Financial Data and Key Metrics Changes - For Q3 2025, the company reported revenue of $1.3 billion, a 31% increase year-over-year [24] - Year-to-date revenue for 2025 reached $3.9 billion, representing a 36% increase compared to the same period in 2024 [25] - Adjusted EBITDA for Q3 was $226.6 million, while year-to-date adjusted EBITDA was $646.2 million [24][25] - Net income for Q3 was $52.3 million, with diluted earnings per share of $0.32 [24] - Total facility occupancy across the portfolio was 89%, with mature facilities achieving 95% occupancy [25] Business Line Data and Key Metrics Changes - The company operates 320 facilities, with a total of 35,202 operating beds, including 32,677 skilled nursing beds and 2,525 assisted living beds [18] - Occupancy in new facilities was 81%, down from 83% the previous year, while skilled mix improved to 25% from 22% [26] - Mature facilities reported a skilled mix increase from 32% to 34% in 2025 [25] Market Data and Key Metrics Changes - The skilled nursing industry is projected to grow, with total expenditures expected to reach $337.4 billion by 2032 [11] - The demographic shift indicates that nearly 20% of the U.S. population will be aged 65 or older by 2030, increasing demand for post-acute care services [11] Company Strategy and Development Direction - The company aims to be the leading provider of post-acute clinical care, focusing on high-quality skilled nursing care [9] - The operational model is locally led and centrally supported, allowing for tailored care while maintaining compliance and oversight [10] - The company plans to continue executing its growth strategy through both organic growth and acquisitions, with a disciplined approach to capital allocation [12][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's renewed commitment to transparency and operational excellence following recent challenges [5][6] - The company anticipates record revenue and adjusted EBITDA for the full year 2025, with guidance indicating annual revenue between $5.25 billion and $5.35 billion [29][31] Other Important Information - The company has strengthened its internal controls and compliance measures following an independent investigation [7][23] - The company has acquired the underlying real estate of five facilities, enhancing its ownership position [28] Q&A Session Summary Question: Can you discuss the momentum in occupancy and skilled mix? - Management noted strong occupancy in mature facilities and emphasized the need for time to implement systems in new and ramping facilities [33][34] Question: What impactful changes have been made regarding controls? - Management highlighted improvements in compliance as a key area of focus, enhancing support for local administrators [36][37] Question: Can you provide insights on cash flow generation and M&A activity? - Cash provided by operations for the first nine months was $407 million, with a strong cash position at the end of Q3 [39] - Management indicated a selective approach to M&A, with a focus on supporting newly acquired facilities [40][42] Question: How should long-term growth be modeled? - Management confirmed that historical growth models remain applicable, with a focus on maintaining a disciplined approach to acquisitions [47][49] Question: What is the embedded EBITDA opportunity across new and ramping cohorts? - Management indicated that new facilities typically operate at a 2-3% margin, improving as they mature [50][51] Question: How is Medicaid rate development being modeled? - Management emphasized the importance of evaluating state Medicaid programs during acquisitions to ensure appropriate reimbursement [52][54] Question: How have local market relationships fared through the audit process? - Management reported strong relationships with local markets, indicating that the operational model has proven effective [59][61] Question: Are there changes in M&A target strategy post-audit? - Management confirmed that the evaluation process for M&A targets remains disciplined, focusing on both turnaround opportunities and well-performing facilities [62][63]

Financial Data and Key Metrics Changes - In Q3 2025, the company reported revenue of $1.3 billion, a 31% increase year-over-year [22] - Year-to-date revenue for the first nine months of 2025 reached $3.9 billion, representing a 36% increase compared to the same period in 2024 [22] - Adjusted EBITDA for Q3 was $226.6 million, while year-to-date adjusted EBITDA was $646.2 million [22] - Net income for Q3 was $52.3 million, with diluted earnings per share of $0.32 [22] - Total occupancy across the portfolio was 89%, with mature facilities achieving 95% occupancy, up from 94% the previous year [23] Business Line Data and Key Metrics Changes - The company operates 320 facilities across the country, providing care to over 30,000 residents daily [8] - The skilled mix in mature facilities increased from 32% to 34% in 2025 [23] - New facilities ended Q3 2025 with 81% occupancy, down from 83% in 2024, while skilled mix improved to 25% from 22% [24] Market Data and Key Metrics Changes - The skilled nursing industry is projected to grow, with total expenditures expected to reach $337.4 billion by 2032 [10] - The demographic shift indicates that nearly 20% of the U.S. population will be aged 65 or older by 2030, increasing demand for post-acute care services [10] Company Strategy and Development Direction - The company aims to be the leading provider of post-acute clinical care, focusing on high-quality skilled nursing care [8] - The operational model is locally led and centrally supported, allowing local leaders to make decisions while maintaining compliance and oversight [9] - The company plans to continue executing its growth strategy through both organic growth and acquisitions, having completed 106 acquisitions in 2024 [16][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver exceptional value and improve clinical outcomes, emphasizing a renewed commitment to transparency and governance [6][11] - The company expects record revenue and adjusted EBITDA for the full year 2025, with guidance indicating annual revenue between $5.25 billion and $5.35 billion [26] Other Important Information - The company has strengthened its compliance and internal controls following an independent investigation, enhancing its operational framework [6][21] - The company has invested in leadership development through its Administrator in Training program, with a retention rate of approximately 78% [19] Q&A Session Summary Question: Can you discuss the momentum in the business regarding occupancy and skilled mix? - Management noted strong occupancy in mature facilities and expressed confidence in improving occupancy and skilled mix in new and ramping facilities as they integrate into the company's operational model [31][32] Question: What are the most impactful changes made regarding controls? - The focus has been on strengthening compliance within the organization, which supports the locally led and centrally supported model [34][35] Question: Can you provide insights on cash flow generation and M&A activity? - Cash provided by operations for the first nine months was $407 million, with a significant increase in cash and cash equivalents compared to the previous year [38] - The company plans to continue being selective in M&A, focusing on supporting and integrating newly acquired facilities [40][41] Question: How should long-term growth be viewed in light of recent changes? - Management indicated that the previous growth models remain applicable, with expectations of continued strong performance and opportunistic acquisitions [45][46] Question: What is the current embedded EBITDA opportunity across new and ramping cohorts? - New facilities typically operate at a 2-3% margin, which can increase to low double digits as they mature [48][49] Question: How is the company modeling growth for Medicaid rates? - The company closely evaluates state Medicaid programs during acquisitions, targeting states with favorable reimbursement structures for higher acuity patients [50][51]

Financial Performance & Growth - PACS Group's 2025 revenue guidance is between $525 billion and $535 billion[10] - The company anticipates approximately 30% revenue growth compared to 2024 at the midpoint of the guidance[12] - Adjusted EBITDA for 2025 is projected to be between $480 million and $490 million[10] - For the nine months ended September 30, 2025, total revenue reached $39310 million[125], and Adjusted EBITDA was $3630 million[125] - Q3 2025 revenue was $13446 million, reflecting a year-over-year increase of approximately 310%[62,82] - Q3 2025 Adjusted EBITDA was $1315 million, a year-over-year increase of approximately 168%[62,82] - Last Twelve Months (LTM) revenue reached $514 billion, with LTM Adjusted EBITDA of $4569 million[81] Operational Metrics - The company operates 320 facilities across 17 states[15] - Mature facilities have an occupancy rate of 948%[22] - Mature facilities have an average skilled mix of 330%[22] - Mature facilities have an average CMS Quality Measure Star Rating of 43[22]

Core Insights - PACS announced its operating results for the third quarter of 2025, indicating a significant update in its financial performance [1] - The company has completed its restatement of financials, ensuring compliance with SEC obligations, which reflects a commitment to transparency and regulatory adherence [1] Financial Performance - The announcement includes the operating results for Q3 2025, although specific financial metrics are not detailed in the provided content [1] - The completion of the financial restatement suggests that previous financial statements may have been adjusted, which could impact investor perception and future financial reporting [1]

Revenue Performance - Revenue for Q3 2025 was $1.34 billion, an increase of 31.0% year-over-year[6] - Year-to-date revenue for 2025 reached $3.93 billion, reflecting a 36.4% increase compared to the prior year period[6] - Full-year 2024 revenue was $4.09 billion, up 31.4% from full year 2023[6] - Total revenue for Q3 2025 reached $1,344,567, a 31.1% increase from $1,026,305 in Q3 2024[24] - Patient and resident service revenue increased to $1,344,302 in Q3 2025, up 31.3% from $1,024,276 in Q3 2024[24] - Skilled nursing services revenue for the nine months ended September 30, 2025, was $3,843,153, a 34.9% increase from $2,849,806 in 2024[30] Net Income and Profitability - Net income for Q3 2025 was $52.3 million, with year-to-date net income of $131.7 million[6] - Net income attributable to PACS Group, Inc. for the nine months ended September 30, 2025, was $131,841, compared to $18,559 for the same period in 2024, representing a 610.5% increase[24] - Operating income for the nine months ended September 30, 2025, was $214,908, compared to $51,094 in 2024, reflecting a 320.5% increase[24] - Net income for the three months ended September 30, 2025, was $52,330,000, a significant increase from $16,210,000 in the same period of 2024, representing a year-over-year growth of 223%[40] Adjusted EBITDA - Adjusted EBITDA for Q3 2025 was $131.5 million, while year-to-date adjusted EBITDA was $363.0 million[6] - Adjusted EBITDA for the three months ended September 30, 2025, reached $131,515,000, compared to $49,082,000 in the same period of 2024, indicating a growth of 168%[40] - Adjusted EBITDAR for the nine months ended September 30, 2025, was $646,216,000, up from $200,954,000 in the same period of 2024, reflecting a substantial increase of 221%[40] - Adjusted EBITDA for full-year 2025 is projected to be between $480 million and $490 million[14] Cash and Liquidity - As of September 30, 2025, cash and cash equivalents totaled $355.7 million, up from $157.7 million as of December 31, 2024[6] - Net cash at the end of the period was $359,056, significantly up from $62,012 at the end of September 2024[25] - Cash provided by operating activities for the nine months ended September 30, 2025, was $407,614, compared to $302,751 in 2024[25] Occupancy and Facilities - Mature facilities occupancy was 94.8%, significantly higher than the industry average of 79%[6] - The occupancy rate for skilled nursing services was 88.9% for the nine months ended September 30, 2025, down from 90.8% in 2024[30] - The occupancy rate for skilled nursing services decreased to 86.2% in 2025 from 94.4% in 2024, reflecting an 8.2% decline[31] - The number of facilities at period end increased to 290 in Q3 2025, up 16.5% from 249 in Q3 2024[28] - The number of operational beds at period end increased to 32,677 in Q3 2025, a 19.0% increase from 27,467 in Q3 2024[30] - The total number of facilities at period end increased by 3 to 79 in new facilities, representing a 3.9% growth[31] - The number of facilities decreased by 31 to 62 in ramping facilities, a decline of 33.3% compared to 93 in 2024[31] Costs and Expenses - The company reported a total rent-cost of services of $95,107,000 for the three months ended September 30, 2025, compared to $72,632,000 in the same period of 2024, which is an increase of 31%[40] - Interest expense for the three months ended September 30, 2025, was $8,529,000, slightly down from $9,029,000 in the same period of 2024, showing a decrease of 6%[40] - Provision for income taxes for the three months ended September 30, 2025, was $23,966,000, compared to $17,446,000 in the same period of 2024, marking an increase of 37%[40] - Depreciation and amortization expenses for the three months ended September 30, 2025, totaled $14,401,000, up from $10,523,000 in the same period of 2024, which is an increase of 37%[40] - The company incurred acquisition-related costs of $101,000 for the three months ended September 30, 2025, compared to $845,000 in the same period of 2024, indicating a decrease of 88%[40] - Stock-based compensation expense for the three months ended September 30, 2025, was $12,516,000, slightly up from $12,304,000 in the same period of 2024, reflecting an increase of 2%[40] - Legal and other costs for the three months ended September 30, 2025, amounted to $19,596,000, with no comparable costs reported in the same period of 2024, indicating new expenditures in this area[40] Patient Acuity and Rates - The average daily rate for Medicare patients increased to $988.41 in mature facilities for the three months ended September 30, 2025, compared to $947.82 in 2024[35] - The skilled mix by revenue for mature facilities increased to 56.4% in 2025 from 55.0% in 2024, indicating a shift towards higher acuity patients[34] - The average daily rate for total skilled patient payors increased to $824.34 in 2025 from $805.90 in 2024[35] - The skilled mix by nursing patient days for new facilities increased to 24.7% in 2025 from 22.3% in 2024, indicating improved patient acuity[34] - Skilled nursing services revenue for new facilities increased by $143,808 or 19.3% to $887,886 in 2025 from $744,078 in 2024[31]

Operations and Facilities - As of September 30, 2025, the company operates 320 facilities across 17 states, serving over 31,100 patients daily[180] - The number of operational beds increased by 5,210 to 32,677 as of September 30, 2025, compared to 27,467 in 2024[190] - The number of facilities at the end of the period rose to 290, reflecting a 16.5% increase from 249 facilities in 2024[193] - The company added 495 skilled nursing beds and 271 assisted living beds through acquisitions during the nine months ended September 30, 2025[187] - The company disposed of one facility with 120 skilled nursing beds during the nine months ended September 30, 2025[187] - The number of facilities increased to 79 at the end of the period, up from 76 in the previous year, marking a 3.9% growth[194] Revenue and Financial Performance - Skilled nursing services revenue for the three months ended September 30, 2025, was $1,310,933, representing a 29.8% increase from $1,010,277 in the same period of 2024[190] - Total skilled nursing services revenue for the nine months ended September 30, 2025, reached $3,843,153,000, up 34.9% from $2,849,806,000 in 2024[193] - Skilled nursing services revenue for mature facilities increased to $746,242,000, a 136.8% increase from $315,154,000 in the same period last year[192] - Patient and resident service revenue increased by $320.0 million to $1.3 billion for the three months ended September 30, 2025, representing a 31.2% increase year-over-year[222] - Total revenue for the three months ended September 30, 2025, was $1.3 billion, up 31.0% from $1.0 billion in the same period of 2024[221] - Skilled nursing services revenue rose by 34.9%, or $993.3 million, to $3.8 billion for the nine months ended September 30, 2025, driven by a 27.3% increase in patient days[234] Occupancy and Patient Metrics - The occupancy rate for skilled nursing services was 89.0% for the three months ended September 30, 2025, down from 90.5% in 2024[190] - Occupancy rate for skilled nursing services across all facilities was 88.9%, a decrease of 1.9% from 90.8% in the prior year[193] - The average Quality Measure (QM) Star rating for Mature facilities was 4.3 with an occupancy rate of 95% as of September 30, 2025[181] - Actual patient days for mature facilities increased to 4,025,794, a 117.5% increase from 1,850,627 in the same period last year[193] Cost and Expenses - Cost of services increased by $196.7 million to $1.0 billion, a 23.1% rise, primarily due to a $129.9 million increase in salaries and wages[226] - General and administrative expenses increased by $31.9 million to $102.5 million, driven by higher salaries and significant legal expenses related to ongoing investigations[228] - Total operating expenses increased by $885.3 million to $3.7 billion for the nine months ended September 30, 2025, a 31.3% increase compared to the same period in 2024[232] - General and administrative expenses increased by $47.4 million to $301.6 million for the nine months ended September 30, 2025, driven by a 28.3% increase in salaries and wages[239] Income and Profitability - Operating income for the three months ended September 30, 2025, was $86.3 million, a substantial increase of 275.7% compared to the previous year[221] - Net income for the three months ended September 30, 2025, was $52.3 million, a 222.8% increase from $16.2 million in the same period of 2024[221] - Net income for the nine months ended September 30, 2025, was $131.7 million, reflecting a 587.5% increase compared to $19.2 million for the same period in 2024[232] Cash Flow and Liquidity - Cash provided by operating activities was $407.6 million for the nine months ended September 30, 2025, compared to $302.8 million for the same period in 2024[250] - Cash and cash equivalents as of September 30, 2025, were $355.7 million, reflecting a strong liquidity position[246] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $407.6 million, an increase of $104.9 million compared to the same period in 2024[252] Debt and Financing - The total principal amount outstanding under the Amended and Restated Credit Facility as of September 30, 2025, was $100.0 million[246] - As of September 30, 2025, the company had $100.0 million of variable rate debt, with no interest rate hedge in place[268] - The company had outstanding indebtedness of $253.0 million under mortgage loans and promissory notes, all at fixed interest rates as of September 30, 2025[271] Interest Rate Sensitivity - A hypothetical 10% increase in interest rates would increase annual interest expense by approximately $0.7 million, while a 10% decrease would decrease it by the same amount[268] Operational Efficiency - Days sales outstanding improved from 57.8 days as of September 30, 2024, to 50.4 days as of September 30, 2025, reflecting operational efficiencies[252]

Facility Operations - As of June 30, 2025, the company operates 316 facilities across 17 states, serving over 30,500 patients daily[190] - The number of facilities at period end rose to 287, representing a 34.1% increase from 214 in 2024[204] - The total number of post-acute care facilities increased from 220 to 316, marking a 43.6% growth[238] - The company added 119 skilled nursing beds and 175 assisted living beds during the six months ended June 30, 2025[197] - The company disposed of one facility with 120 skilled nursing beds during the six months ended June 30, 2025[197] Revenue and Financial Performance - Skilled nursing services revenue for the three months ended June 30, 2025, was $1,278,145, a 37.9% increase from $926,955 in the same period of 2024[201] - Skilled nursing services revenue for the six months ended June 30, 2025, increased to $2,532,220, a 37.7% increase from $1,839,529 in 2024[204] - Patient and resident service revenue increased by $373.6 million to $1.3 billion for the three months ended June 30, 2025, representing a 39.9% increase year-over-year[232] - Skilled nursing services revenue rose by $351.2 million to $1.3 billion, driven by a 28.3% increase in patient days[234] - Patient and resident service revenue increased by $731.2 million to $2.6 billion for the six months ended June 30, 2025, a 39.4% increase compared to the same period in 2024[245] - Skilled nursing services revenue rose by 37.7%, or $692.7 million, to $2.5 billion for the six months ended June 30, 2025, driven by an increase in patient days of 1,188,351 or 29.7%[246] Occupancy and Patient Metrics - The occupancy rate for skilled nursing services was 88.6% for the three months ended June 30, 2025, down from 91.0% in 2024[201] - Actual patient days for skilled nursing services increased to 5,182,818, a 29.7% increase from 3,994,467 in 2024[204] - Available patient days for skilled nursing services increased to 5,829,409, a 32.8% increase from 4,389,269 in 2024[204] - The occupancy rate for skilled nursing services decreased to 81.2%, down by 2.5% from 83.7% in 2024[205] Cost and Expenses - Cost of services increased by $258.7 million to $1.0 billion, primarily due to a $168.6 million rise in salaries and wages[238] - General and administrative expenses decreased by 26.6% to $100.3 million, reflecting operational efficiencies[232] - Total operating expenses increased by $630.3 million to $2.5 billion for the six months ended June 30, 2025, a 34.5% increase compared to the same period in 2024[244] - General and administrative expense increased by $15.5 million to $199.1 million for the six months ended June 30, 2025, driven by a 36.0% increase in salaries and wages[252] Income and Profitability - The net income for the three months ended June 30, 2025, was $50.97 million, a 259.9% increase compared to a loss of $31.88 million in the prior year[232] - Net income for the six months ended June 30, 2025, was $79.3 million, compared to $2.9 million for the same period in 2024, reflecting a significant increase[244] Cash Flow and Liquidity - Cash and cash equivalents were $294.2 million as of June 30, 2025, with total principal amount outstanding under the credit facility at $142.0 million[259] - Net cash provided by operating activities for the six months ended June 30, 2025, was $202.8 million, an increase of $109.3 million compared to the same period in 2024[266] - Cash, cash equivalents, and restricted cash at the end of the period on June 30, 2025, totaled $297.6 million, up from $77.9 million at the end of the same period in 2024[264] Debt and Interest Rates - The company had $142.0 million of variable rate debt as of June 30, 2025, with no interest rate hedge in place, exposing it to interest rate fluctuations[282] - A hypothetical 10% increase in interest rates would increase annual interest expense by approximately $0.9 million, while a 10% decrease would decrease it by the same amount[282] - The company had $256.2 million in outstanding indebtedness under mortgage loans and promissory notes, all at fixed interest rates as of June 30, 2025[284] Regulatory and Strategic Considerations - Approximately 72% of SNF revenue in 2022 was derived from government sources, with Medicaid representing 51% and Medicare 21%[195] - The company expects patient and resident service revenue to continue to grow as it executes its acquisition strategy[221] - The company is in a state of forbearance with lenders associated with the credit facility and is in discussions regarding terms for an amendment and waiver[260] - The company is in active discussions with Required Lenders regarding terms of an amendment and waiver to its Amended and Restated Credit Facility[276] - The company has a liquidity requirement to maintain unrestricted cash and certain permitted investments of at least $100 million until audited financial statements for the fiscal year ended December 31, 2024 are delivered[272]

Operations and Facilities - As of March 31, 2025, the company operates 315 facilities across 17 states, serving over 30,400 patients daily[186] - The company added one skilled nursing facility during the three months ended March 31, 2025, increasing total skilled nursing beds by 119[193] - Subsequent to March 31, 2025, the company expanded operations by adding six facilities, contributing 376 skilled nursing beds and 271 assisted living beds[194] - The number of facilities at the end of Q1 2025 increased to 139 from 65 in Q1 2024, a growth of 113.8%[200] Revenue and Financial Performance - Skilled nursing services revenue for the three months ended March 31, 2025, was $1,254,075, reflecting a 37.4% increase from $912,575 in the same period of 2024[198] - Skilled nursing services revenue for mature facilities increased to $692,159,000 in Q1 2025 from $282,038,000 in Q1 2024, a growth of 145.4%[200] - Patient and resident service revenue increased by $357.6 million to $1.3 billion for the three months ended March 31, 2025, a 38.9% increase compared to the same period in 2024[226] - Skilled nursing services revenue rose by 37.4%, or $341.5 million, to $1.3 billion, driven by an increase in patient days of 615,117, or 31.2%[227] Occupancy and Quality Metrics - The occupancy rate for skilled nursing services was 89.2% for the three months ended March 31, 2025, down from 91.1% in 2024[198] - The average Quality Measure (QM) Star rating for Mature facilities was 4.1 with an occupancy rate of 96% as of March 31, 2025[187] - The occupancy rate for mature facilities improved to 95.5% in Q1 2025 from 94.6% in Q1 2024, an increase of 0.9%[200] Cost and Expenses - Cost of services increased by $287.8 million to $1.0 billion, a 39.1% increase, primarily due to a $170.9 million rise in salaries and wages[230] - General and administrative expense increased by $51.8 million to $98.7 million, primarily due to a $22.8 million rise in legal fees and $12.2 million in stock compensation expense[232] - Rent - cost of services increased to $93.8 million, compared to $63.5 million, driven by new facilities and annual rent escalators[231] Income and Taxation - Net income for the three months ended March 31, 2025, was $28.4 million, a decrease of 18.5% compared to $34.8 million in the same period in 2024[225] - The effective tax rate decreased to 33.6% for the three months ended March 31, 2025, compared to 39.7% for the same period in 2024[235] Cash Flow and Liquidity - Net cash provided by operating activities for Q1 2025 was $150.2 million, an increase of $91.5 million compared to Q1 2024, driven by a $100.4 million increase in cash flows from changes in operating assets and liabilities[245] - Cash used in investing activities for Q1 2025 was $16.4 million, a decrease of $102.3 million compared to Q1 2024, primarily due to no cash used for investments in partnerships or acquisitions[247] - Cash, cash equivalents, and restricted cash at the end of Q1 2025 totaled $290.6 million, up from $93.3 million at the end of Q1 2024[243] Debt and Interest Rate Exposure - The company had $142.0 million of variable rate debt as of March 31, 2025, with no interest rate hedge in place, exposing it to interest rate fluctuations[261] - A hypothetical 10% increase in interest rates would increase annual interest expense by approximately $0.9 million, while a 10% decrease would decrease it by the same amount[261] - The company had $259.5 million in outstanding indebtedness under mortgage loans and promissory notes, all at fixed interest rates as of March 31, 2025[263] Regulatory and Compliance - The company is required to maintain a minimum liquidity of $100 million during the forbearance period, which is set to run until October 31, 2025[254] - The company has entered into multiple forbearance agreements with lenders regarding technical events of default under its credit facility[251] - The company has historically derived a substantial portion of its revenue from Medicare and Medicaid programs, which are subject to inflation adjustments[256]

Financial Performance - For the year ended December 31, 2024, the company generated total revenue of $4.1 billion, representing a CAGR of 29.9% over the last three years[51] - For the year ended December 31, 2024, total operating expenses were $4.0 billion, with net income of $55.3 million and Adjusted EBITDA of $279.5 million[53] - As of December 31, 2024, the company had total long-term liabilities of $3.5 billion[54] - The company had outstanding indebtedness under mortgage loans insured with HUD and two promissory notes to third parties totaling $262.6 million, all at fixed interest rates[550] - As of December 31, 2024, the company had approximately $142.0 million of variable rate debt, with a hypothetical 10% increase in interest rates potentially increasing annual interest expense by approximately $1.0 million[548] Facility Operations - The company operated 138 Mature facilities, 50 Ramping facilities, and 126 New facilities as of December 31, 2024[68] - The average occupancy rate for Mature facilities was 94% as of December 31, 2024, significantly higher than the industry average of 77%[49] - The average occupancy rate for New facilities was 83% as of December 31, 2024[69] - The skilled mix by revenue for Mature facilities was 54% as of December 31, 2024[69] - The company has successfully acquired and integrated over 300 facilities to date, establishing a reputation as an acquiror-of-choice in the industry[92] Revenue Sources - Medicare and Medicaid accounted for 33.8% and 40.4% of routine revenue for the year ended December 31, 2024, respectively[51] - Approximately 72% of SNF revenue in 2022 came from government sources, with Medicaid representing 51% and Medicare 21%[105] - Medicare and Medicaid accounted for 33.8% and 40.4% of the company's routine revenue for the year ended December 31, 2024[124] Industry Trends - The SNF industry in the U.S. comprises around 15,000 facilities serving approximately 1.3 million patients annually, with the top 10 operators representing about 11% of total SNFs [102]. - The number of SNFs has declined from approximately 15,650 in 2017 to about 14,800 in 2024, attributed to compliance challenges and barriers to entry for new operators [104]. - The U.S. population aged 65 and older is projected to nearly double from 2020 to 2060, reaching 95 million, which will increase demand for SNF services [103]. - Total industry expenditures for SNFs are expected to grow from $193.6 billion in 2022 to $283.3 billion in 2031, reflecting a CAGR of 4.3% [108]. Regulatory Environment - The company is subject to inquiries and audits by federal and state agencies, which may impose penalties for regulatory deficiencies[122] - The company received Civil Investigative Demands from the U.S. Department of Justice regarding potential violations of the Federal False Claims Act[123] - The OIG identified over $563 million in overpayments to hospitals for non-compliance with Medicare's post-acute care transfer policy[173] - CMS has increased scrutiny on facilities with high reimbursements for ultra-high therapy, indicating a focus on billing practices[177] - The company must comply with various anti-kickback and self-referral laws, with violations potentially leading to significant penalties[171] Strategic Plans - The company plans to explore additional purchases of real estate assets and new market entries in the future[50] - The company plans to expand its presence through acquisitions and new facility builds, historically completing about 25 acquisitions and one new facility per year [109] - The company aims to enhance its service offerings by exploring ancillary opportunities such as pharmacy and laboratory services, which could provide additional revenue streams [112] Quality of Care - The average QM Star rating for Mature facilities as of December 31, 2024, was 4.3, compared to the industry average of 3.4[49] - The company’s facilities have above-industry average QM Star ratings, reflecting excellence in clinical quality and patient experience[85] - The company has promoted 11 administrators from within its organization in the year ended December 31, 2024, demonstrating a commitment to internal career development[89] - The company maintains a culture of compliance and innovation, focusing on billing integrity and regular facility audits to build trust with payors[84] - The company’s investments in capital improvements and ongoing maintenance aim to enhance the quality of care and patient experience across all facilities[93] Payment Models - The Patient-Driven Payment Model (PDPM) classifies patients into payment groups based on their condition and care needs, impacting Medicare reimbursement levels[128] - The Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program withholds 2% of SNFs' Medicare payments, redistributing 50-70% based on performance metrics[129] - The Balanced Budget Act of 1997 requires a per diem PPS for SNFs, covering all costs related to services for Medicare Part A beneficiaries[127] - The Medicare payment rates for skilled nursing facilities (SNFs) under the SNF prospective payment system (PPS) increased by 4.2% for Fiscal Year 2025[127] - The final rule for FY 2026 updates SNF PPS rates by 3.2%, reflecting a 3.3% market basket increase and a negative 0.7% productivity adjustment[127] Legislative Changes - The Inflation Reduction Act of 2022 extended premium subsidies for private health insurance until the end of 2025, aiding older patients with limited savings[138] - The One Big Beautiful Bill Act, enacted in July 2025, imposes significant reductions in Medicaid funding and requires states to conduct more frequent eligibility redeterminations[139] - The OBBBA limits Medicaid provider payments to 100% of the Medicare rate for expansion states and 110% for non-expansion states, potentially impacting reimbursement rates[139] - The OBBBA establishes a $1.0 million limit for home equity exempted from Medicaid eligibility calculations for long-term care starting January 1, 2028[144] - Proposed legislation continues to emerge at both federal and state levels aimed at improving quality of care and oversight in nursing homes[151] Staffing and Employment - As of December 31, 2024, the company employed 45,680 individuals across 314 facilities, including 26,788 clinicians[114] - The company has a decentralized market-driven operating model that emphasizes local operational autonomy, which enhances responsiveness to patient needs[86] - Federal and state agencies conduct regular surveys to ensure compliance with regulatory standards, with unannounced inspections occurring at least annually[162] - CMS's final rule on minimum staffing standards for skilled nursing facilities will be implemented over three years, facing significant opposition and potential delays[155]

Operations and Facilities - As of September 30, 2024, the company operates 276 facilities across 15 states, serving over 26,400 patients daily[240] - The company added 46 stand-alone skilled nursing operations and 22 assisted living facilities during the nine months ended September 30, 2024, increasing capacity by 4,390 skilled nursing beds and 1,508 assisted living beds[248] - Subsequent to September 30, 2024, the company expanded operations by adding 45 facilities, contributing 5,030 skilled nursing beds and 271 assisted living beds[249] - The number of facilities at period end rose to 249, representing a 26.4% increase from 197 in the previous year[255] - The company acquired 75 facilities since September 30, 2023, contributing to improved operational performance[314] Financial Performance - Skilled nursing services revenue for the three months ended September 30, 2024, was $1,010,277, reflecting a 28.9% increase from $783,834 in the same period of 2023[252] - Skilled nursing services revenue for the nine months ended September 30, 2024, increased to $2,849,806, a 26.9% increase from $2,245,707 in 2023[255] - Total revenue for the three months ended September 30, 2024, was $1.026 billion, a 30.0% increase from $789.2 million in the same period of 2023[279] - Patient and resident service revenue increased by $235.3 million to $1.0 billion for the three months ended September 30, 2024, a 29.8% increase compared to the same period in 2023[280] - Patient and resident service revenue increased by $621.8 million to $2.9 billion for the nine months ended September 30, 2024, a 27.5% increase compared to the same period in 2023[291] - Total revenue for the nine months ended September 30, 2024, was $2.88 billion, a 27.6% increase from $2.26 billion in the same period of 2023[291] Occupancy and Patient Metrics - The occupancy rate for skilled nursing services was 90.5% for the three months ended September 30, 2024, compared to 90.4% in the prior year[252] - Occupancy rate for skilled nursing services decreased slightly to 90.8% from 91.2% year-over-year[255] - Actual patient days for skilled nursing services increased to 6,165,899, a 26.5% rise from 4,873,494 in the previous year[255] - Available patient days for the total facilities increased by 1,442,887 to 6,788,832, a 27.0% increase[255] Revenue Sources and Mix - Approximately 72% of SNF revenue in 2022 was derived from government sources, with Medicaid accounting for 51% and Medicare for 21%[245] - The skilled mix by revenue increased to 50.5% for the three months ended September 30, 2024, up from 49.4% in the same period of 2023[252] - For the three months ended September 30, 2024, Medicare revenue as a percentage of total skilled mix increased to 33.3% from 31.8% in 2023[256] - The skilled mix by revenue for new facilities was 39.3% in 2024, down from 54.6% in 2023[256] Cost and Expenses - Cost of services increased by $211.1 million to $849.6 million, a 33.1% rise compared to the same period in 2023, primarily due to increased salaries and wages[285] - General and administrative expenses rose by $21.0 million to $70.6 million for the three months ended September 30, 2024, with stock compensation expense accounting for $12.3 million of the increase[287] - Rent - cost of services increased to $72.6 million for the three months ended September 30, 2024, compared to $58.4 million in the same period of 2023, driven by new facility additions[286] - Operating expenses increased by $717.7 million to $2.83 billion for the nine months ended September 30, 2024, representing a 34.0% increase compared to the prior year[291] Profitability and Income - Net income decreased by 75.7% to $19.2 million for the nine months ended September 30, 2024, down from $78.7 million in the same period of 2023[291] - The effective tax rate increased to 52.5% for the nine months ended September 30, 2024, compared to 27.1% for the same period in 2023[303] Cash Flow and Financing - Cash and cash equivalents were $49.5 million as of September 30, 2024, compared to $355.7 million as of September 30, 2025[307] - Net cash provided by operating activities for the nine months ended September 30, 2024, was $302.8 million, an increase of $229.4 million compared to the same period in 2023[314] - Net cash used in investing activities for the nine months ended September 30, 2024, was $338.3 million, an increase of $225.5 million compared to the same period in 2023, driven by $140.3 million for real estate acquisitions[316] - The company is in discussions with lenders regarding amendments to its credit facility, with potential borrowing capacity of up to $586.7 million[308] - The total long-term debt additions during the nine months ended September 30, 2024, amounted to $70.1 million, with favorable terms compared to existing debt[319] Market Trends and Industry Insights - The skilled nursing facility industry in the U.S. has seen a decline in the number of facilities from approximately 15,650 in 2017 to about 14,800 in 2024, indicating a growing demand for skilled nursing services[244] - The company’s operational model focuses on acquiring underperforming facilities and converting them into higher-value transitional care facilities, enhancing clinical quality and operational metrics[241]