The Pennant (US:PNTG)2025-08-06 20:11Part I. Financial Information Financial Statements Presents unaudited condensed consolidated financial statements for Q2 and six months ended June 30, 2025, including Balance Sheets, Income, Cash Flows, and explanatory notes Condensed Consolidated Balance Sheets | Balance Sheet Highlights | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $127,374 | $122,856 | | Total Assets | $751,417 | $679,521 | | Total Current Liabilities | $104,941 | $101,700 | | Long-term Debt | $37,000 | $0 | | Total Liabilities | $417,790 | $367,556 | | Total Equity | $333,627 | $311,965 | - Total assets grew to $751.4 million from $679.5 million, primarily driven by increases in Goodwill and Other indefinite-lived intangibles resulting from acquisitions Long-term debt increased to $37.0 million from zero at year-end11 Condensed Consolidated Statements of Income | Income Statement Highlights (in thousands, except EPS) | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $219,501 | $168,745 | $429,343 | $325,660 | | Income from Operations | $11,528 | $9,562 | $24,178 | $18,086 | | Net Income | $7,981 | $6,094 | $16,503 | $11,152 | | Net Income attributable to Pennant | $7,085 | $5,690 | $14,860 | $10,596 | | Diluted EPS | $0.20 | $0.18 | $0.42 | $0.35 | - Revenue for Q2 2025 increased by 30.1% year-over-year to $219.5 million Net income attributable to the company grew by 24.5% to $7.1 million, resulting in a diluted EPS of $0.20, up from $0.18 in Q2 202413 Condensed Consolidated Statements of Cash Flows | Cash Flow Highlights (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $13,414 | $11,036 | | Net cash used in investing activities | ($60,355) | ($33,280) | | Net cash provided by financing activities | $37,080 | $19,228 | | Net decrease in cash | ($9,861) | ($3,016) | | Cash end of period | $14,385 | $3,043 | - Cash used in investing activities significantly increased to $60.4 million in the first six months of 2025, up from $33.3 million in the prior year period, primarily due to higher cash payments for business and asset acquisitions totaling $55.9 million17 Notes to the Condensed Consolidated Financial Statements - As of June 30, 2025, the company operated 137 home health, hospice, and home care agencies, and 61 senior living communities20 - The company's revenue is primarily derived from Medicare, Medicaid, and managed care programs For the six months ended June 30, 2025, Medicare and Medicaid combined accounted for 61.3% of total revenue5660 - During the first six months of 2025, the company acquired five home health agencies, four hospice agencies, and four senior living communities The aggregate purchase price for the Signature Group acquisition was $48.5 million7475 - On April 30, 2025, the company entered into a purchase agreement with UnitedHealth Group and Amedisys to acquire certain home health, hospice, and palliative care assets for a purchase price of $102.5 million, contingent on the closing of the UnitedHealth/Amedisys merger80 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Discusses Q2 and H1 2025 financial performance, revenue growth from acquisitions, operational improvements, regulatory impacts, and liquidity, including the $250 million credit facility Overview and Recent Activities - As of June 30, 2025, the company's portfolio grew to 137 home health and hospice agencies and 61 senior living communities, totaling 198 operations130131 - In the first six months of 2025, the company acquired five home health agencies, four hospice agencies, and four senior living communities, continuing its expansion strategy132 Government Regulation - CMS issued the CY 2026 Home Health Prospective Payment System (HH PPS) Proposed Rule, which includes a net payment update of -6.4%, potentially decreasing aggregate payments to home health providers by $1.135 billion137 - The 2026 Hospice Payment Final Rule provides a 2.6% payment update, an estimated increase of $750 million in aggregate payments to hospice providers138 - The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, enacts significant Medicaid reforms that could reduce federal funding and potentially lead to lower or delayed reimbursement for services provided by the company140 Key Performance Indicators | Key Performance Indicator | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Home Health | | | | | | Total Admissions | 17,832 | 14,140 | 36,710 | 28,789 | | Hospice | | | | | | Average Daily Census | 3,909 | 3,220 | 3,852 | 3,091 | | Senior Living | | | | | | Occupancy | 78.8% | 78.8% | 78.7% | 78.7% | | Avg. Monthly Revenue/Unit | $5,188 | $4,790 | $5,165 | $4,730 | Results of Operations - Q2 2025 vs Q2 2024: Total revenue increased 30.1% to $219.5 million Home Health and Hospice revenue grew 32.5%, while Senior Living revenue grew 23.1% Total cost of services increased 31.0%, leading to a slight increase in cost of services as a percentage of revenue to 80.8%185187188189 - Six Months 2025 vs Six Months 2024: Total revenue increased 31.8% to $429.3 million Home Health and Hospice revenue grew 34.8%, and Senior Living revenue grew 23.4% Total cost of services increased 32.4%, with cost of services as a percentage of revenue rising slightly to 80.6%199201202203 Liquidity and Capital Resources - Primary liquidity sources are cash from operations and a $250.0 million Amended Revolving Credit Facility, which matures in 2029211212 - As of June 30, 2025, the company had $14.4 million in cash and $208.8 million of available borrowing capacity on its credit facility214 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its $250.0 million variable-rate revolving credit facility - A hypothetical 1.0% change in interest rates would impact annual interest expense by approximately $0.4 million, based on the outstanding debt as of June 30, 2025221 Controls and Procedures Management, including CEO and CFO, concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control - The CEO and CFO concluded that disclosure controls and procedures were effective to provide reasonable assurance that required information is recorded, processed, summarized, and reported in a timely manner222 - There were no material changes in internal control over financial reporting during the second quarter of 2025223 Part II. Other Information Legal Proceedings The company is involved in ordinary course legal claims and lawsuits, none expected to have a material adverse effect - The company is subject to claims and lawsuits as part of its normal business operations, but none are currently expected to be materially adverse225 Risk Factors Highlights risks from the proposed 2026 Home Health PPS rule potentially decreasing Medicare reimbursement and the OBBBA impacting Medicaid reimbursement - Key risks include potential decreased Medicare reimbursement for home health services if the 2026 HH PPS Proposed Rule is adopted, and potential adverse effects on Medicaid reimbursement due to the OBBBA226 Other Information Discloses CEO Brent J. Guerisoli's Rule 10b5-1 trading plan for potential sale of 4,463 shares and termination of a similar plan by a former director - CEO Brent J. Guerisoli established a Rule 10b5-1 trading plan for the potential sale of up to 4,463 shares of common stock between August 2025 and May 2026227 Exhibits Lists exhibits filed with Form 10-Q, including corporate documents, a purchase agreement, and CEO/CFO certifications - A key exhibit filed is the Purchase Agreement dated April 30, 2025, among The Pennant Group, UnitedHealth Group, and Amedisys for the acquisition of certain assets230