PACS Raises Outlook as Revenue Growth Slows
The skilled-nursing operator lifted its full-year adjusted EBITDA forecast to $640 million-$660 million.
PACS Group (PACS), a skilled-nursing operator, reported slower second-quarter revenue growth as occupancy and patient mix eased from the first quarter. Operating margin nevertheless widened to about 7.7% from 6.1% a year earlier.
The quarter marked a shift from PACS's faster start to the year. Revenue was roughly flat sequentially, while adjusted EBITDA declined 2.1% and its margin eased to about 11.7% from roughly 12.0%.
Revenue rose 9.1% from a year earlier to $1.43 billion, decelerating from 11.2% growth in the first quarter. Net income increased 49.8% to $76.3 million, compared with 184.2% growth in the prior quarter, and declined 5.4% sequentially. Adjusted EBITDA rose 24.6% to $166.8 million after growing 74.6% in the first quarter, which included a $16.3 million benefit that hadn't been assumed in guidance.
Same-store skilled-nursing revenue grew 5.8%, down from 8.0% in the first quarter. Same-store occupancy rose 150 basis points from a year earlier to 90.6%, though it slipped from 90.9% sequentially. Overall skilled mix increased 100 basis points from a year earlier to 30.0% and declined from 30.5% in the first quarter.
Ramping facilities drove the strongest year-over-year operating improvement, with skilled mix rising to 26.9% from 22.5% and occupancy increasing to 87.7% from 86.1%. Mature-facility skilled mix fell to 31.9% from 34.2%, while occupancy declined to 93.8% from 94.7%. Across the portfolio, the average daily skilled-nursing rate increased 3.8% to $506.40.
PACS raised its full-year revenue forecast to $5.75 billion–$5.85 billion, increasing both ends by $100 million. The outlook includes a modest contribution from 20 Eduro facilities acquired in Texas, while the prior forecast excluded future acquisitions. The broader Eduro transaction covers 34 facilities and 3,633 beds, with the remaining 14 properties expected to close during the third and fourth quarters.
Investment accompanied the expansion. Real-estate spending increased to $104.3 million from $86.5 million in the first quarter, while available liquidity declined to $756.6 million from $795.1 million. First-half operating cash flow rose 83.3% to $371.8 million, providing funding as investing cash outflow widened to $282.7 million.