Pacs Group Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David MacDonald - Truist Securities, Inc. - Analyst : Hey, guys. Cuple of questions. Just curious, look, M&A has been a little bit more robust since the IPO than we had expected. I guess just any general comments on the opportunity that you see among skilled mix, occupancy, et cetera, within either the recent or even the pending acquisitions relative to the overall company? And then I get one or two others.

Question: David MacDonald - Truist Securities, Inc. - Analyst : And then guys, I guess just one quick follow up on that is when we hear about -- it sounds like the pipeline's pretty full. How do we think about the internal governors in terms of M&A? Obviously, it's a decentralized model. So it's not what we traditionally think about is there's only a certain amount that you can do in a certain period of time. So I'm just curious how you think about the pacing of potential further M&A on a go forward basis and how you think about that just given, again, what our checks suggest is a pretty full opportunity in terms of ongoing consolidation?

Question: David MacDonald - Truist Securities, Inc. - Analyst : And then guys just last one from me. When you look at the quality scores, can you just talk about a little bit the impact that has on the conversations with payers and especially as you start entering new states, new markets, the halo effect that potentially has just in terms of, again, the overarching conversations that you're having with some of the payers in your markets?

Question: Scott Fidel - Stephens Inc - Analyst : Great. Thanks. Hey, everyone. First question, just -- thought it would be helpful if you want to give us some of your thinking around the pacing of EBITDA in 3Q and 4Q that's embedded in the implied guide without giving obviously explicit quarterly guidance. But just thinking in particular about one, just seasonality or indicators in the KPIs for the buildings that you had in force through the end of the second quarter. And then second, just the pacing of the new acquisitions. Clearly, I would assume that probably has a little bit more dilutive effect on EBITDA in the 3Q relative to 4Q just as you start the integration of those facilities?

Question: Scott Fidel - Stephens Inc - Analyst : Okay, great. And then following up on that and implied in your comment Derick around the acquisitions that you've done in 3Q really not contributing to EBITDA. I thought it would be helpful if you wanted to give us an update on when thinking about the embedded EBITDA in the acquired facilities. Clearly, a quarter or so ago, you had sort of $100 million -- [up to $100 million] of embedded EBITDA opportunity in the recent tranches of deals. Looks like you're already harvesting that nicely in the first half. So just interested in how you're thinking about that embedded EBITDA opportunity, just given the new facilities that you're bringing on right now with very little EBITDA that are going to ramp up the forward embedded EBITDA opportunity looking out to 2025, for example?

Question: Scott Fidel - Stephens Inc - Analyst : Great. And I guess since Dave started the precedent of a third question. I'll continue that trend and sneak one more in here. Just thought it would be helpful, you talked about 3.5% rate growth for Medicaid in the first half. I'm interested if you could give us what you're seeing on visibility into Medicaid rates in the back half of the year and as you're seeing some of the FY25 rates come in and how you would think about that underlying Medicaid rate trend in the back half of the year compared to the first half? That's it for me. Thanks.

Question: Jason Cassorla - Citi - Analyst : Great, thanks. Good afternoon, guys. Congrats on the quarter. Maybe just picking up on the rate side. I wanted to ask about the 2025 Medicare rate known as up a strong 4.2% at the headline level. I guess just curious on how you're thinking about how that rate translates for you guys? Is there any considerations in terms of the wage index changes or any components of the rule that are worth noting at this points? Thanks.

Question: Jason Cassorla - Citi - Analyst : Okay, great. Maybe just shifting gears a little bit. Wanted to ask about the purchase option opportunity on your book. It looks like you have 31 currently, but maybe could you just help unpack that opportunity set for you? What timing on executing those options would look like? Just any other color as we think about the purchase options as the source of EBITDA upside down the line?

Question: Ben Hendrix - RBC Capital Markets - Analyst : Thank you very much, guys. Just a quick follow-up on that last one. Would the same be true for the joint venture that you entered into for the old real estate of the latest acquisition. I think it was about 25% of that you own. Would you be looking to increase your ownership percentage of that JV overtime?

Question: Ben Hendrix - RBC Capital Markets - Analyst : Great, thank you. And sorry, just one more. I appreciate the corollary you offered on that. One California facility and its ability to kind of ramp up into a preferred provider relationship. I wanted to get the landscape of the four new states that you're in, what the provider relationships are there that exist and your opportunity to get more of a preferred relationship in those regions -- you know those regions well? Thank you.

Question: Tao Qiu - Macquarie Holdings (USA) Inc - Analyst : Thank you. Good afternoon. I think I heard you have 31 leaders in the AIT program. You are acquiring at a faster pace when we account for the Prestige transaction. Do you feel like you have adequate leadership pipeline to continue the brisk pace on acquisitions? And also, maybe remind us how fast you're turning out these leaders and how you make sure they adhere to the same culture and operating models? Thank you.

Question: Tao Qiu - Macquarie Holdings (USA) Inc - Analyst : Got it. That's helpful. And then a clarification. You initiated the stock incentive program this quarter. Help us understand what will be the run rate of stock-based comp going forward? Any G&A target you can provide?

Question: Tao Qiu - Macquarie Holdings (USA) Inc - Analyst : And last question from me. In terms of the Medicaid supplemental program, could you size up the impact for the quarter from that program?

Question: Tao Qiu - Macquarie Holdings (USA) Inc - Analyst : Overall. I mean California is probably a big piece there, but if you can provide any color, that would be helpful. Thank you.

Question: Tao Qiu - Macquarie Holdings (USA) Inc - Analyst : Okay. How much of that is in the guidance?