The Pennant (US:PNTG)2021-02-27 21:19Financial 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]