Pennant Group, Inc. Q1 FY2025 earnings call

• Key initiatives include leadership development, clinical excellence, employee experience, margin improvement, and growth.
• Record-breaking quarter with revenue of $209.8 million, up $52.9 million (33.7%) from prior year quarter; consolidated adjusted EBITDA of $16.4 million, up $5.1 million (45.9%); adjusted diluted earnings per share of $0.27, up $0.07 (35%).
• 52 local leaders earned C-level designations since January of last year, including 19 local CEOs.
• Completed the second stage of the Signature Healthcare transaction in Oregon, with successful integration; also acquired senior living operations in Idaho, Texas, and Arizona, and the Villages at Red Mountain Senior Living in Arizona.

The Pennant Group had strong performance in both operating segments in the first quarter. The Home Health and Hospice segment had Q1 revenue of $159.9 million, up $43.4 million (37.2%) from the prior year quarter, and adjusted EBITDA of $25.1 million, up $7.3 million (40.6%). The adjusted EBITDA margin was 15.8%, a 10 basis point improvement. The Senior Living segment had revenue of $50 million, up $9.5 million (23.6%) from the prior year quarter, adjusted EBITDA of $4.9 million, up $1.4 million (40.8%), and segment adjusted EBITDA margin increased to 9.9%, a 120 basis point improvement over the prior year quarter.

• 2025 guidance includes revenue of $800 million to $865 million, adjusted EBITDA of $63.1 million to $68.2 million, and adjusted EPS of $1.03 to $1.11.
• Trending towards the upper end of the 2025 guidance range due to strong first quarter performance, early progress in recent acquisitions, and continued momentum across businesses.

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to materially differ from those expressed.
• Cash flows used in operations in the first quarter were impacted by significant acquisitions, accounts receivable, annual incentive payouts, and payroll accrual timing.
• Macroeconomic uncertainties and sensitivity to the environment, especially affecting senior living's private pay residents.

Q: Stephen Baxter from Wells Fargo asked about the reacceleration of same-store growth in home health and hospice, specifically if there was a driver or if the fourth quarter was a one-off.

A: John Gochnour said seasonal change with holiday season impact in Q4 and pick-up in Q1, with double-digit growth year-over-year on ADC for hospice and home health admissions.

Q: Stephen Baxter asked about guidance expectations and which business was a bigger contributor.

A: Brent Guerisoli said both segments performed well, with strong revenue quality in senior living and outsized performance in home health/hospice, trending towards upper end of guidance.

Q: Stephen Baxter asked about the Optum transaction evaluation.

A: Brent Guerisoli said due to antitrust process, limited to discuss, but emphasized focus on great leaders and leadership pipeline for acquisitions.

Q: Stephen Baxter asked about senior living's economic sensitivity.

A: Brent Guerisoli said sensitivity exists but focus on revenue quality, with 30% of business in Medicaid/state labor programs, targeting mid-single-digit RevPOR growth.

Q: Stephen Baxter asked about the hiring environment.

A: John Gochnour said strong trends in hiring and retention, added over 200 net nurses in Q1, with labor cost inflation noted but trends positive.