What operational changes led to the noticeable rate growth and improved occupancy in the ramping cohort, and what's expected going forward?

The ramping cohort benefits from solid facility leadership building community reputation, leading to increased confidence from consumers, partners, and payers. This results in more managed care agreements, increased occupancy, and skilled mix. Stabilization in labor costs (reduced overtime, agency usage) also expands margins. The company expects continued upside as these facilities mature. “As those facilities also stabilize, you see stabilization and 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.”

How critical are PACS's quality metrics in contracting and securing referral sources?

Quality is fundamental to their business thesis. Many payers have quality thresholds for participation in plans, and high quality ensures PACS has a "seat at the table" for contract negotiations. Combined with density in markets, quality is the best way to negotiate favorably. “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, threshold -- quality thresholds that is. And so if you are performing below those thresholds, than you typically are excluded from conversations around those new contracts.”

How is PACS thinking about automation/AI to improve efficiencies and free up clinicians for direct care?

PACS sees good use cases for AI, focusing on compliance. They are using AI to identify patient needs and care levels from hospital histories, saving clinician time and improving care capture. They envision further use in scrubbing documentation. The goal is to increase efficiency, potentially expand margins, and allow clinicians more patient interaction. “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.”

PACS

PACS Group (PACS) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Health Care· Aug 5, 2026

Source: earnings call transcript

Executive summary

PACS Group Q2 FY26 — Strong Revenue and Adjusted EBITDA Growth with Operational Improvements

PACS Group delivered strong Q2 FY26 results, driven by operational improvements across its existing portfolio, including increased occupancy and skilled mix. The company is actively integrating new acquisitions, such as the Eduro Healthcare facilities, while maintaining a conservative balance sheet and addressing ongoing government investigations and internal control remediation efforts. The focus remains on high-quality care and disciplined growth.

Highlights

Revenue increased 9.1% year-over-year to $1.43 billion.
Adjusted EBITDA grew 25% year-over-year to $166.8 million.
Adjusted EBITDA margin expanded by 150 basis points to 11.7%.
Same-store occupancy increased by 150 basis points to 90.6%.
83.6% (239 facilities) of skilled nursing facilities with reported CMS quality measure ratings were 4 or 5 stars.

Concerns

Government investigations continue to progress, with timing of resolution unknown.
Material weaknesses in internal control over financial reporting are being remediated, expected by year-end.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year revenue	$5.75 billion to $5.85 billion high materiality	FY26	High
Full-year adjusted EBITDA	$640 million to $660 million high materiality	FY26	High
Closing of remaining Eduro facilities	Remaining 14 facilities to close medium materiality	Q3 FY26 and Q4 FY26	Medium
Future acquisitions	Announce and close on other facilities medium materiality	Before year-end · FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Same-store Skilled Nursing Includes 284 skilled nursing facilities operated as of the beginning of 2025, providing a meaningful year-over-year view of underlying portfolio performance. Consistent with Q1 revenue growth of 6.1% (excluding supplemental WQIP payments). Occupancy: 90.6%Occupancy change: up 150 basis pointsSkilled mix: 29.7%Skilled mix change: up from 29.2%	$1.35 billion	5.8%	—	—
Total Skilled Nursing Portfolio Overall portfolio performance, with occupancy significantly above the industry average of 79.5%. Occupancy: 90.4%Occupancy change: up 180 basis pointsPrior year occupancy: 88.6%Skilled mix: 30%Skilled mix change: up 100 basis pointsPrior year skilled mix: 29%	—	—	—	—
Mature Facilities These facilities have gained tenure within the PACS model and demonstrate strong performance. Number of facilities: 184Occupancy: 93.8%Skilled mix: 31.9%Average CMS quality measure rating: 4.5	—	—	—	—
Ramping Facilities Facilities progressing through the integration life cycle, showing strong improvement and substantial upside potential. Number of facilities: 100Occupancy: 87.7%Skilled mix: 26.9%	—	—	—	—
New Facilities Recently acquired facilities in the initial stages of integration. Number of facilities: 6Occupancy: 78.7%Skilled mix: 27.2%	—	—	—	—

PACS operating KPIs by quarter

PACS operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change vs prior quarter
Facilities	321 As of December 31, 2025, PACS operates 321 facilities across 17 states, caring for more than 31,700 patients daily and supported by over 47,000 dedicated team members. Source: earnings call transcript	323 As of March 31, 2026, PACS operated 323 facilities across 17 states with approximately 35,500 total beds, including roughly 32,700 skilled nursing beds and 2,700 assisted living beds -- across this platform, we are caring for approximately 31,900 patients daily. Source: earnings call transcript	324 As of June 30, PACS operated 324 health care facilities across 17 states with 35,631 total beds, including 32,790 skilled nursing beds and 2,841 assisted living beds. Source: earnings call transcript	+0.3%
Patients	31.7K+ As of December 31, 2025, PACS operates 321 facilities across 17 states, caring for more than 31,700 patients daily and supported by over 47,000 dedicated team members. Source: earnings call transcript	~31.9K As of March 31, 2026, PACS operated 323 facilities across 17 states with approximately 35,500 total beds, including roughly 32,700 skilled nursing beds and 2,700 assisted living beds -- across this platform, we are caring for approximately 31,900 patients daily. Source: earnings call transcript	31.9K+ Across this platform, our teams care for more than 31,900 patients each day, supported by approximately 48,000 employees. Source: earnings call transcript	—
Employees	47K+ As of December 31, 2025, PACS operates 321 facilities across 17 states, caring for more than 31,700 patients daily and supported by over 47,000 dedicated team members. Source: earnings call transcript	—	~48K Across this platform, our teams care for more than 31,900 patients each day, supported by approximately 48,000 employees. Source: earnings call transcript	—
Total operating beds	35.379K Today, our portfolio includes 35,379 total operating beds, of which 32,854 are skilled nursing beds and 2,525 are assisted living beds, which span across 17 states, reflecting a scaled and geographically diversified footprint. Source: earnings call transcript	~35.5K As of March 31, 2026, PACS operated 323 facilities across 17 states with approximately 35,500 total beds, including roughly 32,700 skilled nursing beds and 2,700 assisted living beds -- across this platform, we are caring for approximately 31,900 patients daily. Source: earnings call transcript	35.631K As of June 30, PACS operated 324 health care facilities across 17 states with 35,631 total beds, including 32,790 skilled nursing beds and 2,841 assisted living beds. Source: earnings call transcript	—
Total operating beds Skilled Nursing	32.854K Today, our portfolio includes 35,379 total operating beds, of which 32,854 are skilled nursing beds and 2,525 are assisted living beds, which span across 17 states, reflecting a scaled and geographically diversified footprint. Source: earnings call transcript	~32.7K As of March 31, 2026, PACS operated 323 facilities across 17 states with approximately 35,500 total beds, including roughly 32,700 skilled nursing beds and 2,700 assisted living beds -- across this platform, we are caring for approximately 31,900 patients daily. Source: earnings call transcript	32.79K As of June 30, PACS operated 324 health care facilities across 17 states with 35,631 total beds, including 32,790 skilled nursing beds and 2,841 assisted living beds. Source: earnings call transcript	—
Total operating beds Assisted Living	2,525 Today, our portfolio includes 35,379 total operating beds, of which 32,854 are skilled nursing beds and 2,525 are assisted living beds, which span across 17 states, reflecting a scaled and geographically diversified footprint. Source: earnings call transcript	2,700 As of March 31, 2026, PACS operated 323 facilities across 17 states with approximately 35,500 total beds, including roughly 32,700 skilled nursing beds and 2,700 assisted living beds -- across this platform, we are caring for approximately 31,900 patients daily. Source: earnings call transcript	2,841 As of June 30, PACS operated 324 health care facilities across 17 states with 35,631 total beds, including 32,790 skilled nursing beds and 2,841 assisted living beds. Source: earnings call transcript	+5.2%
Occupancy rate	89.1% Total occupancy stands at 89.1% with our mature facilities delivering exceptional 94.9% occupancy, up from 94.4% last year. Source: earnings call transcript	90.9% Total occupancy for all facilities for the quarter was 90.9%, compared to 89.2% in the prior year and continuing to significantly outpace the industry average of approximately 79%. Source: earnings call transcript	—	+1.8 pt
Occupancy rate Mature Facilities	94.9% Total occupancy stands at 89.1% with our mature facilities delivering exceptional 94.9% occupancy, up from 94.4% last year. Source: earnings call transcript	94.8% Our mature facilities remained highly stable, operating at 94.8% occupancy with skilled mix of 33% and which continues to reflect the strength and consistency of our longer-tenured operations. Source: earnings call transcript	93.8% 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. Source: earnings call transcript	-1 pt
Occupancy rate Ramping facilities	—	88.9% Our ramping facilities averaged 88.9% occupancy with skilled mix continuing to improve, reflecting ongoing operational progress as these facilities move toward mature performance levels. Source: earnings call transcript	87.7% 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. Source: earnings call transcript	-1.2 pt
Occupancy rate New facilities	—	82.7% Our new facilities averaged 82.7% occupancy, with skilled mix of 26.5%, reflecting the early stages of integration and stabilization as these facilities continue progressing towards mature performance levels. Source: earnings call transcript	78.7% 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. Source: earnings call transcript	-4 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

Eduro Healthcare Acquisition of operations of 34 skilled nursing facilities.

The portfolio includes 3,633 skilled nursing beds across Texas, Montana, South Dakota, North Dakota, New Mexico, and Utah. Operations of the first 20 facilities in Texas closed on August 1, 2026.

Risks & headwinds

Government investigations

Timing of resolution unknown

Mitigation:Fully cooperative and engaged with the government; investments made to strengthen organization, enhance infrastructure, and reinforce compliance and reporting processes.

Material weaknesses in internal control over financial reporting Expected to be remediated by end of FY26

Remediation plan actively advancing, substantial progress made

Mitigation:Strengthening leadership team, enhancing compliance department, and implementing additional controls across key areas of the business, particularly within revenue processes.

What to watch in Q3 FY26

Remediation of material weaknesses in internal control over financial reporting

By end of FY26

Current Actively advancing remediation plan, substantial progress made

Target Remediation completed

Why it matters

Critical for financial reporting integrity and investor confidence.

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.

Find out whether PACS delivers this. Inve re-checks your case every morning.

Q&A highlights

What gives management confidence in stronger earnings growth for the back half of the year, given the updated guidance?

Management attributes confidence to continued strength across all cohorts (occupancy, skilled mix, quality, cash flow) in H1. The guidance is disciplined, reflecting normal integration considerations for the Eduro transaction, with only a modest contribution from the 20 closed Texas facilities and excluding remaining Eduro or future acquisitions.

“we feel very good about the momentum in our business. And -- but we do want to be disciplined in our guide. So the rate reflects the continued strength we saw across all of our cohorts in the first half, including occupancy, skilled mix, quality and cash flow.”

asked by Benjamin Rossi · answered by Jason Murray

3 min read 7 chapters

Detailed narrative

Operational Momentum and Portfolio Performance

PACS Group reported strong Q2 FY26 results, with revenue up 9.1% and adjusted EBITDA up 25%, reflecting sustainable operating model execution. The existing portfolio drove performance, with same-store revenue growth of 5.8% and a 150 basis point increase in same-store occupancy, demonstrating organic growth and the effectiveness of their locally led, centrally supported model.

Overall occupancy for the total skilled nursing portfolio increased by 180 basis points to 90.4%, significantly above the industry average of 79.5%.

Quality Outcomes and Clinical Excellence

The company highlighted significant improvements in quality, with 83.6% (239 facilities) of skilled nursing facilities achieving 4 or 5-star CMS ratings. A case study of a California facility successfully graduating from a 'special focused facility' designation underscored PACS's ability to turn around clinically and operationally challenged assets through strong local leadership and support.

This focus on quality is seen as a primary driver of financial success, building trust with hospitals, payers, and patients.

Acquisition Strategy and Eduro Transaction

PACS is returning to an active acquisition phase, having closed on 20 of 34 skilled nursing facilities from Eduro Healthcare in Texas on August 1, with the remaining 14 expected to close in Q3/Q4. This transaction adds significant density in Texas and expands presence in other markets, aligning with PACS's disciplined strategy to improve clinical quality and create long-term value.

The acquired Eduro facilities, while having positive EBITDA margins, are expected to see further improvement in quality measures, occupancy, and skilled mix under PACS's model.

Financial Strength and Capital Allocation

The company ended Q2 with $756.6 million in available liquidity, including $164.5 million of cash, and a net leverage of 0.1x, providing flexibility for investments, acquisitions, and real estate ownership. They deployed $104.3 million to acquire real estate in Q2, bringing the H1 total to $190.8 million, now owning the underlying real estate for 64 of their operated facilities.

This conservative leverage profile is considered an important strategic advantage.

Guidance Increase and Future Outlook

PACS raised its full-year revenue guidance to $5.75 billion-$5.85 billion and adjusted EBITDA guidance to $640 million-$660 million, reflecting confidence in existing portfolio performance and integration capabilities. The updated guidance includes a modest contribution from the 20 closed Eduro facilities but excludes the remaining 14 and any future acquisitions. The company anticipates continued high performance in the second half of the year.

Internal Controls and Government Investigations

The company is actively remediating material weaknesses in internal control over financial reporting, expecting completion by year-end, and continues to cooperate with ongoing government investigations, expressing confidence in their ability to navigate these matters responsibly. They emphasize that financial statements are prepared in accordance with GAAP and fairly present the company's financial position.

Technology and AI Integration

PACS is actively exploring and implementing AI tools to enhance operational efficiencies, particularly in patient assessment and documentation. The goal is to identify patient needs, capture care elements, save clinician time, and improve quality measures. This strategic use of technology aims to free up clinicians for direct patient care and potentially expand margins, while ensuring compliance with privacy regulations.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.