The Pennant (PNTG) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION 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 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 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 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 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 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] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements 1. DESCRIPTION OF BUSINESS 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] - 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] 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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] - 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] - 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] 3. RELATED PARTY TRANSACTIONS 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] 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 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 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] 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 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][59] - 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] 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 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] - 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] - 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] 8. PROPERTY AND EQUIPMENT—NET 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 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] 10. OTHER ACCRUED LIABILITIES 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] 11. DEBT 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][189] - 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][79] 12. OPTIONS AND AWARDS 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 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] 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 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] 15. COMMITMENTS AND CONTINGENCIES 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] - 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][99] - 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] - 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][104] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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][111] 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] - The Company has experienced and expects continued increases in labor costs due to overtime, premium pay, and the need for temporary staffing[114] Recent Activities 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] 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] - 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] Government Regulation 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] - 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] 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] Key Performance Indicators This section presents key operational and financial metrics used to evaluate the performance of the company's business segments Home Health and Hospice Services 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 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 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 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] - 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] Senior Living Services 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] Primary Components of Expense This section outlines the main categories of operating expenses, including cost of services, rent, and general and administrative costs Cost of Services 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] Rent—Cost of Services 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] General and Administrative Expense 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] Depreciation and Amortization 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] Critical Accounting Policies and Estimates 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] Recent Accounting Pronouncements 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] Results of Operations 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 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][163] * 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][165][166] * Senior living revenue decreased primarily due to a 5.8% decrease in occupancy[167] 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][169][170] - 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] Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020 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][175][176] * 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] * Senior living revenue decreased primarily due to a 6.9% decrease in occupancy[177] 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][180][181] - 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] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations and fund operations Revolving Credit Facility 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][189] - The Company believes its existing cash, operating cash flow, and access to financing facilities will provide sufficient liquidity for the next twelve months[189] Cash Flow Analysis (Six Months) 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] - 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] - 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] Contractual Obligations, Commitments and Contingencies 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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 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] Changes in Internal Control over Financial Reporting 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] PART II. OTHER INFORMATION This section includes information on legal proceedings, risk factors, exhibits, and official signatures for the report Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 6. Exhibits 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] 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]