Awesome. Good morning, and welcome to the 2026 Jefferies Healthcare Services Conference. I am Brian Tanquilut, healthcare services analyst here at Jefferies. Our next fireside chat is with PACS Group. They are one of the largest operators of skilled nursing facilities in the U.S. Joining us today are Jason, Josh, and Carey, the company's management team. Maybe I will start, Jason, if you can just give us a little bit of an overview on PACS and also the state of the union. Yeah, sure, and thanks, Brian. Thanks, everyone. We are excited to be here. PACS is a post-acute healthcare services company. We operate skilled nursing facilities across the country, as was mentioned. Our business model is one where we target underperforming facilities that have not reached their full potential operationally. We have a leadership model and operational model that we deploy in those facilities. We work to turn the operations around and add value to those locations. We started in 2014. I am one of the co-founders of the company, along with my business partner, Mark Hancock. Started with two facilities back in 2014. We have grown today to around 3 58. We have done that, again, largely through the business thesis of taking underperforming and deploying a new operating model to them. The company as we look at this past year in 2026, or I should say in 2026, the first two quarters of 2026, we have been performing at a very high level. We continue to execute on the clinical side, which is key to our success as an organization. We like to think of ourselves as one of the best providers in our sector from a clinical standpoint. The metrics, I think, point to that. We believe strongly that everything that we do, all the success that we have been able to achieve at our facility level as an organization begins with quality care. As we take these underperforming facilities, typically they are broken in many ways. Clinically, they, again, are not performing at the level that they should. As we invest in those facilities, deploy capital, and probably more importantly, deploy the leadership needed for those facilities to turn around, we start to see the clinical product improve and the clinical outcomes improve. That creates a virtuous cycle within the facilities where reimbursement improves, the occupancy levels improve, and the referral patterns improve. So it all begins with care and quality. That is something that we- It is a reputation that we are trying to build for ourselves. I think over the last several years, we have been able to accomplish that. That is a general overview of the company. No, that's awesome. Maybe Carey. Carey's a good longtime friend of mine. When he joined PACS, I was pretty excited. I'll ask you the question, when you joined PACS, why PACS? The other thing is, as you think through the performance of the first half of the year versus what your outlook is for the back half of the year, if you can just walk us through how you expect that to progress. Sure, you bet. First of all, why did I join PACS? Meeting Jason, his other Co-Founder, Mark Hancock, Josh, this team, they're an incredible group of people, high character, high integrity people. Looking at the operating model, that was so important to me, and I've been even more impressed after joining than I was in looking at it previous. This operating team is the finest operating team I've ever had the opportunity to be associated with. They know what drives results, and they focus on those things, and then they produce results. As a CFO, it's great to have that comfort to know that the operating team's going to come through, particularly when you're talking about guidance. You mentioned guidance. We've been really pleased with how the year has gone so far, as Jason mentioned. We went into the year thinking we'd have about $565 million of EBITDA. That was the midpoint of our initial guidance. Our guidance has improved now to a midpoint of $650 million of EBITDA, so improved quite a bit. That means we've had a really strong first and second quarter, and we expect a good third and fourth quarter. We're about halfway to that $650 million mark through the first two quarters of the year, a little less. So we expect a good second half of the year as well. So really pleased to be at PACS, an incredible group of people. My finance organization is a real high-quality organization as well. I'm just trying to make sure I build that finance organization to be able to scale with the growth of the business as we go forward. Josh, maybe I'll turn to you. When Jason was describing the strategy and the model of acquiring relatively underperforming locations or facilities, walk us through what you bring to the table to turn these things around, and what are the KPIs that you track? What are the levers that you pull to drive that growth and the timeline to get an acquired facility to optimal operations? Yeah. As mentioned, both for Jason and myself, we are nursing home administrators. That is our background. That is how we spent the early parts of our career. We understand what a good high-performing facility looks like and one that is underperforming. As he mentioned, our strategy has been, and really our mission has been to take the unfortunate reality that a lot of facilities are underperforming, both clinically and financially, and to be able to go in and to assess what we can do to make improvements. We generally start with assessing the leadership in the facility at the administrator position. The administrator hangs their license. They are responsible to run the day-to-day operations, and unfortunately in our space, we have not always attracted the best and the brightest, the most sophisticated operators. For us, that was a heavy investment that we made early on, was teaching and training, recruiting what I would say is a non-typical nursing home administrator. Someone who is entrepreneurial, who is driven, who cares about the business, but understands that there are levers when you are running a business that you must pull in order to have great outcomes, and have those outcomes be great clinically and also financially. You mentioned KPIs for us. As we assess leaders, oftentimes, either refine the leader that is in place or make a replacement, and we have mentioned a number of times our Administrator in Training program, we think is the best in the business. We have about 50 AITs at this point. That has grown over time with the growth, having a bench of talented individuals who are coming up, experiencing the day-to-day, understand what a good facility looks like, feels like, runs like, is important. We have plenty of resource to do that. As we look at these acquisitions, we are assessing that leadership, and then that leadership is assessing the team. Your director of nursing, your director of therapy, other key department managers who are leading people and processes in the facility are essential. That administrator, we believe, is capable to do those things. Decisions can stay as close to the patient as possible. When that happens, you start to see a buy-in. You start to see people who are dedicated, and have access to what we offer at PACS, which is systems and technology and live information that they can view in the moment to see how they are performing clinically. What changes they can make, what they can do to train and educate their staff to take a more clinically complex patient, do it well, so that they can build a reputation in the community, where the people who are either contracting where their patients are going to go or actually referring patients to a facility are picking your facility to do that. We are tracking quality measures to ensure that we are providing excellent care. As Jason mentioned, that virtuous cycle is when that goes really well, that becomes noted in the community, and they start sending more patients and more clinically acute patients. The KPIs we are usually measuring quality measures, then we are measuring occupancy, which we talked a lot about. How many heads are in the beds, and of those, how many of those are short-term, high acuity patients that generally reimburse higher but need an additional level and quality of care that is essential. We focus on those metrics. But when we talk about deploying into our model, it is assessing people and leadership, which has been foundational to how we have grown as an organization. That is awesome. Jason, maybe as I think about, just broadly speaking, when we take it up to the 30,000 foot view, when we think through the SNF space, where does it stand today in terms of the regulatory environment and how regulators view the space? Because it has ebbed and flowed over the years, right? When you think of RUGs-III, RUGs-IV, right? Sure. From back in the day. How would you pitch that to investors in terms of where the space is in terms of favorability and growth? Yeah. I would characterize it as skilled nursing is a very highly regulated industry. I think that that is an actual competitive advantage that we as a company have because it is an incredibly challenging environment to operate in. You have to have really good people. I think like Josh mentioned, that is one of the competitive advantages I think we have tried to create over the years is to create a culture and a company that is magnetic to attracting highly talented people that can figure out how to operate at a high level, even within these challenging headwinds of regulatory environment. Every state is a little different. Every state has its own regulations that you have to operate within. You have federal regulations as well. It is a very highly regulated industry. As we, again, as a team, as we put together our business plans in every one of these individual facilities, that is why it is so important that we have the right people in the right places. Our administrators really are the lifeblood at what they do. We mentioned we have 350 some odd facilities. We also have 350 some odd administrators, and they are the local leaders of their respective facilities. We have a description of how we describe our operating model as locally led and centrally supported, meaning that every one of our facilities are led by these administrators, are supported by PACS Services, which is our back office function. That is a support function that does help provide that additional level of support in this highly regulated industry for our administrators and their teams to make sure that they are playing within the boundaries of what is required of them and what is appropriate. That is what PACS Services does on the back office side. Then as we provide that support for our administrators and their teams, these are highly entrepreneurial people. They are driven to be the very best at what they do. As we provide them the appropriate resources, we do find ways to succeed in that challenging environment. Again, I guess the short answer would be, we view it as a competitive advantage as a company to be able to operate within such a highly regulated industry. Because of our model. Maybe if I may follow up, what is your view in terms of the growth outlook for the industry today? If you look at, right now we have, I believe, just under 15,000 nursing homes, right about 15,000 nursing homes across the country. We see an aging demographic, and the infrastructure is not going to be able to support that aging demographic. We are already starting to see some of that demographic hit in different states. There is going to have to be either additional infrastructure that is built, like bricks and mortar facilities, to take care of these patients, or there is going to need to be, excuse me. There is going to need to be a change in which we provide other services outside of the skilled nursing realm to take care of this demand that is coming. I think that there is just across our portfolio today, we run just over 90% occupancy, and that is a very high occupancy in comparison to our competition. We see that continuing to grow as we think about new states that we are expanding into. There is going to need to continue to be infrastructure or creative ways in which we create the infrastructure in order to take care of the aging demographic that is there. No, it makes a lot of sense. Josh, I will pivot a little bit here. You just did a deal in Florida that adds 32 facilities. If you walk us through what the integration plan is and the ramp timeline for these facilities as you bring them on board. Yeah, we are excited. Being somebody, I was running, Jason referenced two facilities at the beginning. I was one of the administrators of those two facilities, so I have been here and witnessed the growth and what it takes to onboard facilities. When you talk about integrating them, there is the actual process that is going on right now in these facilities to ensure that we are onboarding staff, that we have staff ready day one to take care of patients. There is an assessment of the IT environment. What does it look like? Traditionally, technology is not always well adapted in these facilities, and we need our people to have access to our electronic health record to have real-time information so they can track KPIs. There will be a process of ensuring that our IT teams are out and actually helping to onboard these facilities. And then there's the actual work of providing the care, getting out into the community, assessing clinical capabilities, finding out from each individual community what we can do and do better in these facilities that have been distressed for a period of time before we're going to be taking them over. We've gotten a little bit of practice, obviously over time, going from 2- 358. We've refined this process of integrating those facilities. We did an acquisition, that part closed on August 1st, so the Aduro acquisition that we talked about prior to this Florida. With a slower acquisition count that we had in 2025, we feel like we're kind of revving the engines up a little bit. We have historically been a growth company, which many of you know, or if you're not familiar with our story, you can see through the numbers. That's been the case. As I mentioned before, our model is to go in to assess the talent that we have, and so that will be a big part of the Aduro acquisition as well as the Florida acquisition that we do and future acquisitions, going in to assess the quality of the teams that we have at each individual facility. Fortunately, we have a pipeline of talent. Fortunately, we have access for even many of these administrators that are capable, that are in spots, not every one of them changes over, that will have access now to new tools, to new processes, policies, procedures, other things that we can deploy that we bring value to because of the size and scale and experience of our organization. We feel well positioned when we talk about onboarding. The Aduro acquisition was a total of 34 facilities, 31 of which have closed, and we anticipate the other three in Q4 closing and then the 32 in Florida for Q4. We feel like we're one of the very few number of providers who can actually grow at that sort of scale. When we talk about portfolio deals and opportunities to be able to successfully integrate those facilities and to make improvements in the space, we feel we're in a great position to do that. So we anticipate this being one of many deals that we're going to do in the future as our space begins to be more consolidated with high-quality operators like PACS. Carey, since Josh talked about the growth through acquisitions that you guys have done, maybe if you can just walk us through how you view the growth algorithm for the business and then maybe your thoughts on the capital structure as you do more of these relatively sizable transactions. Sure. Yeah. We have a significant capacity for growth. We have a balance sheet that almost has no leverage. It is 0.1x leverage. We have plenty of capacity there. Although a lot of the deals we do are ones where we are just taking over the leases and continue to operate and then improving on the performance. We did, with the Aduro acquisition, for the first time, buy some assets that were moderately performing, had some level of EBITDA. We are willing to put out. We want to use our balance sheet some to grow as we move forward. I think you will see us have a rapid pace of growth through the next few years. We have a lot of acquisitions that we are looking at. There is a lot in the pipeline, a very healthy pipeline. When I think about the allocation of capital, those acquisitions are usually the highest and best use of capital. We are looking at. We do buy some real estate, so that is another opportunity for capital allocation. But in each case, we are looking at what is the highest adjusted risk return that we can achieve, and we are allocating capital on a case-by-case basis as the opportunities come to us based on that return of capital. Maybe Jason, I will pass it to you. Just as we think about it, I think you have a stated goal of having a 50/50 mix of owned versus leased. So what is the path to that? What does that look like? That was a number that Mark and I had developed early on. I do not know if I can really describe a rhyme or reason behind that number other than it just felt good. 50/50 felt good. Strong about it. Yeah. That's right. We did know that we wanted to own real estate because it strengthened the balance sheet of the company. Early on, as Carey mentioned, when we first started the company, we didn't really have capital because it's very capital intensive to buy the real estate. So we were buying essentially just operations, "buying," you're basically getting them for free because they are underperforming, right? There's no EBITDA there, so there's nothing you're really buying. So you're taking on that risk, but as you turn that around, it starts generating cash flow, and then we were taking that cash flow, and we were putting it into new deals, and we were eventually able to get to a point where we could buy real estate to where now we've created a pretty healthy real estate portfolio. I don't know necessarily if the goal is 50% at this point. I think we get back to the strategy that Carey was mentioning, which is, what is the highest and best use of capital? So we'll look at deals where it may make very good sense, where maybe we have a purchase option, where we've negotiated a set purchase price on that option, and we're in the money because we've been able to perform very well operationally in that facility. It may make good sense for us to buy that real estate. It helps us with the potential lease in that facility as well, where we can add more EBITDA to the bottom line. That calculus is all part of an exercise that we go through when we're looking at these types of deals. The overarching theme would be, what is the highest and best use of capital? That's what we're going to do. That makes sense. Maybe Josh, and maybe for Carey too. As I think about the fact that your mature facilities are running at what, 94% occupancy, and I think company wide it is like 90%. How much margin runway is there? Then, when you are running at these occupancy rates, obviously the acquisitions help lengthen that growth rate. But how do we think about all that when you put it all together? You want me to start it? Okay. Sure. Yeah. The margins on our mature business are more like a mid-teens kind of number versus our overall, which is somewhere around 11%. So there is definitely more margin in our mature businesses. When you look at our same store growth that we have had this year so far, it has been around 6%. And there is still a lot of opportunity for us to continue at that pace, if not better, from a same store standpoint. The makeup of that same store is about, we have 284 facilities in the same store. 88 of those are ramping, and they are at about 87% occupancy, 27% skilled mix, versus that 94% and 32% you talked about for mature. So there is still a lot of room for us to grow those ramping facilities. I will also say, that being at 94% occupancy and 32% skilled mix is not the goal. We have some of our facilities that are at 100% occupancy and 100% skilled mix, and so there is still room for growth even within that mature cohort itself. So, I definitely believe there is room for margin growth as we go forward in the overall business from the ramping and mature, and then even within the mature. So I think we can continue to move that margin. We have done it for the past few years, grown the margin each year, and I think we will continue to do that going forward. Josh, anything you would add? No, I would just echo the fact that I am thinking of a facility in my head. One of those first two facilities in San Diego was one that was heavily distressed. I got the chance to see that from the beginning to where it is now. And that facility runs close to 100% occupied and is over 70% skilled mix. So there are levels to maturity as well. For not wanting to have 50 different cohorts that we are tracking, we have new ramping and mature, but there are levels to maturity. As those facilities prove over time that they have established themselves as the premier provider in those communities, confidence just continues to increase. Managed care, which is a hot topic, naturally. Managed care contracting improves. Volume of patients that those managed care contracts have access to and want to specifically target your facility because they have seen exceptional results. Hospitals now that are being penalized if you're readmitted to the hospital. They care more than they ever had about our space. Brian, you asked, the reputation of nursing homes, I think has improved, at least for an understanding and a knowledge that the communities get now, I would say, about how important post-acute care is. If you establish yourself as that premier provider, we expect and we've seen in our numbers that occupancy increases, that skilled mix can start moving towards that upper limit of 100%, and every time you're making steps there, your margin expands. That's a perfect lead into my question for Jason. As hospitals are trying to bring down length of stay and try to discharge patients as quickly as possible, what are you doing strategically to position yourself to capture more of the higher acuity and skilled mixes? Yeah, I think that's a great point you bring up because that dynamic has existed in our space for a while now. I've been in this sector now for 25 years, and it certainly has changed significantly in that 25 years. Managed care has done that. It does require a lot of providers. It requires us to do more with less. It requires us to be able to get similar outcomes, if not better outcomes than what we had historically, taking care of the same patient in less amount of time. We as a company have really embraced this idea because it's here to stay. Lengths of stay will just continue to shrink. Reimbursement will always continue to be something that we have to fight for every year. As we've evaluated the landscape, we've had to invest heavily in people, as we've already talked about. Technology is another big piece that we leverage as a provider to take advantage of this particular dynamic where we're providing real-time data to our caregivers at the facility level that we can make good decisions off of. That information is also, we can take that information and share it with the referring providers in the markets where we operate, and it becomes a tool that we can use to drive volume. Even though we see lengths of stay going down, our thought is if we can embrace this and continue to invest in people, continue to invest in technology to provide the tools that our teams need locally to take care of this changing environment, take care of these patients, and get really high-quality outcomes, we will hopefully replace that length of stay with volume. That has been a strategy. I think it has worked out well for us so far. It makes sense, right? Even if it is a shorter length of stay, as long as you are keeping the bed occupied- Yeah. That is right. it is generating revenue. It just creates churn, and it creates a lot of work, right? Again, having been an administrator, Josh, as well, it creates churn for the teams. Having a patient admit and discharge, that requires a lot of work. The teams have to be really well experienced in that area to make sure that those processes are buttoned up and seamless for our patients. Maybe Carey, for you, as I think about the rate environment for the business, right? Obviously Medicare, it's a fee schedule. But when you think about MA, when we think about commercial, we think about managed Medicaid, what does that look like for PACS? Yeah. The managed care side of it, I think we're going to continue to see rate increases as we look forward there. On the Medicare side, as you noted, it's pretty scheduled. It's much better than from my previous life in the PT side, where we were always getting barely any increase. Here it's a 2.4% increase for next year. Then we have regular Medicaid increases that happen in October of each year. I think the outlook for that is good. It's favorable. We're going to continue to see Medicaid increases as well, and some states are certainly better than others. But we like the states we're in. Josh, anything you would add? Yeah, just I think our space, and we particularly have tried very hard to make sure that people understand how important we are to the landscape of healthcare. We can actually do more. Jason mentioned we can do more with less. We're used to it in post-acute care. We haven't been the highest reimbursed and probably never will be. We embrace that idea, and so we talk to managed care plans, we talk to hospitals and health groups about this being the lowest cost setting for institutional care. If you're going to make cuts anywhere, it shouldn't be in post-acute care. You should be asking us to take on additional acuity, patients sooner than they otherwise would have discharged from a hospital where you're paying $3,000 a day and you can pay $600 or $700 or $800 a day in a skilled nursing facility, so long as they can get exceptional care. That's where we think our density, our commitment to quality is going to be the differentiator. Then we're making sure those legislators understand how important funding our space is. We've had a lot of success, particularly post-COVID. When the landscape shifted, we needed people to make sure that they understood the labor environment shifted and that we needed to be reimbursed appropriately. They have understood that well, and we've seen a lot of success in the last couple of years. Carey, were you going to say something? Yeah, I was just going to say from strictly a rate perspective, as I think about the growth going forward, I in my mind count on a 2%-3% rate growth only. Then we're going to grow that from a same store basis on the fact that we're going to be increasing occupancy and skilled mix and getting us up into the mid-single digits as we go forward. So yeah. Makes sense. Jason, maybe just in the last few minutes, one question I need to ask. DOJ, SEC inquiry, any updates on where that stands or finalization of that? Yeah. We've publicly talked about this. The investigation continues, and we continue to cooperate with it. It is going at the pace of the government. That is a bit of a challenge. We've signaled to the government our desire to have a resolution on this sooner than later. They've also actually signaled to us as well that they would like resolution on it sooner than later. We are in active conversations with them now. What I can say is that the scope continues to be what the scope has been historically, what we've disclosed publicly. There's been no scope creep there, which is a good thing. The activity that we're seeing and conversations with them lead us to believe that we're hopefully going to have some resolution here soon and that the company is in a very good position as it relates to, we feel like we're in a good position to be able to absorb what is coming. Cool. We got a minute left. Anything that you feel that investors don't fully understand about the PACS story or anything you want to leave the audience with in terms of how to think of the investment thesis here? I'll go first and then with 40 seconds left, guys. Go. Yeah. So quality, what I would hope investors understand is, number one, how critical our sector is for the healthcare continuum. It is an incredibly intimate environment that we take care of patients in, and we are open 24 hours a day, seven days a week. And we have some amazing teams, some amazing people that take care of these patients every single day. And I don't know if you've had an opportunity to walk through a nursing home lately. I don't know what your experience has been, but if it's been like mine, there's a lot of opportunity for us to improve this sector. And that's what drives our growth, is that there's a lot of opportunity for us to add value to these facilities, to make them brighter, to make them lighter, to make them more joyous. It's a moral obligation that we feel we have and a mission of our company to continue to do that. So, we feel like we have really embraced that idea of revolutionizing this sector, and it's something that we have a lot of energy to do. Yeah. I agree with that totally. It all starts with care and the quality of care that we provide, and that translates into results. And then as a company, we have a very strong balance sheet. There's no telling what the kind of growth we can achieve over the next few years. We've grown from two facilities 12 years ago to 358 today, and I think we'll continue to grow at a very rapid pace going forward. Amazing. Guys, thank you so much. Really appreciate you being here. Appreciate it. Thank you.