Greetings. Welcome to PACS Group Fourth Quarter Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Mark Hancock, Executive Vice Chairman and Interim Chief Financial Officer. Thank you, and you may begin.

Thank you, and good afternoon, everyone. Thank you for joining us for our earnings call. Before we begin the prepared remarks, we would like to remind you that this afternoon, PACS Group issued a press release announcing its fourth quarter and full year 2025 results. An investor presentation was published and is available on the Investor Relations section of pacs.com. I'd like to remind everyone that, during the course of today's conference call, we will discuss certain forward-looking information, including 2026 guidance for 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 2025 Form 10-K and our other SEC filings. During this call, we will discuss certain non-GAAP financial measures, including 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 measures, 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.

Thanks, Mark, and thank you all for joining us today. Today marks a very important milestone for PACS as we report our fourth quarter and full year 2025 results. This filing reflects a full year of performance as a scaled public company and highlights the significant progress we've made across the organization. We're especially proud to reach this point while delivering record performance, which is a testament to the strength of our platform, the dedication of our teams and our continued focus on operational excellence. The past year required significant focus and discipline across the organization as we continued to scale following the transformative growth of 2024. As our footprint expanded, we enhanced our infrastructure, systems and compliance structure to support a larger and more complex platform. We believe that work further positions PACS for sustainable growth as a public company. And as we enter 2026, we do so optimistically and expect a continued steady reporting cadence and disciplined execution that defines our operating model. Operationally, 2025 was defined by integration and performance. Following the transformative acquisition activity in 2024, our primary focus was successfully assimilating those facilities into the PACS operating model and driving measurable improvement across our expanded footprint. At the same time, we executed on 8 additional strategic acquisitions in 2025, all within our existing markets, further increasing density and deepening local scale. At the center of our performance remains our locally led centrally supported operating model. Our administrators and local leadership teams are empowered to make clinical and operational decisions closest to the patient where they matter most. At the same time, PACS Services provides the centralized support infrastructure, including accounting, compliance, HR, IT and regulatory expertise. This structure allows our teams to remain laser-focused on patient outcomes. This coordinated structure allows us to move with…

Thank you, Jason. Our fourth quarter and full year 2025 results reflect the strength of our operating platform and the disciplined execution across a significantly expanded portfolio. Let me begin with our fourth quarter performance. Revenue for the quarter was $1.36 billion, up approximately 12% over the same period in the prior year. Net income totaled $59.8 million for the quarter. Adjusted EBITDAR was $237.7 million, while adjusted EBITDA was $142.1 million. Fourth quarter performance reflects continued occupancy strength, stable skilled mix trends and consistent execution. Now turning to the full year 2025 results specifically. For the year ended December 31, 2025, total revenue was $5.29 billion, representing approximately a 29% growth increase over 2024. Net income for the full year was $191.5 million, with diluted earnings per share coming in at $1.22 per share. Adjusted EBITDAR was $883.9 million and adjusted EBITDA for the full year totaled $505 million. These results represent record performance for PACS and demonstrate our ability to scale profitably while maintaining operational discipline and investing in quality across our platform. From a portfolio standpoint, total occupancy for the year averaged 89.1%. Mature facilities continue to perform at a very high level, averaging 94.9% occupancy, which was up 0.5 from the prior year, reflecting sustained demand and clinical consistency across our established operations. Ramping facilities averaged 86.3% occupancy, which was down from over 93% in the prior year. This year-over-year change, however, reflects the graduation of facilities within certain cohorts and the corresponding shift between those buckets. As facilities acquired in late 2023 and early 2024, many of which entered the portfolio at lower starting occupancy levels, those facilities progressed into ramping status during 2025. While these facilities are still in the earlier stages of stabilization relative to our longer tenured ramping operations, we are seeing…

Thanks, Mark. And as Mark mentioned, we expect the full year to deliver record revenue and adjusted EBITDA, and our performance year-to-date has already reached record levels for the company. This continued momentum highlights the strength of our model and our teams throughout the country. We intend to continue proving that strength quarter after quarter. We're energized and moving forward with discipline and focus, and we look forward to demonstrating our ability to execute and deliver results for both patients and shareholders. So with that, operator, I believe we're ready for questions.

[Operator Instructions] Our first question comes from David MacDonald with Truist.

Just a couple of quick questions. I guess for starters, look, we're constantly hearing the conversation around affordability, cost-effective, high-quality care. I'm wondering if you guys can just talk a little bit about your payer conversations and potential share gain opportunities, just given the quality ratings that you guys are putting forth, and then if, kind of, you look within post-acute facility-based, where you stand in terms of cost effectiveness.

Yes. Thanks for the question. This is Josh Jergensen. This has always been a part of the company's strategy. As we go into these facilities upon acquisition, we deploy our operating model, which begins with providing high-quality care. And as you mentioned, we feel that as we move those facilities toward the quality metrics that we've been able to prove out through the new ramping and mature cohorts, we become a very attractive partner for really any of the insurers in the space that are looking for places to send their patients with high-quality care, access to bed, bed availability, density. And so our ability to sit at the table and negotiate really strong contracts is something that we've begun to see play out, particularly as we have these facilities moving from new ramping to mature. So we believe this is only going to increase, and we've seen that even in our mature facilities as they continue to increase the percentage of their skilled mix that's contracted with managed care. And those relationships continue to expound, and we look forward to moving those facilities from lower quality, as they enter into our portfolio, to higher quality, and we believe that, that's going to continue to be a model that flows through and creates margin expansion for us.

And then, guys, I guess just a couple of other ones. Just -- you mentioned briefly kind of the M&A pipeline. I was wondering if you could provide any more detail there. That kind of 20-ish type of number, how we should still be thinking about it annually? And I would assume we should expect that you guys, where you have the opportunity, will look to continue to acquire the real estate along with the M&A transactions?

Yes, David. So yes, I mean, I think in regards to guidance, consistent with kind of our historical practice, we've baked in kind of a nominal number of facilities being acquired in 2026 to the tune of about 5 facilities per quarter with nominal revenue as those come on because the -- as you know, we typically acquire underperforming assets that are very low occupied, 60% to 70% occupied when you take them on, so with nominal revenue and effectively 0 margin. So that's what's included in the guidance, and maybe I'll let Josh touch on kind of the pipeline.

Yes. Pipeline, I would say, is very robust right now. We're starting to see a number of deals come through in very attractive areas as we continue to mature in the way that we evaluate deals. We feel really confident as we start to align the due diligence we're doing with deals that we're starting to see come up. And so, we're very excited. We also remain very strategic in the way that we go about these deals. We want to make sure that the model that we have translates well into taking these distressed facilities, deploying our model and have them be successful. And always, through the course of these acquisitions, we're looking at the opportunity, as you questioned at the end, the way that we evaluate the real estate. If there's an opportunity for us to take on both real estate and operations, we're going to take those opportunities as we strengthen and look to strengthen the balance sheet. But being an operator who's willing to partner with others who have capital to deploy and have access to deals, we also feel confident in our position with each of them as a high-quality operator and tenant of those facilities. And we've proven the ability to do both of those things. And I would imagine, as we continue to progress, you would see consistency in both operating facilities and the activity and use of capital being used to go out and find opportunities that include real estate as well.

Okay. And then, guys, just last one. You mentioned the San Diego area de novo. I'm just curious, is there potentially a chance that you could see maybe a little bit of de novo activity with a little bit more frequency? I mean I don't need to explain to you, California is probably one of the more difficult states. If you look across your footprint, are there some other states where maybe a little bit more -- doing a de novo here and there would make some more sense in terms of on a go-forward basis?

Yes. I think everyone can see that, historically, the de novo development hasn't been the primary driver of our growth strategies as acquisitions have generally offered more attractive risk-adjusted returns and faster integration into our platform, and that's what makes those incredibly attractive. That being said, there are many opportunities to add high-quality product into an industry that has a number of assets that are old and dilapidated and need investment. And so while not opposed to continuing to do that, if there are states and areas where it makes sense to go through the process and the capital investment to add additional beds, we believe that will be a part of the strategy. As we look to the future, we would envision that it would probably look similar to how it has in the past, at least in the short term, where more of our acquisition will be driven by existing facility acquisition.

Okay. And guys, just one last one for me. Just coming back to M&A. Anything that you would call out in terms of pricing in terms of what you're seeing relative to these opportunities, either softening or strengthening in the pricing environment in terms of what you're looking at to have to pay to acquire some of these things?

Yes, David. I mean we have seen price increases over recent years, right, with inflation and real estate prices going up and that being ultimately reflected in some of the leases that -- whether we acquire it via just operations or even the real estate cost per bed. And so we continue to see that in certain markets, but we also see that also starting to plateau in pricing versus, again, kind of the accelerated pricing we've seen in recent years. And so -- but we see a number of facilities, hundreds of facilities that come through our potential M&A pipeline. And we generally acquire and close on a very small fraction of those. So we are very selective and opportunistic, and we are disciplined in kind of our -- making sure that those facilities meet our investment profile.

The next question comes from the line of Ben Hendrix with RBC.

Congratulations on the quarter.

Yes. Thanks, Ben.

You guys will be pretty well positioned for some of the changes in the value-based purchasing program for skilled nursing. But just wondering if you had any early observations on what you're seeing with the addition of the staffing measures and also the infection prevention measure in value-based purchasing for fee-for-service Medicare.

Yes, I'll take that one. This is Josh again. Any time I think, as an organization, we see clinical quality tied to reimbursement, we feel very confident. Our model has always consistently began with care and the way that we provide our service to our patients, focusing on things like rehospitalization rates, focusing on staffing to acuity, educating our staff, training them, investing in the physical plans, which allows our facilities to be in a position to not only accept those patients, but do an excellent job taking care of them. And you see that through our clinical results. And so as reimbursement is tied to quality metrics and other things, we believe that we're positioned as well, if not better, than anyone else in the industry to actually see that be a net positive rather than something that's going to take away from future ability for the company to be financially successful.

Great. And then also along the same lines, the Transforming Episode Accountability Model or TEAM model, again, I think this -- it seems like this would be something that you all would be very well positioned for, but just wanted to get any -- that in your markets, if it's impacting your facilities or if you're seeing any change in referral sources?

Very beginning stages of these programs, and I think each of you, obviously, been around the industry for a long time, know that a number of these have come up. This certainly is not the first. It won't be the last. Again, kind of back to the way that I answered the first part of the question, as there's an opportunity to identify ourselves as the top clinical provider in each of the communities that we're in, we believe that positions us in a great way to be the primary provider of choice. And each of these hospitals is becoming a lot more aware of the post-acute environments that they're relying on for discharge of their patients. Health plans are also very aware of what's going on in that regard as well. And we begin to have some of the conversation in a couple of the communities where they're beginning to roll these out. And because of our platform, because of the way we've gone about doing things clinically, because of the bed density, that's another part, and you heard Jason talk about the 8 acquisitions that we took on in existing states and communities where we already operate, that density gives these upstream providers access to beds. And that access allows them to put providers, hospitalists, rounding physicians or nurse practitioners in those facilities with higher volume of patients, improving the quality of care, the access to care. And so again, we feel very well positioned as that and other future programs will roll out because we've always led with care and quality.

There are no further questions at this time. This now concludes our question-and-answer session. I would like to turn the floor back over to Jason Murray for closing comments.

Yes. Thank you, operator, and thank you all for joining us. I believe that's all we have. Have a great day.

Ladies and gentlemen, thank you for your participation. That concludes today's conference. Please disconnect your lines, and have a wonderful day.