The Pennant (PNTG) - 2024 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (unaudited) This section presents The Pennant Group, Inc.'s unaudited condensed consolidated financial statements as of March 31, 2024 Financial Metric | Financial Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total Assets | $578,243 | $539,691 | | Total Current Assets | $87,063 | $80,077 | | Goodwill | $107,220 | $91,014 | | Total Liabilities | $414,011 | $394,176 | | Long-term debt, net | $83,294 | $63,914 | | Total Equity | $164,232 | $145,515 | Income Statement Item | Income Statement Item | Three Months Ended Mar 31, 2024 (in thousands) | Three Months Ended Mar 31, 2023 (in thousands) | | :--- | :--- | :--- | | Revenue | $156,915 | $126,464 | | Total Expenses | $148,391 | $122,184 | | Income from Operations | $8,524 | $4,280 | | Net Income | $5,058 | $1,997 | | Net Income Attributable to The Pennant Group, Inc. | $4,906 | $1,850 | | Diluted EPS | $0.16 | $0.06 | Cash Flow Activity | Cash Flow Activity | Three Months Ended Mar 31, 2024 (in thousands) | Three Months Ended Mar 31, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $545 | $8,996 | | Net cash used in investing activities | ($23,636) | ($2,326) | | Net cash provided by (used in) financing activities | $19,754 | ($5,797) | | Net (decrease) increase in cash | ($3,337) | $873 | Notes to the Condensed Consolidated Financial Statements - As of March 31, 2024, the Company's subsidiaries operated 112 home health, hospice, and home care agencies, and 53 senior living communities[20] Revenue by Payor - Q1 2024 vs Q1 2023 | Payor | Q1 2024 Revenue (in thousands) | Q1 2023 Revenue (in thousands) | | :--- | :--- | :--- | | Medicare | $76,981 | $60,756 | | Medicaid | $25,066 | $17,631 | | Managed Care | $20,122 | $17,126 | | Private and Other | $34,746 | $30,951 | | Total Revenue | $156,915 | $126,464 | Segment Revenue and Adjusted EBITDAR - Q1 2024 vs Q1 2023 | Segment | Q1 2024 Revenue (in thousands) | Q1 2024 Adj. EBITDAR (in thousands) | Q1 2023 Revenue (in thousands) | Q1 2023 Adj. EBITDAR (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Home Health and Hospice | $116,490 | $19,550 | $91,079 | $14,412 | | Senior Living Services | $40,425 | $12,011 | $35,385 | $10,241 | - In Q1 2024, the company acquired one home health agency via a joint venture with John Muir Health for $11.7 million, and acquired the real estate of two senior living communities for $10.4 million[66][67][69] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, highlighting a 24.1% revenue increase to $156.9 million driven by strong segment performance Overview and Recent Activities As of March 31, 2024, the company operated 112 home health and hospice agencies and 53 senior living communities, expanding its portfolio in Q1 2024 - The company expanded its portfolio to 165 total operations as of March 31, 2024, up from 162 at year-end 2023[122] - Acquisitions in Q1 2024 included one home health agency and two senior living communities[123] Key Performance Indicators Key metrics for Q1 2024 show significant growth in home health admissions and hospice census, alongside improved senior living occupancy and revenue per unit Home Health and Hospice Statistics (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total home health admissions | 14,649 | 10,910 | | Total Medicare home health admissions | 6,346 | 4,948 | | Total hospice admissions | 3,080 | 2,451 | | Average hospice daily census | 2,962 | 2,439 | Senior Living Statistics (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Occupancy | 78.5% | 78.1% | | Average monthly revenue per occupied unit | $4,667 | $4,300 | Results of Operations Q1 2024 total revenue increased 24.1% to $156.9 million, with income from operations more than doubling due to strong segment growth and improved operational efficiency Revenue by Segment (Q1 2024 vs Q1 2023) | Segment | Q1 2024 Revenue (in thousands) | Q1 2023 Revenue (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Home health and hospice services | $116,490 | $91,079 | 27.9% | | Senior living services | $40,425 | $35,385 | 14.2% | | Total revenue | $156,915 | $126,464 | 24.1% | - Cost of services as a percentage of revenue decreased by 80 basis points to 80.3% in Q1 2024 from 81.1% in Q1 2023, primarily due to decreased wages and benefits as a percent of revenue in the Home Health and Hospice segment[178][179] - General and administrative expenses increased by 31.4% to $11.4 million, mainly due to a $2.2 million increase in payroll and related benefits[182] Liquidity and Capital Resources The company's liquidity relies on cash from operations and a $150 million credit facility, with Q1 2024 showing decreased operating cash flow and increased investing cash outflow - As of March 31, 2024, the company had $61.6 million of available borrowing capacity on its Revolving Credit Facility[188] Cash Flow Summary (Q1 2024 vs Q1 2023) | Cash Flow Activity | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $545 | $8,996 | | Net cash used in investing activities | ($23,636) | ($2,326) | | Net cash provided by (used in) financing activities | $19,754 | ($5,797) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate changes on its variable-rate revolving credit facility, impacting annual interest expense by $0.8 million - A 1.0% change in interest rates would cause annual interest expense to change by approximately $0.8 million based on the outstanding long-term debt as of March 31, 2024[195] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[196] - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[197] Part II. Other Information Item 1. Legal Proceedings The company is involved in various ordinary course legal claims, none expected to materially affect financial condition or results - The company states that none of the various claims and lawsuits arising in the ordinary course of business are expected to have a material adverse effect on its results of operations or financial condition[200] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - The report indicates no material changes from the risk factors disclosed in the 2023 Annual Report[201] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits filed with this report include certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[203]