson: And Ben, as a follow-up to your question about the Ohio supplemental payments, just as a reminder, we do expect another -- at least one more California WQIP payment in 2026. We haven't accrued it again, same thing, because we don't know the amount, and we don't know exactly when we're going to receive it. We've started receiving some of that in the third quarter. So I think we will receive some in the third. And then the second payment related to that will be either late this year or early in 2027. But we -- again, we're not accruing that. It's not in the guidance because we don't know what those amounts will be. Benjamin Hendrix: And to be sure, those will be reflected in your same-store revenue growth? Carey Hendrickson: Yes, they will, just like they were in the first quarter. Operator: This now concludes our question-and-answer session. I would like to turn the floor back over to Jason Murray for closing comments. Jason Murray: Yes. Thank you, operator. And again, thanks, everyone, for joining us today. We appreciate your support of PACS. Have a nice rest of your day. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines, and have a wonderful day. Before you buy stock in Pacs Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Pacs Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Pacs Group. The Motley Fool has a disclosure policy. PACS (PACS) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in PACS Group, Inc.? Here are five stocks we like better. PACS Group delivered strong Q2 growth: Revenue rose 9.1% year over year to $1.43 billion, net income increased 50% to $76.4 million, and adjusted EBITDA grew 25% to $166.8 million. Same-store occupancy and skilled mix also improved, supporting a 150-basis-point expansion in the adjusted EBITDAR margin. Operations and acquisitions are providing further upside: The company highlighted improving quality and performance across its existing facilities and closed on the first 20 of 34 Eduro Healthcare facilities. The remaining 14 facilities are expected to close in the third and fourth quarters, though integration is expected to weigh on initial EBITDA contribution. PACS raised its 2026 outlook: Full-year revenue guidance increased to $5.75 billion-$5.85 billion, while adjusted EBITDA guidance rose to $640 million-$660 million. The company had $756.6 million in liquidity, minimal net leverage of 0.1 times, and expects to complete remediation of previously disclosed internal-control weaknesses by year-end. PACS Group (NYSE:PACS) reported second-quarter 2026 revenue growth of 9.1% and adjusted EBITDA growth of 25% from a year earlier, citing higher occupancy, improved skilled nursing patient mix and continued progress across acquired facilities as they mature within its operating model. Revenue for the quarter totaled $1.43 billion, up $118.8 million from the prior-year period. Net income rose 50% to $76.4 million, while adjusted EBITDA increased $32.9 million to $166.8 million. Adjusted EBITDAR was $261.5 million, and the adjusted EBITDAR margin expanded 150 basis points year over year to 11.7%. → Sandisk Just Delivered a Blowout Quarter—Here's Why the Stock Is Falling Chief Executive Officer Jason Murray said the company’s earnings growth was primarily driven by its existing portfolio rather than newly acquired operations. “Our same-store facilities delivered revenue growth of 5.8%, while same-store occupancy increased by 150 basis points,” Murray said. Same-store skilled nursing revenue rose 5.8% to $1.35 billion. Same-store occupancy reached 90.6%, compared with 89.1% a year earlier, while same-store skilled mix increased to 29.7% from 29.2%. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Across the total skilled nursing portfolio, occupancy increased 180 basis points to 90.4%, and skilled mix rose 100 basis points to 30%. Chief Financial Officer Carey Hendrickson said total portfolio occupancy remained above the 79.5% industry average cited by the company. At June 30, PACS operated 324 healthcare facilities across 17 states, with 35,631 beds. Its skilled nursing portfolio included 184 mature facilities, 100 ramping facilities and six new facilities. New facilities had occupancy of 78.7% and skilled mix of 27.2%. Ramping facilities had occupancy of 87.7% and skilled mix of 26.9%. Mature facilities had occupancy of 93.8% and skilled mix of 31.9%. → No Hangover: Revisiting Microsoft One Week After Earnings President and Chief Operating Officer Josh Jergensen said ramping facilities have been benefiting from stronger leadership, growing community reputations and managed-care contracting. He said that as facilities stabilize, PACS also sees lower overtime, double-time and agency labor use, supporting margin expansion. The company also highlighted its quality measures. As of the end of the quarter, 239 skilled nursing facilities, or 83.6% of those with reported CMS Quality Measure ratings, held four- or five-star ratings. Mature facilities had an average CMS Quality Measure rating of 4.5, compared with an industry average of 3.7 cited by PACS. Murray said quality performance is central to the company’s ability to secure admissions and negotiate with payers. He said some payers use quality thresholds when determining which providers can participate in their plans, while PACS’ market density also supports contracting discussions. Murray described the turnaround of a California behavioral-health nursing facility that PACS acquired while it was designated as a Special Focus Facility, a CMS designation for nursing homes with significant quality and regulatory issues. The facility received notice in March 2025 of the potential termination of its Medicare and Medi-Cal provider agreements, according to Murray. The facility, which serves more than 250 residents and employs more than 500 people, graduated from the Special Focus Facility program on June 29, 2026. Murray said PACS and local management strengthened clinical, operational and regulatory processes while working with CMS, the California Department of Public Health and technical assistance partners. PACS also said it is returning to a more active acquisition period. The company previously announced an agreement to acquire operations at 34 skilled nursing facilities from Eduro Healthcare, representing 3,633 beds across Texas, Montana, South Dakota, North Dakota, New Mexico and Utah. On Aug. 1, PACS closed on the first 20 facilities in Texas and expects the remaining 14 facilities to close in the third and fourth quarters, subject to customary conditions and regulatory approvals. Hendrickson said the updated outlook includes only a modest contribution from the 20 Texas facilities, with revenue expected to contribute more than EBITDA initially because of integration needs. Jergensen said the Texas facilities operate at occupancy in the mid-60% range and skilled mix of roughly 10% to 11%, which the company believes presents improvement opportunities. Cash from operating activities totaled $371.8 million in the first six months of 2026. PACS invested $190.8 million in real estate during the first half, including $104.3 million during the second quarter. The company said it owned the real estate associated with 64 operated facilities after exercising additional purchase options following quarter-end. At June 30, PACS had $756.6 million in available liquidity, including $164.5 million in cash and cash equivalents, and had no borrowings under its $600 million credit line. Net leverage was 0.1 times. The company said general and administrative expense increased to $114.3 million from $100.3 million a year earlier, reflecting investments in personnel, systems and compliance infrastructure, as well as higher stock-based compensation. PACS said it is advancing remediation of previously disclosed material weaknesses in internal control over financial reporting and expects remediation to be completed by year-end. PACS raised its full-year 2026 revenue guidance to $5.75 billion to $5.85 billion, from a prior range of $5.65 billion to $5.75 billion. It also increased adjusted EBITDA guidance to $640 million to $660 million, from $605 million to $625 million previously. The guidance excludes the pending 14 Eduro facilities and other potential acquisitions. It also does not include potential Ohio quality incentive payments or certain California WQIP payments because PACS said it does not know the amounts or timing of those payments. Murray also addressed previously disclosed government investigations, stating that PACS remains cooperative with the government and cannot estimate when the matters will be resolved. PACS Group, Inc, through its subsidiaries, operates skilled nursing facilities and assisted living facilities in the United States. The company also provides senior care and independent facilities. It engages in the acquisition, ownership, and leasing of health care-related properties. The company was founded in 2013 and is based in Farmington, Utah. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "PACS Group Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance was primarily driven by the existing portfolio, where revenue growth of 9.1% significantly outpaced expense growth, leading to a 25% increase in adjusted EBITDA. Management attributes margin expansion to the 'virtuous cycle' of clinical quality, where high CMS ratings build trust with referral partners and payers, directly supporting occupancy and patient mix. The 'locally led, centrally supported' model empowers facility administrators to make decisions closest to the patient while utilizing national-scale resources for compliance and technology. A successful turnaround of a Special Focus Facility in California serves as a case study for the PACS model's ability to stabilize clinically complex and regulatory-challenged assets. The portfolio is structured into maturity cohorts (new, ramping, mature), with organic growth driven by the progression of 106 facilities toward mature operating levels. Strategic density in key markets like Texas is being prioritized to enhance negotiating leverage with managed care payers and optimize regional leadership resources. Updated 2026 revenue guidance of $5.75 billion to $5.85 billion incorporates the Q2 beat and modest contributions from 20 recently closed Texas facilities. Guidance methodology remains conservative, excluding 14 pending Eduro facility closures and any future unannounced acquisitions despite a robust M&A pipeline. Management expects continued margin improvement as ramping facilities stabilize labor costs and reduce reliance on agency staffing, which reached a two-year low in Q2. The company anticipates a return to a more active acquisition period, evaluating a diverse mix of single-facility deals and larger regional portfolios. Financial outlook excludes potential upside from pending supplemental quality payments in Ohio and California due to uncertainty regarding exact timing and amounts. Management remains fully cooperative with ongoing government investigations and expressed confidence in navigating these matters without disrupting core strategy. Material weaknesses in internal controls over financial reporting are being addressed through leadership additions and enhanced revenue process controls, with remediation expected by year-end. The introduction of adjusted net income and adjusted EPS metrics aims to provide better transparency into underlying earnings power and peer comparability. The Eduro acquisition adds 3,633 beds across six states, representing a significant expansion of the company's geographic footprint and market density. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management noted that as facilities move into the ramping phase, stabilized leadership builds community reputation, leading to better managed care agreements. Margin expansion in this cohort is specifically tied to the stabilization of labor costs, including the reduction of overtime and agency usage. High quality ratings are described as the 'fundamental basis' for business, acting as a prerequisite for participating in many managed care plans. Density in specific markets combined with quality outcomes provides the primary leverage in negotiating favorable reimbursement rates with payers. PACS is exploring AI use cases to scan hospital records to ensure all patient care needs are captured immediately upon admission. The strategic goal for technology is to automate documentation scrubbing and administrative tasks to maximize the time clinicians spend on direct patient care.

This article first appeared on GuruFocus. Revenue: $1.43 billion, up 9.1% year-over-year. Net Income: $76.4 million, up 50% year-over-year. Adjusted EBITDA: $166.8 million, up 25% year-over-year. Adjusted EBITDAR: $261.5 million. Adjusted EPS: $0.63, up 34% from $0.47 in the prior year. Adjusted EBITDA Margin: Expanded 150 basis points year-over-year to 11.7%. Same-Store Skilled Nursing Revenue: Increased 5.8% to $1.35 billion. Same-Store Occupancy: Increased 150 basis points to 90.6%. Total Skilled Nursing Occupancy: Increased 180 basis points to 90.4%. Skilled Mix: Increased 100 basis points to 30% for the total portfolio. Cost of Services: $1.09 billion, up 6.7% year-over-year. General and Administrative Expense: $114.3 million, up from $100.3 million in the prior year. Cash from Operating Activities: $371.8 million for the first six months of 2026. Real Estate Investment: $104.3 million deployed in Q2; $190.8 million for the first half of 2026. Available Liquidity: $756.6 million, including $164.5 million in cash and cash equivalents. Net Leverage: 0.1 times. Facilities: Operated 324 healthcare facilities with 35,631 total beds as of June 30. Full-Year Revenue Guidance: Increased to $5.75 billion to $5.85 billion. Full-Year Adjusted EBITDA Guidance: Increased to $640 million to $660 million. Warning! GuruFocus has detected 5 Warning Sign with IPI. Is PACS fairly valued? Test your thesis with our free DCF calculator. Release Date: August 05, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Revenue increased 9.1% year-over-year to $1.43 billion, with adjusted EBITDA up 25% to $166.8 million, demonstrating strong margin expansion. Same-store revenue grew 5.8% and occupancy improved by 150 basis points to 90.6%, indicating robust organic growth in the existing portfolio. Quality metrics are strong, with 83.6% of skilled nursing facilities rated four or five stars and mature facilities averaging 4.5 stars, above the industry average of 3.7. The company successfully graduated a Special Focus Facility in California, showcasing its ability to turn around challenged operations and preserve access to care. The acquisition of 34 skilled nursing facilities from Eduro Healthcare adds significant density in Texas and other states, with the first 20 facilities closed on August 1, 2026. The company raised its full-year 2026 revenue guidance to $5.75-$5.85 billion and adjusted EBITDA guidance to $640-$660 million, reflecting confidence in continued performance. Balance sheet remains strong with net leverage of 0.1 times, $756.6 million in liquidity, and no drawn credit line, providing flexibility for future growth. The company continues to face previously disclosed government investigations, with no estimated timeline for resolution, creating ongoing uncertainty. Material weaknesses in internal control over financial reporting remain unremediated, though the company expects to fix them by year-end. General and administrative expenses increased 14% year-over-year due to investments in personnel, systems, and compliance infrastructure, which could pressure margins. The Eduro acquisition integration is expected to be modest in the near term, with revenue contributing more than EBITDA initially, and the remaining 14 facilities are not yet included in guidance. The company has not accrued for potential Ohio quality incentive payments or California WQIP payments, which could create volatility in future revenue if they are delayed or lower than expected. New and ramping facilities have lower occupancy (78.7% and 87.7%, respectively) and skilled mix compared to mature facilities, indicating significant work remains to bring them to mature levels. Q: Can you walk us through what you're seeing with your business and how trends year-to-date have given you added confidence in your earnings growth during the back half of the year?A: Carey Hendrickson (CFO) stated that the company feels very good about the momentum in its business but wants to remain disciplined in its guidance. The updated range reflects continued strength across all cohorts in the first half, including occupancy, skilled mix, quality, and cash flow. The guidance includes only a modest contribution from the 20 Texas facilities acquired from Eduro on August 1, and excludes the remaining 14 Eduro facilities and any other future acquisitions. The guidance accounts for normal execution and integration considerations. Q: Can you walk through what's changed operationally across the ramping cohort for things like facility mix, clinical programs, staffing, and improvements to referrals or rate design?A: Joshua Jergensen (President and COO) explained that as facilities enter the ramping cohort, they have solid facility leadership that has built a reputation in the community for consistent care outcomes and quality. This reputation leads to increased confidence from consumers, partners, and payers, resulting in increased activity around executed managed care agreements. As facilities stabilize, they see stabilization in labor, overtime, and agency usage, leading to expanded revenue and margins. There is still substantial upside as these facilities move towards maturity. Q: Can you talk about how critical the quality metrics you're posting are in terms of working on contracting or securing referral sources?A: Jason Murray (CEO) stated that quality is the fundamental basis behind the entire business thesis. Many payers have quality thresholds that providers must meet to participate in their plans. Performing above these thresholds allows PACS to have a seat at the table when negotiating payer contracts. The best way to negotiate with payers is through quality, followed by density in the markets where they operate. Quality is the starting and ending point of their strategy. Q: Can you give us a sense of how you're thinking about automation/AI in the context of providing more efficiency to free up clinical people for direct care?A: Joshua Jergensen (President and COO) noted that there are good use cases for AI, but they must be mindful of compliance elements. The company has added resources to its compliance team with experience around privacy to ensure tools are safe. AI is being used to identify patient needs based on history and physicals from hospitals, saving clinicians time and ensuring all elements of care are captured. This leads to increased quality measures and decreased return rates to hospitals. Future use cases include scrubbing documentation to ensure correct documentation. Q: When you look at your pipeline, is the breadth bigger than historically? Any chunkier assets coming into the pipeline?A: Jason Murray (CEO) stated that there is a high level of M&A activity, especially since getting back in compliance with SEC filings. The pipeline includes a mixed bag of everything, from smaller one-off deals to smaller regional operators to large chunky deals. This diversity gives the company optionality when trying to be disciplined and strategic about growth. Q: What are you seeing on the payer side regarding Medicare rates and Medicaid updates? And what are you seeing in managed care contracting?A: Joshua Jergensen (President and COO) explained that PACS specifically identifies states where they can improve Medicaid rate reimbursement, particularly those that incentivize quality. They have seen increases due to clinical teams capturing appropriate care for more clinically acute patients. On the Medicare side, the federal level recognizes that nursing homes can provide care to highly acute patients and has given increases. Managed care providers are paying more attention to quality outcomes and density, which are differentiators for PACS in contract negotiations. Q: What are the dynamics around labor, availability of supplies, need to rely on temporary staff, and wage updates?A: Joshua Jergensen (President and COO) stated that the general dynamics of the labor market are continuing to improve. Contract labor in Q2 was the lowest it had been in the past two years. These improving labor dynamics are leading to increased margin expansion as facilities continue to operate at high levels. Q: Can you provide color around the revenue and earnings contribution of the 20 Eduro facilities in Texas in 2026, and how they compare to existing facilities in Texas?A: Carey Hendrickson (CFO) noted that guidance includes a modest contribution from the 20 Texas facilities, with revenue contributing more than EBITDA due to integration in the first several months. Joshua Jergensen (President and COO) added that the Eduro facilities have a strong foundation with positive EBITDA margins, but there are opportunities for improvement in quality measures, which could lead to expansion in occupancy and skilled mix. These facilities run at mid-60% occupancy and around 10-11% skilled mix, similar to other new facilities, and are expected to follow a similar path to maturity. Q: Can you provide sizing color on the Ohio quality incentive payments and whether they've been baked into guidance?A: Carey Hendrickson (CFO) stated that the Ohio payments haven't come yet, so the company doesn't know the exact amounts and has not been accruing for them. They expect to receive them in the second half of the year, but have not included any of that in guidance, so it would be upside. Similarly, they expect at least one more California WQIP payment in 2026, which is also not accrued or included in guidance. Q: Are we expecting a step-up in agency utilization or additional overhead costs as you bring on the Eduro facilities?A: Joshua Jergensen (President and COO) stated that they don't see any increase in agency labor. When taking on new acquisitions, they evaluate the teams in place, and the Eduro teams generally have more strength than historically seen in more distressed assets. They will deploy their systems, policies, and procedures, and build responsibly on top of that. Outside of integration costs like IT and network infrastructure, operational metrics on the cost side aren't expected to change substantially. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Conference Call and Webcast Scheduled for Tomorrow, August 5, 2026, at 11:30 am ET. SALT LAKE CITY, August 04, 2026--(BUSINESS WIRE)--PACS Group, Inc. (NYSE: PACS) ("PACS" or the "Company"), which together with its subsidiaries is one of the largest post-acute healthcare companies in the United States, announced operating results for the second quarter of 2026. Second Quarter 2026 Financial Highlights Revenue was $1.43 billion, an increase of 9.1% over prior year. Net income was $76.3 million, an increase of $25.4 million, or 49.8% from $51.0 million in the prior-year period. Diluted Earnings Per Share was $0.47, an increase of 51.6% over prior year, and Adjusted Earnings Per Share was $0.63, an increase of 34.0% over prior year.1 Adjusted EBITDA was $166.8 million, an increase of $32.9 million, or 24.6% from $133.9 million in the prior-year period.1 Adjusted EBITDAR was $261.5 million.1 Second Quarter 2026 Select KPIs On a same-store basis, which includes the 284 skilled nursing facilities ("SNFs") operated by the Company as of the beginning of 2025, SNF revenue increased 5.8% in the second quarter of 2026 compared to the prior-year period. Occupancy improved to 90.6% from 89.1% in the second quarter of 2025, and skilled mix increased in both revenue and nursing patient days. The Company had 239 facilities, or 83.6%, of its skilled nursing portfolio achieve a 4 or 5 star CMS Quality Measure Star rating, with its 184 mature facilities achieving an average rating of 4.5. Overall occupancy was 90.4%, compared to an industry average of 79.5%. Mature facilities occupancy was 93.8%. Mature facilities skilled mix was 31.9%, while overall skilled mix increased to 30.0%, an improvement of 100 basis points from 29.0% in the prior-year period, driven by continued improvement in our Ramping facilities cohort. Cash provided by operating activities was $371.8 million for the six months ended June 30, 2026. The Company deployed $104.3 million to acquire real estate during the second quarter of 2026, bringing the total real estate investment to $190.8 million for the first six months of the year. As of June 30, 2026, the Company had $756.6 million in available liquidity, including $164.5 million of cash and cash equivalents. "Our second quarter results reflect the continued strength of the PACS platform and the exceptional execution of our local leadership teams across the country. We delivered strong growth in revenue, net income, occupancy and skilled mix while continuing to improve quality outcomes throughout our portfolio," said Jason Murray, PACS Chief Executive Officer. "Just as important, we are expanding our footprint through acquisitions, including the Eduro transaction previously announced, which will add 34 well-positioned facilities in Texas and other attractive markets. We believe these additions, combined with our proven operating model and deep bench of experienced leaders, create meaningful opportunities to enhance care, support our facility teams and drive long-term growth. As we enter the second half of the year, we remain confident in the momentum of our business and our ability to create value through both operational excellence and disciplined expansion." "Our second quarter results highlight the effectiveness of our operating model in driving continued improvement across both our mature and ramping cohorts. We increased revenue by more than 9%, grew Adjusted EBITDA 25%, and generated strong operating cash flow while maintaining substantial liquidity and a conservative balance sheet," said Carey Hendrickson, PACS Chief Financial Officer. "At the same time, we continue to invest in long-term growth through strategic real estate acquisitions and the integration of additional facilities. Our strong operating performance provides us the flexibility to pursue growth opportunities from a position of financial discipline, and we are well positioned to continue scaling the PACS platform and delivering meaningful value for stakeholders." Growth Highlights As previously announced on June 29, 2026, subsidiaries of PACS have entered into a definitive agreement to acquire the operations of 34 skilled nursing facilities across six western states from Eduro Healthcare. The operations are in Texas (22 facilities), Montana (six facilities), South Dakota (three facilities), and one facility in each of New Mexico, North Dakota, and Utah. Collectively, the facilities comprise 3,633 skilled nursing beds. As of August 1, 2026, PACS has closed on its acquisition of the operations of 20 of the 22 Texas facilities, with the remaining 14 Eduro facilities expected to close in the third and fourth quarters of 2026. Revised 2026 Business Outlook "Given the continued excellent performance of our portfolio across all cohorts, we are increasing our full-year 2026 Adjusted EBITDA guidance to a range of $640 million to $660 million, up from our prior range of $605 million to $625 million," said Hendrickson. "At the midpoint, this represents approximately 29% growth over 2025. "We are also increasing our revenue guidance to $5.75 billion to $5.85 billion, up from our prior range of $5.65 billion to $5.75 billion. "Our guidance reflects a modest contribution of anticipated revenue and EBITDA related to the 20 Texas facilities associated with the Eduro transaction that closed on August 1, 2026. It does not include the remaining Eduro facilities that have yet to close, nor does it include any future acquisitions. That said, we continue to see a robust pipeline of acquisition opportunities and remain actively engaged in evaluating potential transactions that align with our strategic, operational and financial criteria," said Hendrickson. As of today, PACS's growing portfolio comprises 344 healthcare operations across 17 states. PACS owns 64 facilities and leases an additional 49 facilities with partial ownership in real estate. PACS holds 36 purchase options on leased facilities and 20 purchase options through partnerships. The Company remains focused on acquiring underperforming and moderately performing operations where its operating model can drive meaningful improvement, while selectively investing in real estate to support long-term value creation. A live webcast will be held August 5, 2026, at 11:30 a.m. Eastern time to discuss PACS’s second quarter financial results. To listen to the webcast please visit the Investor Relations section of PACS’s website at https://IR.pacs.com or by dialing 877-407-0621 / +1 215-268-9899. The webcast will be recorded and will be available for replay via the website for 30 days following the call. About PACS™ PACS Group, Inc. is a holding company investing in post-acute healthcare facilities, professionals, and ancillary services. Founded in 2013, PACS Group is one of the largest post-acute platforms in the United States. Its independent subsidiaries operate 344 post-acute care facilities across 17 states serving over 33,400 patients daily. References herein to the consolidated "Company," as well as the use of the terms "we," "us," "our," "its" and similar verbiage, refer to PACS Group, Inc. and its consolidated subsidiaries, taken as a whole. PACS Group, Inc. and its subsidiaries that are not licensed healthcare providers do not provide healthcare services to patients, residents or any other person, and do not direct or control the provision of services provided or the operations of those provider subsidiaries. All healthcare services are provided solely by its applicable subsidiaries that are licensed healthcare providers, under the direction and control of licensed healthcare professionals in accordance with applicable law. More information about PACS is available at https://IR.pacs.com. The information on our website is not part of this press release. Forward Looking Statements Disclaimer This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release other than statements of historical fact, including statements regarding our future financial performance and guidance, including expected revenue and adjusted EBITDA for fiscal year 2026, business strategy and growth plans, acquisition and integration activities, including the expected timing of remaining facility closings, operational and quality improvement initiatives, capital allocation and investment strategies, expectations regarding our acquisition pipeline and future transactions, uncertainty regarding the timing, amount, and continuation of payments under California's WQIP or similar state programs; our ability to execute share repurchases at favorable prices or at all, and the impact of repurchases on our capital position and liquidity; and other expectations, beliefs, plans, or objectives of management, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "shall," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," "goal," "objective," "seeks," or "continue," or the negative of these terms or other similar expressions. Forward-looking statements are neither promises nor guarantees and are based on management’s current expectations, estimates, forecasts and assumptions and on trends that we believe may affect our business, results of operations, financial condition and prospects. These statements are subject to risks, uncertainties and other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, our dependence on reimbursement from third-party payors, and changes in patient acuity mix, payor mix, payment methodologies, or new cost-containment initiatives could negatively impact our revenue and results of operations; we may not be fully reimbursed for all services billed through consolidated billing or bundled payments, reducing our revenue and financial condition; increased competition for, or shortages of, nurses, nurse assistants and other skilled personnel could raise labor costs and subject us to monetary fines; state efforts to regulate or deregulate healthcare services or the construction, expansion, or acquisition of healthcare facilities could impair our ability to expand or increase competition; failure to attract patients and residents or compete effectively with other healthcare providers may reduce our revenue and profitability; reviews and audits of care delivery, recordkeeping and billing may detect noncompliance requiring repayment of billed amounts or other costs; litigation and claims common in our industry could result in significant legal costs, settlements or damage awards, and our self-insurance programs may expose us to unexpected costs and losses; material weaknesses in our internal control over financial reporting, or failure to remediate such weaknesses or maintain effective controls, could impair timely and accurate reporting, reduce investor confidence, subject us to penalties, and affect the value of our common stock; inability to provide consistently high quality of care, or employee conduct that impacts patient health, safety or clinical treatment, could result in civil or criminal penalties and harm our operations; significant reliance on information technology, and any failure or interruption of that technology, could impair our operations; operational metrics derived from internal systems without independent verification may contain inaccuracies that harm our reputation; inability to complete acquisitions at attractive prices or at all may reduce revenue, and divestitures of underperforming or non-strategic subsidiaries would further decrease revenue; we may not successfully integrate acquired facilities or achieve expected benefits; acquisitions may entail unforeseen costs, liabilities or regulatory issues that adversely affect our operations; difficulty completing partnerships consistent with our growth strategy; failure to achieve or maintain competitive quality ratings from CMS or private rating organizations could negatively affect us; inability to obtain insurance or increases in insurance costs could impair our financial condition; geographic concentration of our facilities, including in California, increases vulnerability to local economic downturns, regulatory changes or natural disasters; actions of national labor unions may reduce our revenue and profitability; because we lease most facilities, we face risks from lease termination, extensions and special charges that could affect our financial condition and results of operations; insufficient cash flow to cover required payments or meet covenants under long-term debt, mortgages and leases could trigger defaults and cross-defaults, risking loss of facilities or foreclosures; we may need additional capital to fund operations and growth, which may be unavailable or available only on unfavorable terms; extensive and complex laws and regulations govern our industry, and noncompliance or regulatory changes could require significant expenditures or operational modifications; our founders, Jason Murray and Mark Hancock, hold substantial control and a substantial portion of our outstanding common stock, and their interests may conflict with those of other stockholders; as a "controlled company" under NYSE governance standards, we may rely on exemptions from certain requirements, and stockholders may not have the same protections afforded to stockholders of non-controlled companies. These and other important factors are described under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, and in other filings that we make with the Securities and Exchange Commission from time to time. Any forward-looking statements contained in this press release speak only as of the date hereof. We undertake no obligation to update any forward-looking statements contained herein to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. PACS GROUP, INC. AND SUBSIDIARIESUNAUDITED KEY SKILLED SERVICES METRICS We categorize our facilities into three cohorts. Mature facilities are defined as facilities purchased more than 36 months prior to a respective measurement date. Ramping facilities are defined as facilities purchased within 18 to 36 months prior to a respective measurement date. New facilities are defined as facilities purchased or built less than 18 months prior to a respective measurement date. The following tables present key skilled services metrics by category for the skilled nursing facilities in each of the three facility cohorts, and for all skilled nursing facilities as of and for the three and six months ended June 30, 2026 and 2025: The following tables present additional detail regarding our skilled mix, including our percentage of revenue and nursing patient days by payor source for the skilled nursing facilities in each of the three facility cohorts, and for all skilled nursing facilities, for the three and six months ended June 30, 2026 and 2025: Skilled mix by revenue: Skilled mix by nursing patient days: The following tables present average daily rates by payor source, excluding services that are not covered by the daily rate, for the three and six months ended June 30, 2026 and 2025: The following tables present the above key skilled services metrics by category for all skilled nursing facilities in operation on January 1, 2025, excluding divestitures since that time, as of and for the three and six months ended June 30, 2026 and 2025: Non-GAAP Financial Measures In addition to our results provided throughout that are determined in accordance with GAAP, we also present the following non-GAAP financial measures: Adjusted Net Income, Adjusted Earnings Per Share, EBITDA, Adjusted EBITDA and Adjusted EBITDAR (collectively, Non-GAAP Financial Measures). Adjusted Net Income, Adjusted Earnings Per Share, EBITDA and Adjusted EBITDA are performance measures. Adjusted EBITDAR is a valuation measure. These Non-GAAP Financial Measures have no standardized meaning defined by GAAP, and therefore have limitations as analytical tools, and they should not be considered in isolation, or as a substitute for analysis of our results as reported in accordance with GAAP. You should review the reconciliation of net income to the Non-GAAP Financial Measures in the table above, together with our current quarter condensed consolidated financial statements and the related notes in their entirety, and should not rely on any single financial measure. Additionally, other companies may define these or similar Non-GAAP Financial Measures with the same or similar names differently, and because these Non-GAAP Financial Measures are not standardized, it may not be possible to compare these financial measures to those of other companies. A reconciliation of Adjusted EBITDA guidance to Net Income on a forward-looking basis cannot be provided without unreasonable efforts, as the Company is unable to provide reconciling information with respect to provision for income taxes, interest expense, depreciation and amortization, and certain other expenses that are not representative of our underlying operating performances, all of which are adjustments to Adjusted EBITDA. Performance Measures We use Adjusted Net Income, Adjusted Earnings Per Share, EBITDA, and Adjusted EBITDA to facilitate internal comparisons of our historical operating performance on a more consistent basis, as well as for business planning and forecasting purposes. In addition, we believe the presentation of these measures is useful to investors, analysts and other interested parties in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our ongoing operating performance. Adjusted Net Income – We calculate Adjusted Net Income as net income, adjusted for net (loss) income attributable to noncontrolling interest, further adjusted for non-core business items as listed in Adjusted EBITDA, as well as the related income tax effects of these adjustments. Adjusted Earnings Per Share – We calculate Adjusted Earnings Per Share by dividing Adjusted Net Income by the weighted‑average diluted shares outstanding for the applicable period. EBITDA – We calculate EBITDA as net income, adjusted for net (loss) income attributable to noncontrolling interest, before: interest expense; provision for income taxes; and depreciation and amortization. Adjusted EBITDA – We calculate Adjusted EBITDA as EBITDA further adjusted for non-core business items, which for the reported periods includes, to the extent applicable, costs incurred to acquire operations that are not capitalizable, stock-based compensation expense, legal and other costs, and certain one-time expenses that are not representative of our underlying operating performance. Costs related to acquisitions include costs related to our acquisition of operations, including related costs such as legal fees, financial and tax due diligence, consulting and escrow fees. Legal and other costs include legal and professional fees incurred associated with the Audit Committee’s independent investigation during the years ended December 31, 2025 and 2024, and with other ongoing investigations. Valuation Measure We use Adjusted EBITDAR as a measure to determine the value of prospective acquisitions and to assess the enterprise value of our business without regard to differences in capital structures and leasing arrangements. In addition, we believe that Adjusted EBITDAR is also a commonly used measure by investors, analysts and other interested parties to compare the enterprise value of different companies in the healthcare industry without regard to differences in capital structures and leasing arrangements, particularly for companies with operating and finance leases. For example, finance lease expenditures are recorded in depreciation and interest and are therefore removed from Adjusted EBITDA, whereas operating lease expenditures are recorded in rent expense and are therefore retained in Adjusted EBITDA. Adjusted EBITDAR is a financial valuation measure that is not specified in GAAP, and is not displayed as a performance measure as it excludes rent expense, which is a normal and recurring cash operating expense, and is therefore presented only for the current period. While we believe that Adjusted EBITDAR provides useful insight regarding our underlying operations, excluding the impact of our operating leases, we must still incur cash operating expenses related to our operating leases and rent and such expenses are necessary to operate our leased operations. As a result, Adjusted EBITDAR may understate the extent of our cash operating expenses for the respective period relative to our cash needs to operate our leased operations and business. Adjusted EBITDAR – We calculate Adjusted EBITDAR as Adjusted EBITDA plus rent-cost of services. View source version on businesswire.com: https://www.businesswire.com/news/home/20260804597044/en/ Contacts Investors: [email protected] Media: Brooks StevensonVP Corporate Communication90 S. 400 W. Suite 700Salt Lake City, UT 84101T: [email protected] https://www.pacs.com https://ir.pacs.com

PACS Group, Inc. (PACS) came out with quarterly earnings of $0.63 per share, beating the Zacks Consensus Estimate of $0.55 per share. This compares to earnings of $0.31 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +14.55%. A quarter ago, it was expected that this company would post earnings of $0.42 per share when it actually produced earnings of $0.5, delivering a surprise of +19.05%. Over the last four quarters, the company has surpassed consensus EPS estimates two times. PACS Group, Inc., which belongs to the Zacks Medical Services industry, posted revenues of $1.43 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 1.07%. This compares to year-ago revenues of $1.31 billion. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. PACS Group, Inc. shares have added about 15.9% since the beginning of the year versus the S&P 500's gain of 11%. While PACS Group, Inc. has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for PACS Group, Inc. was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.57 on $1.43 billion in revenues for the coming quarter and $2.23 on $5.71 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Medical Services is currently in the top 33% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Natera (NTRA), another stock in the same industry, has yet to report results for the quarter ended June 2026. The results are expected to be released on August 6. This genetic testing company is expected to post quarterly loss of $0.44 per share in its upcoming report, which represents a year-over-year change of +40.5%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Natera's revenues are expected to be $657.24 million, up 20.2% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report PACS Group, Inc. (PACS) : Free Stock Analysis Report Natera, Inc. (NTRA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

SALT LAKE CITY, July 28, 2026--(BUSINESS WIRE)--PACS Group, Inc. (NYSE: PACS) ("PACS" or the "Company") announced today that it intends to report its financial results for the second quarter ended June 30, 2026, on Tuesday, August 4, 2026, after the stock market closes. Management will host a call on Wednesday, August 5, 2026, at 11:30 a.m. ET to discuss the financial results and related information. PACS Group invites current and prospective investors to listen to the call via webcast by going to the Investors section of the PACS Group website at https://ir.pacs.com/ or by visiting https://event.choruscall.com/mediaframe/webcast.html?webcastid=MSOaC8tI or by dialing 877-407-0621 / 1-215-268-9899. A recording of the call will be available for replay via the website for 30 days following the call. The Company’s press releases, SEC filings, public conference calls, webcasts and website frequently disclose information that may be material to investors, and the Company encourages investors and others interested in the Company to regularly monitor those outlets for important Company information. About PACS™ PACS Group, Inc. is a holding company investing in post-acute healthcare facilities, professionals, and ancillary services. Founded in 2013, PACS Group is one of the largest post-acute platforms in the United States. Its independent subsidiaries operate 324 post-acute care facilities across 17 states serving over 31,900 patients daily. More information about PACS is available at https://IR.pacs.com. The information included on that website is not incorporated into this press release. Forward-Looking Statements This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as "expect," "intends," "will," "anticipates," "estimates" and variations of such words and similar future or conditional expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding the Company’s expectation of releasing earnings and holding its earnings call. Forward-looking statements are based on management’s current expectations based on information currently available to the Company. Forward-looking statements are subject to known and unknown risks, uncertainties and assumptions, and actual results or outcomes may differ from those expressed or implied in the forward-looking statements due to various factors. All forward-looking statements speak only as of the date of this press release and, except as required by applicable law, the Company has no obligation to update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. View source version on businesswire.com: https://www.businesswire.com/news/home/20260728548442/en/ Contacts Investors: [email protected]: Brooks StevensonVP Corporate Communication90 S. 400 W. Suite 700Salt Lake City, UT 84101T: [email protected]://www.pacs.comhttps://ir.pacs.com

PACS Group, Inc.'s (NYSE:PACS) strong earnings report was rewarded with a positive stock price move. Our analysis found some more factors that we think are good for shareholders. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. In high finance, the key ratio used to measure how well a company converts reported profits into free cash flow (FCF) is the accrual ratio (from cashflow). In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'. That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth. Over the twelve months to March 2026, PACS Group recorded an accrual ratio of -0.14. Therefore, its statutory earnings were quite a lot less than its free cashflow. In fact, it had free cash flow of US$381m in the last year, which was a lot more than its statutory profit of US$243.8m. Over the last year, PACS Group's free cash flow remained steady. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates. PACS Group's accrual ratio is solid, and indicates strong free cash flow, as we discussed, above. Based on this observation, we consider it likely that PACS Group's statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 2 warning signs with PACS Group, and understanding these should be part of your investment process. This note has only looked at a single factor that sheds light on the nature of PACS Group's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.