In its first earnings call, PACS Group predicts continued growth following a $423 million IPO

Fresh off an initial public offering that raised $423 million in net proceeds, PACS Group is looking for opportunities to expand, CEO Jason Murray said Tuesday during the Utah-based holding company’s first-ever earnings call.

The outlook for the company “remains strong, with a robust acquisition pipeline and continued improvement, both clinically and financially, in the businesses we recently acquired,” he said. “We will continue to look for the right facilities and the right markets for acquisition to expand our operational reach.”

PACS Group is already one of the largest nursing home operators in the country. Founded in 2013, the company’s portfolio includes more than 200 facilities, primarily skilled nursing facilities, but also some residential communities.

Of the total, most (109) are in California, with others in Arizona, Colorado, Kentucky, Missouri, Nevada, Ohio, South Carolina and Texas. One of the more recent transactions was the late 2023 acquisition of seven former ProMedica facilities in California, adding to the group’s expanded footprint in California, which already included more than 10,000 beds.

Chief Financial Officer Derick Apt said in a press release issued in conjunction with the call that the company is “proud of our teams for adding 68 facilities and 12 real estate acquisitions in the last 15 months, bringing the total number of facilities operated to 218 and fully owns property. up to 35.”

Quality leads to results

A highlight of the first quarter, Murray said, was 158 of the provider’s facilities receiving a 4- or 5-star quality rating from the Centers for Medicare & Medicaid Services.

“We believe this is a key driver of our year-over-year revenue growth of 31.9%, or $226.3 million on a same-quarter basis,” the CEO said.

“We are proud of our teams across the country and their continued commitment to the clinical excellence that drives our financial results. We look forward to continuing that momentum into 2024,” Murray added.

Financial highlights

Revenue growth for the quarter was “driven in large part” by the addition of 5,194 beds over the past year, Apt said. The additional beds, he said, led to a 35.3% increase in patient days year over year.

PACS earnings per share for the quarter were $0.38 cents, up 31% from the first quarter of 2023.

In connection with PACS’ real estate acquisitions in the quarter, the company added $39.8 million to its total long-term debt. Of that amount, Apt said, $34.7 million was the acquisition of HUD mortgages as part of the acquisition of a three-property portfolio in Missouri. The mortgages have interest rates ranging from 2.9% to 3.6% with remaining terms of 24 to 26 years, he said.

In terms of guidance, Apt says the company is looking forward to a strong 2024.

“We expect annual sales to be between $3.65 billion and $3.75 billion,” he said. “The midpoint of this is a 19% increase over 2023 sales. And we expected EBITDA (earnings before interest, taxes, depreciation and amortization) to be between $351 million and $361 million.”