PACS Q3 2026 Earnings: Adjusted EBITDA Growth Outpaces Revenue

PACS Group (NYSE: PACS) reported Q3 2026 revenue of $1.499 billion, up 11.5% year over year, while diluted EPS increased to $0.37 from $0.32. Net income rose 16.2% to $60.8 million, and non-GAAP adjusted EBITDA grew 33.6% to $175.7 million as same-store skilled nursing revenue, occupancy, and skilled mix improved. The company also raised its full-year revenue and adjusted EBITDA guidance.

Core Earnings Results

Revenue growth translated into higher GAAP earnings, with operating income increasing approximately 15.6% and net income rising 16.2%. The larger change came in adjusted profitability: adjusted EBITDA grew nearly three times as fast as revenue, while adjusted EPS increased 37.0%.

The following figures cover the three months ended September 30, 2026, except where noted.

Adjusted EPS and adjusted EBITDA are non-GAAP measures. The adjusted EBITDA margins above are calculated using reported revenue.

Business and Facility Performance

Same-store skilled nursing facility revenue increased 6.4% across the 284 facilities PACS operated at the beginning of 2025. Same-store occupancy reached 91.3%, up from 89.3%, while companywide skilled nursing revenue grew approximately 10.7%.

The company also reported improvement in overall skilled mix, particularly among ramping facilities. Its 90.2% overall occupancy was above the company-cited industry average of 80.2%, although performance varied by facility cohort.

Mature facilities maintained the highest occupancy at 93.1%, although that was down from 94.8% a year earlier. Ramping-facility occupancy improved to 87.0% from 86.1%, while new-facility occupancy fell to 76.2% from 80.6%. The weaker new-facility result shows that recently added operations still have a meaningful performance gap to close.

Comparisons between individual cohorts require caution because facilities move from “new” to “ramping” and then “mature” over time. The mature-facility count increased from 149 to 196, while the new-facility count fell from 79 to 35, making raw cohort revenue growth less representative of like-for-like performance.

Quality metrics remained favorable: 250 facilities, or 78.9% of the skilled nursing portfolio, held four- or five-star CMS Quality Measure ratings. The 196 mature facilities had an average rating of 4.5 as of September 30.

PACS deployed $213.0 million for acquisitions during Q3 and $403.8 million during the first nine months of 2026. After the quarter ended, the company completed the acquisition of 32 Florida skilled nursing facilities on October 1 and the operations of 10 skilled nursing facilities and one assisted living facility in Texas by November 1. As of the earnings release, PACS operated 398 healthcare facilities across 21 states.

Adjusted Profitability Expanded Faster Than GAAP Margins

The quarter’s central earnings dynamic was the gap between adjusted EBITDA growth and GAAP operating income growth. Adjusted EBITDA margin expanded by approximately 1.9 percentage points, but operating margin improved by only about 0.2 percentage points.

Cost of services increased approximately 9.2%, and rent expense rose about 3.3%, both below the 11.5% increase in revenue. That supported better operating economics at the facility level. However, general and administrative expense increased 35.0% to $138.4 million, while depreciation and amortization rose approximately 39.4% to $20.1 million. Those faster-growing reported expenses limited the improvement in GAAP operating margin.

This divergence makes both measures important: adjusted EBITDA reflects substantial operating leverage, while GAAP operating income captures the rising overhead and depreciation accompanying PACS’s expanding portfolio.

Cash Flow and Balance Sheet

Cash provided by operating activities was $583.1 million for the first nine months of 2026, up approximately 43.0% from $407.6 million in the comparable 2025 period. This is a year-to-date figure, not a quarterly cash flow measure.

Strong operating cash generation was accompanied by significant capital deployment. Investing activities used $538.2 million during the first nine months, compared with $145.9 million a year earlier, while financing activities used $148.7 million. Cash, cash equivalents, and restricted cash declined by $103.9 million over the period.

PACS had $115.3 million of cash and cash equivalents at September 30, down from $197.0 million at the end of 2025. Nevertheless, the company reported $707.4 million of available liquidity and a net leverage ratio of 0.2 times, leaving capacity to fund acquisitions and real estate investments while maintaining relatively low leverage.

2026 Guidance

PACS raised both components of its full-year outlook. The revenue midpoint increased by $200 million, while the adjusted EBITDA midpoint rose by $40 million. Management said the new adjusted EBITDA midpoint represents approximately 37% growth over 2025.

The updated guidance includes approximately $5 million of adjusted EBITDA from retroactive Ohio quality incentive payments received in October. That contribution should be separated from the underlying performance of the facility portfolio when evaluating the revised outlook.

Recent Insider Transactions

Over the latest six-month period in the supplied insider data, PACS insiders purchased 176,501 shares across 11 transactions and sold 2,008,252 shares across 23 transactions. The result was net selling of 1,831,751 shares, equivalent to 1.70% of total insider holdings.

The 10 most recent reported transactions were all direct sales with a combined reported value of approximately $38.67 million. These filings document transactions but do not, by themselves, establish insiders’ expectations for future performance.

Risks Investors Need to Watch

• Acquisition integration: PACS is adding 43 Florida and Texas operations shortly after deploying $403.8 million on acquisitions during the first nine months. Florida is a new state for the company, increasing execution and regulatory complexity.
• New-facility performance: Occupancy at new facilities fell to 76.2%, compared with 93.1% for mature facilities. Failure to improve recently acquired operations could limit expected revenue and margin gains.
• Reimbursement and incentive payments: The revised adjusted EBITDA outlook includes about $5 million from retroactive Ohio quality incentive payments. Changes in state programs, reimbursement rates, or payment timing could affect future results.
• Expense growth: G&A and depreciation increased substantially faster than revenue in Q3. Continued growth at those rates could restrict further expansion in GAAP operating margin even if adjusted EBITDA remains strong.
• Labor and quality execution: Cost of services is PACS’s largest expense, and shortages of nurses or other skilled personnel could raise labor costs. Maintaining clinical quality ratings is also important for facility performance and competitiveness.

Summary

PACS’s Q3 2026 results combined double-digit revenue and GAAP earnings growth with a larger improvement in adjusted EBITDA. Higher occupancy, stronger skilled mix, and continued facility progression supported the quarter, while rising G&A and depreciation kept GAAP margin expansion comparatively modest. The raised 2026 outlook and low reported leverage provide support for continued expansion, but integration of the Florida and Texas facilities, performance at newer operations, reimbursement trends, and expense discipline are the principal areas to monitor.