UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________ FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2021. ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to . Commission file number: 001-38900 __________________________ THE PENNANT GROUP, INC. (Exact Name of Registrant as Specified in Its ...

The Pennant Group, Inc. (NASDAQ:PNTG) Q2 2021 Earnings Conference Call August 10, 2021 ET Company Participants Derek Bunker - Chief Investment Officer Danny Walker - Chief Executive Officer Jen Freeman - Chief Financial Officer Brent Guerisoli - President Conference Call Participants Scott Fidel - Stephens Frank Morgan - RBC Capital Operator Good day and thank you for standing by. Welcome to The Pennant Group Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item I. Financial Statements](index=3&type=section&id=Item%20I.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of income, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, related party transactions, revenue recognition, segment information, acquisitions, debt, and commitments [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates **Condensed Consolidated Balance Sheet Highlights (in thousands):** | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------------- | :------------ | :---------------- | | Total assets | $529,809 | $506,976 | | Cash | $2,879 | $43 | | Accounts receivable, net | $52,136 | $47,221 | | Total current assets | $73,478 | $59,599 | | Long-term debt, net | $38,113 | $8,277 | | Total liabilities | $419,827 | $405,804 | | Total equity | $109,982 | $101,172 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This table outlines the company's financial performance over specific periods, including revenue, expenses, and net income **Condensed Consolidated Statements of Income Highlights (in thousands, except per-share amounts):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Revenue | $110,345 | $92,740 | $216,008 | $184,589 | | Total expenses | $106,776 | $86,665 | $210,826 | $174,242 | | Income from operations | $3,569 | $6,075 | $5,182 | $10,347 | | Net income | $2,469 | $4,337 | $3,382 | $7,317 | | Basic EPS | $0.09 | $0.16 | $0.13 | $0.26 | | Diluted EPS | $0.09 | $0.15 | $0.12 | $0.25 | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This table details changes in the company's equity, reflecting net income, stock-based compensation, and other equity transactions **Changes in Stockholders' Equity (in thousands):** | Metric | Balance at Dec 31, 2020 | Balance at June 30, 2021 | | :------------------------------------- | :---------------------- | :--------------------- | | Total Pennant Group, Inc. stockholders' equity | $96,579 | $105,607 | | Noncontrolling interest | $4,593 | $4,375 | | Total equity | $101,172 | $109,982 | **Key Activities (Six Months Ended June 30, 2021):** * Net income attributable to The Pennant Group, Inc.: **$3,600k** * Stock-based compensation: **$4,915k** * Issuance of common stock from option exercise: **$513k** [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes the company's cash inflows and outflows from operating, investing, and financing activities **Condensed Consolidated Statements of Cash Flows Highlights (in thousands):** | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Net cash (used in) provided by operating activities | $(11,806) | $43,398 | | Net cash used in investing activities | $(15,477) | $(13,803) | | Net cash provided by (used in) financing activities | $30,119 | $(17,868) | | Net increase in cash | $2,836 | $11,727 | | Cash end of period | $2,879 | $12,129 | - The significant decrease in net cash from operating activities in H1 2021 compared to H1 2020 is primarily due to a **$35.1 million** change related to the CARES Act Advance Payments (AAP), with **$28.0 million** received in H1 2020 and **$7.1 million** recouped in H1 2021[191](index=191&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [1. DESCRIPTION OF BUSINESS](index=8&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS) This note describes the company's core healthcare services, operational structure, and its spin-off history - The Pennant Group, Inc. is a holding company that provides healthcare services through independent operating subsidiaries, including **86 home health, hospice, and home care agencies** and **54 senior living communities** across **14 states** as of June 30, 2021[20](index=20&type=chunk) - The Company was spun off from The Ensign Group, Inc. on October 1, 2019, and began trading independently on NASDAQ under the symbol 'PNTG'[21](index=21&type=chunk) [2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=2.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the financial statement preparation basis and key accounting policies, including the impact of recent regulatory acts - The Company deferred approximately **$7,836k** of employer-paid social security taxes under the CARES Act, with **$3,918k** due by December 31, 2021, and the remainder by December 31, 2022[29](index=29&type=chunk) - During the prior year, the Company received **$27,997k** in funds under the Accelerated and Advance Payment (AAP) Program, of which **$7,096k** had been recouped as of June 30, 2021[29](index=29&type=chunk) - The American Rescue Plan Act of 2021 (ARP Act) requires including the next five highest-paid employees in the IRC Section 162(m) wage limitation beginning in the **2027 tax year**[30](index=30&type=chunk) [3. RELATED PARTY TRANSACTIONS](index=10&type=section&id=3.%20RELATED%20PARTY%20TRANSACTIONS) This note details financial transactions and arrangements between the company and its related parties, primarily Ensign subsidiaries - The Company leases **31 senior living communities** from subsidiaries of Ensign, with lease terms ranging from **14 to 20 years**[32](index=32&type=chunk) **Related Party Transactions (in thousands):** | Item | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Rent expense paid to Ensign subsidiaries | $3,173 | $6,246 | $3,071 | $6,172 | | Services received from Ensign's subsidiaries | $749 | $1,617 | $1,166 | $2,188 | | Administrative support under Transition Services Agreement | $747 | $1,735 | $1,525 | $2,861 | [4. COMPUTATION OF NET INCOME PER COMMON SHARE](index=10&type=section&id=4.%20COMPUTATION%20OF%20NET%20INCOME%20PER%20COMMON%20SHARE) This note provides the calculation of basic and diluted net income per common share, including weighted average shares outstanding **Net Income Per Common Share (in thousands, except per share data):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income attributable to The Pennant Group, Inc. | $2,650 | $4,337 | $3,600 | $7,317 | | Basic net income per common share | $0.09 | $0.16 | $0.13 | $0.26 | | Diluted net income per common share | $0.09 | $0.15 | $0.12 | $0.25 | | Weighted average shares outstanding (Basic) | 28,356 | 27,952 | 28,324 | 27,922 | | Weighted average common shares outstanding (Diluted) | 30,647 | 29,662 | 30,785 | 29,780 | [5. REVENUE AND ACCOUNTS RECEIVABLE](index=11&type=section&id=5.%20REVENUE%20AND%20ACCOUNTS%20RECEIVABLE) This note details the company's revenue recognition policies, payor mix, and the composition of its accounts receivable - Revenue from Medicare and Medicaid programs accounted for **61.7%** and **62.8%** of the Company's revenue for the three and six months ended June 30, 2021, respectively[39](index=39&type=chunk) **Revenue by Payor (Three Months Ended June 30, 2021, in thousands):** | Payor | Home Health Services | Hospice Services | Senior Living Services | Total Revenue | Revenue % | | :---------- | :------------------- | :--------------- | :--------------------- | :------------ | :---------- | | Medicare | $20,498 | $33,303 | — | $53,801 | 48.8% | | Medicaid | $2,525 | $2,708 | $9,004 | $14,237 | 12.9% | | Managed care | $12,165 | $725 | — | $12,890 | 11.7% | | Private & other | $6,079 | $102 | $23,236 | $29,417 | 26.6% | | **Total** | **$41,267** | **$36,838** | **$32,240** | **$110,345** | **100.0%** | **Accounts Receivable, Net (in thousands):** | Payor | June 30, 2021 | December 31, 2020 | | :-------------------------- | :------------ | :---------------- | | Medicare | $29,331 | $28,569 | | Medicaid | $8,233 | $7,669 | | Managed care | $10,858 | $7,590 | | Private and other | $4,628 | $4,036 | | Accounts receivable, gross | $53,050 | $47,864 | | Less: allowance for doubtful accounts | $(914) | $(643) | | **Accounts receivable, net** | **$52,136** | **$47,221** | [6. BUSINESS SEGMENTS](index=15&type=section&id=6.%20BUSINESS%20SEGMENTS) This note describes the company's two reportable segments and the key metric used to evaluate their financial performance - The Company operates in two reportable segments: home health and hospice services (**86 agencies**) and senior living services (**54 communities**)[58](index=58&type=chunk)[59](index=59&type=chunk) - Segment performance is evaluated using Segment Adjusted EBITDAR from Operations, which excludes interest, taxes, depreciation, amortization, rent, and certain adjustments like start-up costs and share-based compensation[60](index=60&type=chunk) **Segment Adjusted EBITDAR from Operations (in thousands):** | Segment | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Home Health and Hospice | $14,931 | $11,245 | $28,722 | $21,151 | | Senior Living | $9,752 | $13,492 | $18,586 | $25,989 | | All Other | $(6,068) | $(3,999) | $(12,466) | $(8,781) | | **Total** | **$18,615** | **$20,738** | **$34,842** | **$38,359** | [7. ACQUISITIONS](index=17&type=section&id=7.%20ACQUISITIONS) This note provides details on the company's business acquisitions, including purchase prices and asset allocations - During the six months ended June 30, 2021, the Company acquired **five home health, three hospice, and two home care agencies** for an aggregate purchase price of **$13,385k**[66](index=66&type=chunk) - The 2021 business combinations' purchase price of **$12,800k** was primarily allocated to goodwill (**$6,920k**) and indefinite-lived intangible assets (**$5,816k**) related to Medicare and Medicaid licenses[67](index=67&type=chunk) - During the six months ended June 30, 2020, the Company acquired **one home health agency, three hospice agencies, and two senior living communities** for **$7,268k**, adding **164 operational senior living units**[69](index=69&type=chunk) [8. PROPERTY AND EQUIPMENT—NET](index=18&type=section&id=8.%20PROPERTY%20AND%20EQUIPMENT%E2%80%94NET) This note presents the composition of property and equipment, net of accumulated depreciation, and related depreciation expenses **Property and Equipment, Net (in thousands):** | Asset Category | June 30, 2021 | December 31, 2020 | | :----------------------- | :------------ | :---------------- | | Leasehold improvements | $11,091 | $9,984 | | Equipment | $23,770 | $22,420 | | Furniture and fixtures | $1,183 | $1,186 | | Less: accumulated depreciation | $(18,075) | $(15,706) | | **Property and equipment, net** | **$17,969** | **$17,884** | **Depreciation Expense (in thousands):** * Three Months Ended June 30, 2021: **$1,167** * Six Months Ended June 30, 2021: **$2,338** * Three Months Ended June 30, 2020: **$1,197** * Six Months Ended June 30, 2020: **$2,215** [9. GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS](index=18&type=section&id=9.%20GOODWILL%20AND%20OTHER%20INDEFINITE-LIVED%20INTANGIBLE%20ASSETS) This note details the company's goodwill and other indefinite-lived intangible assets by segment, including additions and impairment assessments **Goodwill by Segment (in thousands):** | Segment | December 31, 2020 | Additions | June 30, 2021 | | :----------------------- | :---------------- | :-------- | :------------ | | Home Health and Hospice Services | $62,802 | $6,920 | $69,722 | | Senior Living Services | $3,642 | — | $3,642 | | **Total** | **$66,444** | **$6,920** | **$73,364** | **Other Indefinite-Lived Intangible Assets (in thousands):** | Asset Category | June 30, 2021 | December 31, 2020 | | :----------------------- | :------------ | :---------------- | | Trade name | $1,355 | $1,355 | | Medicare and Medicaid licenses | $52,534 | $46,133 | | **Total** | **$53,889** | **$47,488** | - No goodwill or intangible asset impairments were recorded during the three and six months ended June 30, 2021 and 2020[73](index=73&type=chunk) [10. OTHER ACCRUED LIABILITIES](index=19&type=section&id=10.%20OTHER%20ACCRUED%20LIABILITIES) This note provides a breakdown of other accrued liabilities, including refunds payable, deferred revenue, and CARES Act advance payments **Other Accrued Liabilities (in thousands):** | Liability Category | June 30, 2021 | December 31, 2020 | | :------------------------------------ | :------------ | :---------------- | | Refunds payable | $2,674 | $2,664 | | Deferred revenue | $1,501 | $1,271 | | Resident deposits | $5,571 | $5,647 | | Contract Liabilities (CARES Act advance payments) | $20,901 | $22,771 | | Property taxes | $897 | $982 | | Accrued self-insurance liabilities - current portion | $2,350 | $1,354 | | Other | $3,518 | $3,586 | | **Total Other accrued liabilities** | **$37,412** | **$38,275** | - CMS began automatic recoupment of CARES Act advance payments in April 2021, with **$7,096k** recouped as of June 30, 2021[75](index=75&type=chunk) [11. DEBT](index=19&type=section&id=11.%20DEBT) This note details the company's long-term debt, including its revolving credit facility and associated terms and covenants **Long-term Debt, Net (in thousands):** | Debt Category | June 30, 2021 | December 31, 2020 | | :-------------------------- | :------------ | :---------------- | | Revolving Credit Facility | $40,500 | $9,500 | | Less: unamortized debt issuance costs | $(2,387) | $(1,223) | | **Long-term debt, net** | **$38,113** | **$8,277** | - The Revolving Credit Facility was increased to a borrowing capacity of **$150.0 million** in February 2021, maturing in **2026**, with **$106.2 million** available as of June 30, 2021[77](index=77&type=chunk)[189](index=189&type=chunk) - The weighted average interest rate on outstanding debt was **2.91%** as of June 30, 2021, and the Company was compliant with all financial covenants[77](index=77&type=chunk)[79](index=79&type=chunk) [12. OPTIONS AND AWARDS](index=20&type=section&id=12.%20OPTIONS%20AND%20AWARDS) This note outlines the company's share-based compensation expense and unrecognized compensation related to stock options and restricted stock **Share-Based Compensation Expense (in thousands):** | Expense Type | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Stock options | $745 | $1,382 | | Restricted Stock | $1,530 | $3,050 | | Restricted Stock to non-employee directors | $224 | $483 | | **Total share-based compensation** | **$2,499** | **$4,915** | **Unrecognized Share-Based Compensation Expense (as of June 30, 2021, in thousands):** | Award Type | Unrecognized Compensation Expense | Weighted Average Recognition Period (in years) | | :-------------------------- | :-------------------------------- | :--------------------------------------------- | | Unvested Stock Options | $12,919 | 4.1 | | Unvested Restricted Stock | $7,877 | 1.3 | | **Total** | **$20,796** | | [13. LEASES](index=21&type=section&id=13.%20LEASES) This note describes the company's operating lease arrangements for facilities and offices, including lease costs and maturity analysis - The Company's independent operating subsidiaries lease **54 senior living communities** and administrative offices under non-cancelable operating leases, with initial terms ranging from **five to 21 years**[89](index=89&type=chunk) **Operating Lease Costs (in thousands):** | Cost Category | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | | :-------------------------- | :------------------------------- | :------------------------------- | | Facility Rent—cost of services | $8,957 | $17,792 | | Office Rent—cost of services | $1,199 | $2,329 | | **Rent—cost of services** | **$10,156** | **$20,121** | | Variable lease cost | $1,490 | $2,989 | **Lease Maturity Analysis (as of June 30, 2021, in thousands):** | Year | Amount | | :----------------- | :------- | | Total lease payments | $525,178 | | Present value of total lease liabilities | $306,393 | | Long-term operating lease liabilities | $291,160 | **Lease Term and Discount Rate:** * Weighted average remaining lease term: **14.5 years** * Weighted average discount rate: **8.2%** [14. INCOME TAXES](index=23&type=section&id=14.%20INCOME%20TAXES) This note provides information on the company's effective tax rates and factors influencing tax expense **Effective Tax Rate:** | Period | Effective Tax Rate | | :------------------------------- | :----------------- | | Three Months Ended June 30, 2021 | 19.7% | | Six Months Ended June 30, 2021 | 21.8% | | Three Months Ended June 30, 2020 | 24.9% | | Six Months Ended June 30, 2020 | 24.1% | - The decrease in the effective tax rate for the six months ended June 30, 2021, was due to an increase in excess tax benefits from share-based compensation, partially offset by an increase in non-deductible expenses[185](index=185&type=chunk) [15. COMMITMENTS AND CONTINGENCIES](index=23&type=section&id=15.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discusses the company's exposure to legal proceedings, regulatory risks, and self-insurance liabilities - The Company operates in highly regulated industries and is subject to governmental review, audits, and investigations, which could result in significant regulatory action[95](index=95&type=chunk) - The business involves significant liability risk, including professional liability claims, elder abuse, wrongful death, and potential lawsuits under the False Claims Act (FCA) and comparable state laws[98](index=98&type=chunk)[99](index=99&type=chunk) - As of June 30, 2021, **eight independent operating subsidiaries** had Medicare revenue Reviews scheduled, on appeal, or in dispute resolution, with no material probable or estimable contingencies[102](index=102&type=chunk) - The Company retains risk for a substantial portion of potential claims for general and professional liability, workers' compensation, and automobile liability, with specified deductible limits[103](index=103&type=chunk)[104](index=104&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, and cash flows, highlighting key performance indicators, segment performance, and the impact of COVID-19 and regulatory changes. It also includes a detailed comparison of financial results for the three and six months ended June 30, 2021, versus 2020 [Overview](index=26&type=section&id=Overview) This section provides a high-level summary of the company's business and operational footprint in the healthcare services sector - The Company is a leading provider of high-quality healthcare services, operating **86 home health and hospice agencies** and **54 senior living communities** across **14 states** as of June 30, 2021[110](index=110&type=chunk)[111](index=111&type=chunk) [COVID-19](index=26&type=section&id=COVID-19) This section discusses the ongoing impact of the COVID-19 pandemic on the company's operations, particularly senior living occupancy and labor costs - COVID-19 continues to impact the senior living business, leading to decreased occupancy, although a slight improvement was observed in Q2 2021[113](index=113&type=chunk) - The Company has experienced and expects continued increases in labor costs due to overtime, premium pay, and the need for temporary staffing[114](index=114&type=chunk) [Recent Activities](index=26&type=section&id=Recent%20Activities) This section highlights the company's recent strategic expansions through acquisitions of home health, hospice, and home care agencies - During the six months ended June 30, 2021, the Company expanded its operations by acquiring **five home health, three hospice, and two home care agencies** for an aggregate purchase price of **$13.4 million**[115](index=115&type=chunk) [Trends](index=27&type=section&id=Trends) This section outlines key operational trends in home health, hospice, and senior living segments, including the impact of acquisitions on margins - The home health and hospice businesses experienced an increase in all key metrics in Q2 2021, while senior living occupancy began a slight increase after a steady decline since the pandemic started[116](index=116&type=chunk) - The Company anticipates lower occupancy rates and higher costs at recently acquired senior living communities, and lower census and higher costs at recently acquired home health and hospice agencies, impacting consolidated and segment margins during periods of acquisition growth[117](index=117&type=chunk) [Government Regulation](index=27&type=section&id=Government%20Regulation) This section details the impact of recent government regulations, such as the CARES Act and ARP Act, on the company's financial results and tax provisions - The CARES Act's temporary suspension of the **2% Medicare sequestration payment adjustment** was extended through December 31, 2021, resulting in **$0.9 million** and **$1.8 million** in recognized revenue for the three and six months ended June 30, 2021, respectively[120](index=120&type=chunk) - The American Rescue Plan Act of 2021 (ARP Act) introduces a new tax provision requiring the inclusion of the next five highest-paid employees in the IRC Section 162(m) wage limitation starting in the **2027 tax year**[121](index=121&type=chunk) [Segments](index=27&type=section&id=Segments) This section defines the company's two reportable business segments and the allocation of general and administrative expenses - The Company has two reportable segments: home health and hospice services, and senior living services, with a separate 'all other' category for general and administrative expenses[122](index=122&type=chunk) [Key Performance Indicators](index=28&type=section&id=Key%20Performance%20Indicators) This section presents key operational and financial metrics used to evaluate the performance of the company's business segments [Home Health and Hospice Services](index=28&type=section&id=Home%20Health%20and%20Hospice%20Services) This section provides specific performance statistics for the company's home health and hospice services segment **Home Health and Hospice Statistics:** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Total home health admissions | 10,069 | 5,259 | 19,166 | 11,395 | | Total Medicare home health admissions | 4,406 | 2,459 | 8,904 | 5,268 | | Average Medicare revenue per 60-day completed episode | $3,441 | $3,412 | $3,424 | $3,232 | | Total hospice admissions | 2,047 | 1,954 | 4,201 | 3,630 | | Average hospice daily census | 2,296 | 1,979 | 2,301 | 1,925 | | Hospice Medicare revenue per day | $171 | $164 | $172 | $163 | [Senior Living Services](index=28&type=section&id=Senior%20Living%20Services) This section provides specific performance statistics for the company's senior living services segment **Senior Living Statistics:** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Occupancy | 72.7% | 78.5% | 72.4% | 79.3% | | Average monthly revenue per occupied unit | $3,176 | $3,204 | $3,181 | $3,205 | [Revenue Sources](index=29&type=section&id=Revenue%20Sources) This section describes the primary payor sources and reimbursement models for the company's home health, hospice, and senior living services [Home Health and Hospice Services](index=29&type=section&id=Home%20Health%20and%20Hospice%20Services) This section details the primary revenue sources and reimbursement mechanisms for home health and hospice services - Home health revenue is primarily derived from Medicare and managed care, with Medicare reimbursement under the Patient-Driven Groupings Model (PDGM) for episodes beginning after January 1, 2020[127](index=127&type=chunk) - Hospice business revenue is mainly from Medicare reimbursement, calculated as daily rates for four levels of care: Routine Home Care, General Inpatient Care, Continuous Home Care, and Inpatient Respite Care[128](index=128&type=chunk) [Senior Living Services](index=29&type=section&id=Senior%20Living%20Services) This section details the primary revenue sources for senior living services, including private pay and government programs - Senior living revenue is primarily generated from private pay sources, supplemented by Medicaid or other state-specific programs[130](index=130&type=chunk) [Primary Components of Expense](index=30&type=section&id=Primary%20Components%20of%20Expense) This section outlines the main categories of operating expenses, including cost of services, rent, and general and administrative costs [Cost of Services](index=30&type=section&id=Cost%20of%20Services) This section describes the key components included in the cost of services, such as payroll, supplies, and insurance - Cost of services primarily includes payroll and related benefits, supplies, purchased services, and ancillary expenses, as well as general and professional liability insurance[131](index=131&type=chunk) [Rent—Cost of Services](index=30&type=section&id=Rent%E2%80%94Cost%20of%20Services) This section clarifies that rent expense primarily comprises base minimum rent under lease agreements - Rent—cost of services consists solely of base minimum rent amounts payable under lease agreements, excluding taxes, insurance, and other charges[132](index=132&type=chunk) [General and Administrative Expense](index=30&type=section&id=General%20and%20Administrative%20Expense) This section details the main elements contributing to general and administrative expenses, including personnel and professional fees - General and administrative expense primarily covers payroll and benefits for Service Center personnel, professional fees, information systems costs, and stock-based compensation[133](index=133&type=chunk) [Depreciation and Amortization](index=30&type=section&id=Depreciation%20and%20Amortization) This section explains the accounting methods and useful lives used for depreciation and amortization of assets - Depreciation is computed using the straight-line method over the estimated useful lives of assets (**three to 15 years**), and leasehold improvements are amortized over the shorter of their useful lives or the remaining lease term[134](index=134&type=chunk) [Critical Accounting Policies and Estimates](index=30&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section identifies the key accounting policies and estimates that require significant management judgment - Critical accounting estimates include revenue recognition (variable consideration, Medicare/Medicaid settlements), leases (incremental borrowing rate), acquisition accounting (purchase price allocation), and income taxes (valuation allowance, uncertain tax positions)[136](index=136&type=chunk) [Recent Accounting Pronouncements](index=30&type=section&id=Recent%20Accounting%20Pronouncements) This section discusses the adoption and impact of recent accounting standards on the company's financial statements - The Company adopted ASU 2021-01 'Reference Rate Reform (Topic 848): Scope' on a prospective basis effective January 7, 2021, with no material impact on its financial statements[31](index=31&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section provides a comparative analysis of the company's financial performance over different reporting periods [Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020](index=38&type=section&id=Three%20Months%20Ended%20June%2030%2C%202021%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030%2C%202020) This section compares the company's financial results for the three-month periods, highlighting revenue and expense changes **Revenue Performance (Three Months Ended June 30, in thousands):** | Segment | 2021 Revenue | 2020 Revenue | Change | % Change | | :-------------------------- | :------------- | :------------- | :----- | :--------- | | Home health and hospice services | $78,105 | $57,984 | $20,121 | 34.7% | | Senior living services | $32,240 | $34,756 | $(2,516) | (7.2)% | | **Total revenue** | **$110,345** | **$92,740** | **$17,605** | **19.0%** | **Key Drivers:** * Total revenue growth of **19.0%** was driven by **$4.1 million** from increased operational performance and **$13.5 million (14.5%)** from acquired operations[162](index=162&type=chunk)[163](index=163&type=chunk) * Home health and hospice revenue increased due to a **91.5%** rise in total home health admissions, **79.2%** in Medicare home health admissions, **4.8%** in total hospice admissions, and **16.0%** in hospice average daily census[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) * Senior living revenue decreased primarily due to a **5.8%** decrease in occupancy[167](index=167&type=chunk) **Cost and Expense Performance (Three Months Ended June 30, in thousands):** | Expense Category | 2021 Amount | 2020 Amount | Change | % Change | | :-------------------------------- | :------------ | :------------ | :----- | :--------- | | Total cost of services | $86,667 | $68,159 | $18,508 | 27.2% | | Cost of services as % of revenue | 78.5% | 73.5% | 5.0% | | | Rent—cost of services | $10,156 | $9,767 | $389 | 4.0% | | General and administrative expense | $8,783 | $7,538 | $1,245 | 17.8% | | Effective tax rate | 19.7% | 24.9% | (5.2)% | | - Cost of services as a percentage of revenue increased by **5.0%** due to increased volume and labor costs in home health and hospice, and decreased occupancy while maintaining fixed costs in senior living[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - General and administrative expense increased due to nonrecurring transition services costs (**$0.7 million**) and operational support for information systems infrastructure (**$0.6 million**)[172](index=172&type=chunk) [Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020](index=40&type=section&id=Six%20Months%20Ended%20June%2030%2C%202021%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202020) This section compares the company's financial results for the six-month periods, detailing revenue and expense variances **Revenue Performance (Six Months Ended June 30, in thousands):** | Segment | 2021 Revenue | 2020 Revenue | Change | % Change | | :-------------------------- | :------------- | :------------- | :----- | :--------- | | Home health and hospice services | $152,712 | $114,746 | $37,966 | 33.1% | | Senior living services | $63,296 | $69,843 | $(6,547) | (9.4)% | | **Total revenue** | **$216,008** | **$184,589** | **$31,419** | **17.0%** | **Key Drivers:** * Total revenue growth of **17.0%** was primarily from **$25.5 million (13.8%)** from acquired home health and hospice operations and organic growth, offset by a **$6.5 million** decrease in senior living[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) * Home health and hospice revenue increased due to a **68.2%** rise in home health admissions, **15.7%** in total hospice admissions, and **19.5%** in hospice average daily census[177](index=177&type=chunk) * Senior living revenue decreased primarily due to a **6.9%** decrease in occupancy[177](index=177&type=chunk) **Cost and Expense Performance (Six Months Ended June 30, in thousands):** | Expense Category | 2021 Amount | 2020 Amount | Change | % Change | | :-------------------------------- | :------------ | :------------ | :----- | :--------- | | Total cost of services | $170,289 | $138,348 | $31,941 | 23.1% | | Cost of services as % of revenue | 78.8% | 74.9% | 3.9% | | | Rent—cost of services | $20,121 | $19,473 | $648 | 3.3% | | General and administrative expense | $18,071 | $14,199 | $3,872 | 27.3% | | Effective tax rate | 21.8% | 24.1% | (2.3)% | | - Cost of services as a percentage of revenue increased by **3.9%** due to increased volume and labor costs in home health and hospice, and decreased occupancy while maintaining fixed costs in senior living[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) - General and administrative expense increased due to **$1.6 million** in transition services costs, **$1.2 million** for information systems infrastructure, and **$1.2 million** for additional personnel wages[183](index=183&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations and fund operations [Revolving Credit Facility](index=43&type=section&id=Revolving%20Credit%20Facility) This section details the company's revolving credit facility, including its borrowing capacity, availability, and maturity - The Revolving Credit Facility was amended in February 2021, increasing borrowing capacity to **$150.0 million**, with **$106.2 million** available as of June 30, 2021, and a maturity in **2026**[187](index=187&type=chunk)[189](index=189&type=chunk) - The Company believes its existing cash, operating cash flow, and access to financing facilities will provide sufficient liquidity for the next twelve months[189](index=189&type=chunk) [Cash Flow Analysis (Six Months)](index=43&type=section&id=Cash%20Flow%20Analysis%20%28Six%20Months%29) This section analyzes the changes in cash flows from operating, investing, and financing activities over the six-month period - Net cash flow from operating activities decreased by **$55.2 million** for the six months ended June 30, 2021, primarily due to a **$35.1 million** change related to CARES Act Advance Payments (AAP), with **$28.0 million** received in H1 2020 and **$7.1 million** recouped in H1 2021[191](index=191&type=chunk) - Net cash used in investing activities increased by **$1.7 million**, mainly due to a **$5.9 million** increase in cash paid for acquisitions, partially offset by a **$3.6 million** decrease in capital expenditures[192](index=192&type=chunk) - Net cash provided by financing activities increased by approximately **$48.0 million**, primarily driven by the financing of acquisitions and the recoupment of AAP[193](index=193&type=chunk) [Contractual Obligations, Commitments and Contingencies](index=44&type=section&id=Contractual%20Obligations%2C%20Commitments%20and%20Contingencies) This section updates on the company's contractual obligations, commitments, and potential contingent liabilities - There have been no material changes to total contractual obligations during the period, other than certain draws and payments made on the Revolving Credit Facility[194](index=194&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section identifies interest rate risk as the primary market risk exposure for the company, stemming from its variable-rate Revolving Credit Facility - The Company is exposed to interest rate risk due to variability in interest payments on its Revolving Credit Facility, which is tied to LIBOR[195](index=195&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures and confirms no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=44&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures as assessed by management - The Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the reporting period[196](index=196&type=chunk) [Changes in Internal Control over Financial Reporting](index=44&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms whether any material changes occurred in the company's internal control over financial reporting - There were no material changes in the Company's internal control over financial reporting during the most recent fiscal quarter[197](index=197&type=chunk) [PART II. OTHER INFORMATION](index=45&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes information on legal proceedings, risk factors, exhibits, and official signatures for the report [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is involved in various routine legal claims and lawsuits, none of which are currently expected to have a material adverse effect on its financial condition or results of operations - The Company is involved in various claims and lawsuits arising in the ordinary course of business, which management does not expect to have a material adverse effect on its results of operations or financial condition[200](index=200&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the comprehensive list of risk factors detailed in the company's 2020 Annual Report and other SEC filings, noting that additional, currently unknown or immaterial risks could also adversely affect the business - Readers should carefully consider the risk factors set forth in the 2020 Annual Report and other SEC filings, as these and other unknown risks may materially adversely affect the Company's business[201](index=201&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Quarterly Report, including corporate governance documents, certifications, and XBRL data files - The exhibit index includes certifications from the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1, 32.2) and various XBRL documents[204](index=204&type=chunk) [Signatures](index=47&type=section&id=Signatures) This section contains the official signatures for the Quarterly Report on Form 10-Q, confirming its due authorization and filing - The report was signed by Jennifer L. Freeman, Chief Financial Officer, on August 9, 2021[208](index=208&type=chunk)

The Pennant Group, Inc. (NASDAQ:PNTG) Q1 2021 Earnings Conference Call May 7, 2021 12:00 PM ET Company Participants Derek Bunker - Chief Investment Officer Danny Walker - CEO Brent Guerisoli - President Jen Freeman - CFO John Gochnour - COO Conference Call Participants Scott Fidel - Stephens Frank Morgan - RBC Capital Operator Good day and thank you for standing by. Welcome to the Pennant Group First Quarter 2021 Earnings Call. [Operator Instructions] Please be advised that today's conference is being rec ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________ FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2021. ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to . Commission file number: 001-38900 __________________________ THE PENNANT GROUP, INC. (Exact Name of Registrant as Specified in Its Cha ...

Financial Data and Key Metrics Changes - For the full year ended December 31, 2020, the company reported total GAAP revenue of $391 million, an increase of $52.4 million or 15.5% over the prior year [30] - GAAP diluted earnings per share were $0.52, while non-GAAP adjusted earnings per diluted share were $0.77, representing a 26.2% increase over 2019 adjusted earnings per share of $0.61 [30][31] - The company maintained a net debt-to-adjusted EBITDA ratio of 1.02 times, excluding $28 million of Medicare advance payments received [31] Business Line Data and Key Metrics Changes - The home health and hospice segment achieved approximately 51% adjusted EBITDA growth in 2020 over the prior year and nearly 60% adjusted EBITDA growth in the fourth quarter over the prior year quarter [12] - Total Medicare home health admissions grew nearly 7% in 2020, while average Medicare revenue per 60-day episode grew 10% [13] - In hospice, total hospice admissions grew 32%, and average Medicare revenue per day increased 4.1% [14] Market Data and Key Metrics Changes - The average home health star rating improved to 4.3 stars, above the national average of three stars, with the percentage of agencies achieving a 5-star rating growing from 3% to 30% sequentially in the fourth quarter [15][14] - The senior living segment faced challenges with occupancy rates declining due to the pandemic, but there are expectations for recovery as vaccination efforts progress [16][18] Company Strategy and Development Direction - The company plans to focus on opportunistic acquisitions in the home health and hospice segment while navigating challenges in the senior living segment [20][21] - The strategy includes increasing the capacity of the revolving credit facility from $75 million to $150 million to support disciplined growth [19][35] - The company aims to improve the health of operating markets and strengthen the leadership pipeline for future investments [22][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in overcoming near-term challenges in the senior living segment and anticipates a return to growth in late 2021 [22][23] - The ongoing vaccine rollout is expected to bolster public confidence and unlock pent-up demand for senior living services [18] - Management affirmed 2021 annual revenue and adjusted earnings per share guidance, citing strong momentum in the home health and hospice business [22][23] Other Important Information - The company did not take the CARES Act provider relief funds, which management believes is the right course for the organization [38] - The company took care of nearly 13,000 patients and residents daily in 2020, highlighting the dedication of frontline staff during the pandemic [40] Q&A Session Summary Question: Impact of decoupling IT systems on efficiency - Management noted that freeing up manhours from IT system transitions will allow resources to focus on business growth and operational improvements [45][46] Question: Local leadership talent and pipeline - The leadership pipeline is robust, with 18 administrators in training, a third of whom are elevated internally, indicating strong internal development [50][51] Question: Quality metrics and star ratings - The average star rating improved from four stars to 4.25 stars, with the percentage of agencies achieving a 5-star rating increasing significantly [53][54] Question: Senior living occupancy projections - Management expects occupancy to stabilize and potentially increase towards the end of the year, aiming to return to pre-pandemic levels [59][61] Question: Impact of weather and business days on Q1 - Severe weather in Texas affected operations, but management remains optimistic about recovery and operational performance [69][70] Question: Length of stay in hospice - Length of stay declined meaningfully, but operators adjusted well, maintaining strong average daily census [72][73] Question: M&A activity priorities - The capital allocation strategy remains focused on home health and hospice, with less emphasis on senior living acquisitions until recovery is evident [76][77]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________________________________________________________________________________________________________ FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 2020. ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to . Commission file number: 001-38900 _____ ...

The Pennant Group, Inc. (NASDAQ:PNTG) Q3 2020 Earnings Conference Call November 11, 2020 12:00 PM ET Company Participants Derek Bunker - CIO Danny Walker - CEO Jenn Freeman - CFO John Gochnour - COO Brent Guerisoli - President, Home Health & Hospice Portfolio Company Conference Call Participants Scott Fidel - Stephens Frank Morgan - RBC Capital Markets David MacDonald - Truist Securities Operator Ladies and gentlemen, thank you for standing by, and welcome to The Pennant Group Third Quarter 2020 Earnings Co ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________ FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2020. ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to . Commission file number: 001-38900 __________________________ THE PENNANT GROUP, INC. (Exact Name of Registrant as Specified in Its ...

The Pennant Group, Inc. (NASDAQ:PNTG) Q2 2020 Earnings Conference Call August 12, 2020 12:00 PM ET Corporate Participants Derek Bunker - Chief Investment Officer, Executive Vice President and Secretary Danny Walker - Chairman, President and Chief Executive Officer Jennifer Freeman - Chief Financial Officer John Gochnour - Chief Operating Officer Conference Call Participants Scott Dupslaff - Stephens Frank Morgan - RBC Capital Markets Operator Ladies and gentlemen, thank you for standing by, and welcome to T ...