The Pennant (US:PNTG)2020-11-11 21:59Financial Data and Key Metrics Changes - The company reported total GAAP revenue of $98.4 million for Q3 2020, an increase of $10 million or 11.3% over the prior year quarter [32] - Adjusted revenue reached a record $96.6 million, nearly 10% higher than Q3 last year, with consolidated adjusted EBITDA of $8.6 million, a 32% increase over the same period [17][33] - Adjusted diluted earnings per share increased to $0.18, representing a 63.6% increase over the spin-adjusted third quarter 2019 results of $0.11 [33] Business Line Data and Key Metrics Changes - Home Health and Hospice operations reported total and Medicare admissions exceeding pre-pandemic levels, with record Hospice average daily census [19] - Senior Living segment experienced a decline in weighted average occupancy by approximately 370 basis points from the first quarter, standing at 76.8% in Q3, but showed a 40 basis point increase since August [21][22] Market Data and Key Metrics Changes - The company affirmed its 2020 annual revenue guidance and increased its adjusted earnings per share guidance to a range of $0.75 to $0.80, reflecting a 34% increase over initial guidance [15][37] - For 2021, the company provided revenue guidance of $430 million to $440 million and adjusted earnings per share guidance of $0.89 to $0.99, representing increases of 14.2% and 21.3% respectively over revised 2020 guidance [16][38] Company Strategy and Development Direction - The company is focused on disciplined growth through opportunistic acquisitions and has successfully completed several acquisitions and joint ventures, including four Home Health agencies and two Hospice agencies [28][30] - The management emphasized the importance of local leadership and operational resilience in navigating the challenges posed by the pandemic and the transition to the PDGM reimbursement model [20][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue producing strong results despite ongoing pandemic challenges, highlighting the resilience of local teams [12][16] - The company is encouraged by initial reports on vaccine efficacy and availability, which could positively impact operations in the second half of 2021 [58] Other Important Information - The company continues to benefit from approximately $28 million in advance Medicare payments and $5.3 million from the CARES Act payroll tax deferral program [35] - The management team is expanding, with Brent Guerisoli set to become President of The Pennant Group in 2021, which is expected to enhance leadership capabilities [13] Q&A Session Summary Question: Contribution of M&A to growth rates historically - Management indicated that historical trends suggest a continued pace of M&A activity in 2021, with local leaders in a strong position to capitalize on opportunities [49] Question: Occupancy trends and guidance - Management expects occupancy to continue at current levels with a slight uptick, reflecting ongoing challenges in the senior living sector [52][56] Question: Impact of vaccine distribution on operations - Management is optimistic about the potential benefits of vaccine distribution in the second half of 2021, while emphasizing the need for effective execution [58] Question: Expected operating cash flow for 2021 - Management will provide projections for operating cash flow in the investor deck [60] Question: Adjusted EPS and sequestration holiday - Management clarified that the adjusted EPS excludes the 2% add-on payment from the sequestration holiday, which is considered temporary [66] Question: Start-up operations and profitability timeline - Start-up operations are expected to reach profitability within 18 to 24 months, with adjustments made based on local market conditions [72][90] Question: Interest in joint ventures - Management noted increased interest in joint ventures, particularly with hospitals seeking solutions during the pandemic [93]