Summary of The Pennant Group FY Conference Call Company Overview - **Company**: The Pennant Group (NasdaqGS:PNTG) - **Industry**: Home health and hospice services, senior living facilities Key Points and Arguments 1. Growth and Acquisitions - The Pennant Group had a productive year in 2025, starting with the second tranche of the Signature acquisition and culminating in the purchase of a large portfolio from UnitedHealth and Amedisys [25][26] - The company emphasizes investment in leadership, which has led to organic growth in operations, surpassing previous performance levels [27][28] 2. Integration Process - The integration of new acquisitions involves a structured approach focusing on leadership readiness, operational health, and the opportunity presented by the acquisition [31][32] - A typical optimization process post-acquisition spans about nine quarters, involving technology integration and rebranding efforts [33][34] 3. Financial Management - The company expects G&A costs to normalize from approximately 6.7% to 6.5% by the end of 2026, despite initial increases due to acquisitions [36][37] - Current leverage is around two times net debt to adjusted EBITDA, with a comfortable range of two to two and a half times for future acquisitions [39][40] 4. Referral Dynamics and Partnerships - The partnership with Ensign has provided operational benefits, including shared expertise and clinical collaboration, although referrals from Ensign's skilled nursing operations remain low [46][47] - The company is exploring joint venture opportunities with health systems to enhance care delivery and improve clinical outcomes [66][67] 5. Reimbursement and Quality Measures - The Pennant Group has achieved a 4.1 CMS Star Rating, which has helped reduce the differential between Medicare Advantage (MA) rates and fee-for-service rates to 20-25% [58][59] - The company is focused on driving down costs while maintaining quality, which is crucial for negotiations with payers [61][62] 6. Hospice Operations - The company sees potential for growth in hospice length of stay, currently just under 100 days, with a target to improve without exceeding caps [76][77] - The hospice segment is expected to grow in the mid to high single digits, with a focus on maintaining quality care [78][79] 7. Senior Living Performance - The senior living segment has seen high occupancy rates and successful rate increases, attributed to capital investments and improved service offerings [88][89] - The company aims to increase the proportion of healthcare services provided, currently at 20-25%, with a long-term goal of 25-33% [91][92] 8. Labor and Staffing - The company has made significant improvements in caregiver onboarding and retention, leading to decreased turnover and enhanced employee experience [94] - Current staffing levels are sufficient to support increased occupancy, with ongoing efforts to scale as demand grows [94] 9. Future Outlook - The Pennant Group is targeting a 15% margin in senior living, with expectations that increased occupancy and operational efficiencies will contribute to this goal [96][97] Additional Important Insights - The company is actively involved in discussions with CMS regarding reimbursement methodologies, emphasizing the importance of home health services in the continuum of care [71][72] - The focus on leadership development and creating opportunities for local leaders is a core part of the company's strategy, differentiating it in a fragmented market [50][54]

Core Viewpoint - The Pennant Group, Inc. (PNTG) shows potential for significant upside, with a mean price target of $33 indicating a 30.7% increase from the current price of $25.25 [1] Price Targets and Analyst Estimates - The mean estimate consists of six short-term price targets with a standard deviation of $4.82, suggesting variability among analysts [2] - The lowest estimate is $28.00, indicating a 10.9% increase, while the highest estimate is $40.00, suggesting a 58.4% increase [2] - A low standard deviation indicates a high degree of agreement among analysts regarding the stock's price movement [9] Earnings Estimates and Analyst Sentiment - Analysts are optimistic about PNTG's earnings prospects, as indicated by a positive trend in earnings estimate revisions [4][11] - Over the last 30 days, the Zacks Consensus Estimate for the current year has increased by 1.6%, with two estimates moving higher and no negative revisions [12] - PNTG holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13] Caution on Price Targets - While price targets are a common tool for investors, they can often mislead and should not be the sole basis for investment decisions [3][10] - Analysts may set overly optimistic price targets due to business incentives, which can inflate expectations [8]

Core Insights - The Pennant Group reported Q3 CY2025 revenue of $229 million, a 26.8% year-on-year increase, exceeding analyst estimates of $222.3 million by 3% [1][6] - The company raised its full-year revenue guidance to $930 million at the midpoint, which is 3.5% above analysts' expectations [1][6] - Non-GAAP profit for the quarter was $0.30 per share, surpassing the consensus estimate of $0.29 by 4.6% [1][6] Financial Performance - Adjusted EBITDA was reported at $17.35 million, slightly below analyst estimates of $18.17 million, resulting in a 7.6% margin [6] - Operating margin decreased to 4.5% from 6% in the same quarter last year [6] - Sales volumes increased by 36.2% year-on-year, compared to a 38.5% increase in the same quarter last year [6] Management Commentary - Management highlighted strong operational execution in home health, hospice, and senior living as key growth drivers, achieving "new highs in revenue, census, occupancy and earnings" [3][4] - The company is focusing on scaling its Southeast operations and improving margins through occupancy gains, with COO John Gochnour noting significant latent upside in the senior living segment [4][5] - Management acknowledged margin pressures due to higher costs and transition-related expenses but emphasized robust organic growth and effective acquisition integration [5]

Financial Data and Key Metrics Changes - The company reported revenues of $229 million for Q3 2025, an increase of $48.4 million, or 26.8% year-over-year [5] - Adjusted EBITDA was $17.3 million, up $2.2 million, or 14.5% compared to the prior year quarter [5] - Adjusted EPS increased to $0.30, reflecting a $0.04 increase, or 15.4% year-over-year [5] - Full-year revenue guidance was raised to between $911.4 million and $948.6 million, with adjusted EBITDA expected between $70.9 million and $73.8 million [10][25] Business Line Data and Key Metrics Changes - Home Health and Hospice segment revenue reached $173.6 million, a 27.9% increase, with adjusted EBITDA of $26.8 million, up 22.7% [12] - Senior Living segment revenue was $55.5 million, up 23.2% year-over-year, with adjusted EBITDA increasing 26.2% [15] - Same-store occupancy in senior living reached 81.8%, with all-store occupancy at 80.9% [15] Market Data and Key Metrics Changes - The average CMS reported star rating for home health was 4.1, compared to the industry average of three stars [12] - Potentially preventable hospitalizations decreased to 8.4%, below the national average of 9.9% [12] - Hospice quality composite score improved to 97%, exceeding the national average of 92% [12] Company Strategy and Development Direction - The company is focused on integrating the recently acquired UnitedHealth Amedisys operations and enhancing local leadership [5][33] - There is a strong emphasis on empowering local clinical leaders to drive operational success and improve clinical outcomes [9][12] - The company plans to continue pursuing acquisition opportunities in senior living and home health, maintaining a disciplined approach [23][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term value of home health services despite current regulatory uncertainties [19] - The company anticipates some lumpiness in results due to integration efforts but expects significant long-term potential from recent acquisitions [6][10] - Management highlighted the importance of local leadership and community engagement in driving operational success [9][48] Other Important Information - The company closed on a $100 million term loan to enhance balance sheet capacity [24] - The acquisition of UnitedHealth Amedisys included 54 locations with trailing 12-month revenues of $189.3 million [21] - The company is actively advocating against proposed regulatory changes that could negatively impact the industry [9][18] Q&A Session Summary Question: What are the top priorities for integration after the Amedisys transaction? - The focus is on identifying and elevating leaders, ensuring exceptional support for agencies, and developing a joint venture with the University of Tennessee [33][34] Question: How should we think about margins in senior living going forward? - As occupancy increases, there is an expectation for improved margins, with a focus on operational efficiency and revenue quality [38] Question: What dynamics are affecting margin guidance? - NCI growth and elevated G&A expenses are impacting EBITDA margins, with adjustments made for these factors [40][41] Question: What is driving the increase in hospice length of stay? - The increase reflects a return to pre-pandemic levels and improved identification of appropriate patients for hospice services [42][43] Question: How is the internal reception of the Amedisys assets? - Employees have shown excitement and commitment, with minimal turnover and strong performance during the transition [46][49] Question: What is the competitive landscape for senior living acquisitions? - There is increased activity in the senior living space, with a mix of opportunities within the company's target range [60][62]

Core Insights - The Pennant Group's shares fell 7.8% following mixed third-quarter results, with revenue growth overshadowed by weaknesses in profitability metrics [1] - Revenue increased by 26.8% year-over-year to $229 million, and adjusted earnings per share were $0.30, both exceeding analyst expectations [1] - Adjusted EBITDA missed analyst expectations, and operating margin decreased to 4.5% from 6% in the same quarter last year [1] - Despite raising the full-year revenue outlook, the decline in key profitability metrics negatively impacted investor sentiment [1] Financial Performance - The Pennant Group's revenue grew to $229 million, a 26.8% increase from the previous year [1] - Adjusted earnings per share were reported at $0.30, surpassing analyst estimates [1] - Adjusted EBITDA did not meet analyst expectations, indicating potential concerns about profitability [1] - Operating margin fell to 4.5%, down from 6% in the same quarter of the prior year [1] Market Reaction - The stock is considered to have low volatility, with only six moves greater than 5% in the past year, indicating that the market views the recent news as significant [3] - The stock has decreased by 11.6% since the beginning of the year and is currently trading at $23.38, which is 30.9% below its 52-week high of $33.83 [5] - A previous notable stock movement occurred when Jefferies initiated coverage with a 'Buy' rating and a $30 price target, reflecting optimism about the home health sector [4]

EAGLE, Idaho, Nov. 06, 2025 (GLOBE NEWSWIRE) -- The Pennant Group, Inc. (NASDAQ: PNTG), the parent company of the Pennant group of affiliated home health, hospice and senior living companies, announced today that it will participate in the upcoming 2025 Stephens Annual Investment Conference on November 19, 2025. Lynette Walbom, Chief Financial Officer, John Gochnour, Chief Operating Officer, and Andy Rider, President of Pennant’s Senior Living segment, will participate in a fireside chat on November 19, 202 ...

Core Insights - The Pennant Group, Inc. reported quarterly earnings of $0.3 per share, exceeding the Zacks Consensus Estimate of $0.29 per share, and showing an increase from $0.26 per share a year ago, resulting in an earnings surprise of +3.45% [1] - The company achieved revenues of $229.04 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 2.71% and up from $180.69 million year-over-year [2] - The stock has underperformed the market, losing about 4.7% since the beginning of the year compared to the S&P 500's gain of 15.1% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.31 on revenues of $273.5 million, and for the current fiscal year, it is $1.14 on revenues of $925.9 million [7] - The estimate revisions trend for The Pennant Group was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Medical - Outpatient and Home Healthcare industry, to which The Pennant Group belongs, is currently in the top 18% of over 250 Zacks industries, suggesting a favorable outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Operations and Growth - As of September 30, 2025, the company operates 141 home health and hospice agencies and 61 senior living communities across 13 states[137] - The company added nine home health agencies, four hospice agencies, and four senior living communities during the nine months ended September 30, 2025[139] - The number of home health and hospice agencies increased to 141, up from 122, representing a 15.6% growth[194] - The number of home health and hospice agencies increased by 19, reaching a total of 141 agencies by September 30, 2025, representing a 15.6% growth[207] Revenue Growth - Total revenue for Q3 2025 was $229,039,000, an increase from $180,688,000 in Q3 2024, representing a growth of 26.8%[163] - Home Health and Hospice Services generated $173,545,000 in revenue for Q3 2025, up from $135,672,000 in Q3 2024, reflecting a growth of 28%[165] - Senior Living Services reported revenue of $53,880,000 for Q3 2025, compared to $45,016,000 in Q3 2024, marking an increase of 19.5%[165] - For the nine months ended September 30, 2025, total revenue reached $658,382,000, up from $506,348,000 in the same period of 2024, a growth of 30%[165] - Total revenue increased by $48.4 million, or 26.8%, to $229.0 million for the three months ended September 30, 2025, compared to $180.7 million in the same period of 2024[192] - Home health and hospice revenue grew by $37.9 million, or 27.9%, driven by a 36.2% increase in total home health admissions and a 16.6% increase in total hospice admissions[194] - Senior living revenue increased by $10.5 million, or 23.2%, attributed to a 7.4% rise in average monthly revenue per occupied unit and improved occupancy rates[195] - Total revenue for the nine months ended September 30, 2025, increased by $152.0 million, or 30.0%, compared to the same period in 2024, reaching $658,382,000[205] - Home health and hospice services revenue grew by $122.0 million, or 32.3%, to $499,455,000, driven by a 30.5% increase in total home health admissions and a 25.6% increase in Medicare home health admissions[208] - Senior living services revenue increased by $30.0 million, or 23.3%, to $158,927,000, primarily due to an 8.9% rise in average monthly revenue per occupied unit[209] Expenses and Costs - Total expenses for Q3 2025 were $218,801,000, compared to $169,894,000 in Q3 2024, resulting in an increase of 28.7%[163] - The cost of services as a percentage of total revenue increased to 81.0% in Q3 2025 from 80.0% in Q3 2024[163] - Total cost of services rose by $41.0 million, or 28.4%, with costs as a percentage of revenue increasing from 80.0% to 81.0%[196] - Total cost of services rose by $125.7 million, or 31.0%, to $531,450,000, with costs as a percentage of revenue increasing to 80.8% from 80.1%[210] - General and administrative expenses increased by $6.3 million, or 48.2%, from $13.0 million to $19.3 million, with the percentage of revenue rising from 7.2% to 8.4%[200][201] - General and administrative expenses increased by $15.4 million, or 42.4%, totaling $51.7 million, attributed to higher payroll and professional services related to acquisitions[214] - Rent—cost of services for Q3 2025 was $12,063,000, compared to $10,906,000 in Q3 2024, reflecting a 10.6% increase[171] - Rent expense increased by 10.6% to $12.1 million, while rent as a percentage of total revenue decreased from 6.0% to 5.3%[199] - Depreciation and amortization expense increased by $0.6 million, or 38.2%, due to higher property and equipment balances from acquisition activities[202] Income and Profitability - Income from operations decreased to $10,238,000 in Q3 2025 from $10,794,000 in Q3 2024, a decline of 5.2%[163] - Net income attributable to the company for Q3 2025 was $6,200,000, down from $6,100,000 in Q3 2024, reflecting a slight decrease of 1.6%[163] - Consolidated net income for Q3 2025 was $6,886,000, compared to $6,657,000 in Q3 2024, indicating a 3.4% increase[171] - The company reported an adjusted EBITDAR from operations of $44,378,000 for Q3 2025, compared to $37,135,000 in Q3 2024, indicating a growth of 19.5%[165] - Segment Adjusted EBITDAR from Operations for Q3 2025 was $44,378,000, up from $37,135,000 in Q3 2024, representing a 35.5% increase[166] - Consolidated Adjusted EBITDA for the nine months ended September 30, 2025, was $50,095,000, compared to $39,523,000 for the same period in 2024, reflecting a 27% growth[170] - Consolidated Adjusted EBITDAR for the nine months ended September 30, 2025, was $85,600,000, compared to $77,423,000 in 2024, a rise of 10.5%[171] Medicare and Reimbursement - Average Medicare revenue per 60-day completed episode for home health services rose to $3,793 in 2025 from $3,687 in 2024, an increase of 2.9%[149] - The proposed Medicare reimbursement reduction of -6.4% in the 2026 Home Health Prospective Payment System could lead to a decrease of $1.135 billion across all home health providers[144] - The Hospice Payment Final Rule for 2026 includes a payment update percentage of 2.6%, resulting in an estimated increase of $750 million in payments across all hospice providers[145] - The company monitors Medicare reimbursement closely due to adjustments related to billing documentation and payment caps, impacting revenue recognition[156] - The average Medicare revenue per 60-day completed episode increased by 5.1% to $3,782[207] Cash Flow and Financing - Net cash provided by operating activities increased by $8.6 million to $27,336,000, driven by a $5.6 million increase in net income[225] - Cash at the end of the period decreased to $2,336,000 from $4,464,000, reflecting a net decrease in cash of $21,910,000[224] - Net cash provided by financing activities decreased by approximately $20.3 million for the nine months ended September 30, 2025, compared to the same period in 2024[227] - The company had $219.8 million of available borrowing capacity on its Amended Revolving Credit Facility as of September 30, 2025[221] - The company has a borrowing capacity of $250.0 million under the Amended Credit Agreement with a syndicate of banks[230] - A 1.0% interest rate change would result in an annual change of approximately $0.3 million in interest expense based on outstanding long-term debt as of September 30, 2025[230] - The company continues to make draws and payments on its Amended Revolving Credit Facility[228] - There have been no material changes to total obligations outside of normal business operations during the reporting period[229] - The company has right-of-use assets obtained in exchange for new operating lease obligations[228] Acquisition and Integration - The company anticipates lower and fluctuating consolidated and segment margins during years of acquisition growth due to the integration of newly acquired operations[141] - Acquisition-related costs for Q3 2025 amounted to $3,047,000, significantly higher than $494,000 in Q3 2024[171] Non-GAAP Financial Measures - The company emphasizes the use of Non-GAAP Financial Measures to provide a clearer view of operational performance, excluding interest, taxes, and depreciation[177]

Core Points - The Pennant Group, Inc. has increased its credit facility by $100 million, bringing the total to $350 million, supported by a lending consortium led by Truist Securities [1][2] - The CEO emphasized that the expansion strengthens the balance sheet and provides capacity for future growth, while maintaining disciplined use of the credit facility [2] - The CFO confirmed that the proceeds from the new term loan will be used to refinance a portion of the outstanding revolving loans [2] Company Overview - The Pennant Group, Inc. operates through 141 home health and hospice agencies and 61 senior living communities across multiple states including Arizona, California, and Texas [3] - Each agency and community operates as an independent subsidiary with its own management and assets, indicating a decentralized operational structure [3]

Revenue Performance - Total revenue for Q3 2025 was $229.0 million, an increase of $48.4 million or 26.8% year-over-year[2]. - Total revenue for the three months ended September 30, 2025, was $229,039 thousand, a 26.7% increase from $180,688 thousand in the same period of 2024[20]. - Home health and hospice revenue for the nine months ended September 30, 2025, reached $499,455 thousand, up 32.3% from $377,463 thousand in 2024[25]. - Total revenue for the nine months ended September 30, 2025, was $658,382,000, a 30.0% increase from $506,348,000 in the same period of 2024[31]. Segment Performance - Home Health and Hospice Services segment revenue for Q3 2025 was $173.6 million, an increase of $37.9 million or 27.9% year-over-year[2]. - Senior Living Services segment revenue for Q3 2025 was $55.5 million, an increase of $10.5 million or 23.2% year-over-year[2]. - Senior living revenue for the three months ended September 30, 2025, was $55,474 thousand, reflecting a 23.2% increase from $45,016 thousand in 2024[27]. - Home Health and Hospice segment revenue for Q3 2025 was $173,545, an increase of 28% from $135,672 in Q3 2024[41]. - Senior Living segment revenue for Q3 2025 was $53,880, up 20% from $45,016 in Q3 2024[41]. Admissions and Census - Total home health admissions for Q3 2025 were 20,426, an increase of 5,433 or 36.2% year-over-year[2]. - Hospice average daily census for Q3 2025 was 4,044, an increase of 600 or 17.4% year-over-year[2]. - Total home health admissions increased by 36.2% to 20,426 for the three months ended September 30, 2025, compared to 14,993 in 2024[24]. - The average daily census for hospice services increased by 17.4% to 4,044 for the three months ended September 30, 2025, compared to 3,444 in 2024[24]. Financial Guidance and Projections - Updated 2025 annual revenue guidance is anticipated to be between $911.4 million and $948.6 million[4]. - Full year 2025 adjusted earnings per diluted share is anticipated to be between $1.14 and $1.18, representing a growth of 23.4% from 2024[5]. - Full year 2025 adjusted EBITDA is anticipated to be between $70.9 million and $73.8 million[4]. Income and Earnings - Adjusted net income for Q3 2025 was $10.4 million, an increase of $2.3 million or 27.6% year-over-year[2]. - Non-GAAP net income for Q3 2025 was $10,421,000, compared to $8,167,000 in Q3 2024, representing a 27.5% increase[32]. - Adjusted diluted earnings per share for Q3 2025 was $0.30, up from $0.26 in Q3 2024[32]. - Consolidated Adjusted EBITDA for Q3 2025 was $17,347,000, compared to $15,149,000 in Q3 2024, indicating a 14.5% increase[36]. Assets and Liabilities - Total assets as of September 30, 2025, were $753,641 thousand, an increase from $679,521 thousand at December 31, 2024[16]. - Total current liabilities increased to $109,352 thousand as of September 30, 2025, from $101,700 thousand at December 31, 2024[16]. - Total equity as of September 30, 2025, was $343,043 thousand, up from $311,965 thousand at December 31, 2024[16]. Operational Metrics - Average Medicare revenue per 60-day completed episode for home health services was $3,793 for the three months ended September 30, 2025, a 2.9% increase from $3,687 in 2024[24]. - Occupancy rate improved to 81.8% in Q3 2025, up from 80.2% in Q3 2024, reflecting a 1.6% increase[28]. - Average monthly revenue per occupied unit rose to $5,136 in Q3 2025, a 7.2% increase from $4,790 in Q3 2024[28]. - Average monthly revenue per occupied unit for the nine months ended September 30, 2025, was $5,180, an 8.9% increase from $4,758 in the same period of 2024[28]. Acquisitions and Corporate Strategy - The company completed the acquisition of 54 home health, hospice, and home care operations from UnitedHealth Group and Amedisys on October 1, 2025[3]. - The company is focusing on transitioning operations and has incurred costs related to acquisitions and unusual charges, impacting overall financial performance[43].