• Pennant Reports Second Quarter 2023 Results

    المصدر: Nasdaq GlobeNewswire / 08 أغسطس 2023 15:04:01   America/Chicago

    EAGLE, Idaho, Aug. 08, 2023 (GLOBE NEWSWIRE) -- The Pennant Group, Inc. (NASDAQ: PNTG), the parent company of the Pennant group of affiliated home health, hospice and senior living companies, today announced its operating results for the second quarter of 2023, reporting GAAP diluted earnings per share $0.09 and adjusted diluted earnings per share of $0.18 for the quarter (1).

    Second Quarter Highlights

    • Total revenue for the quarter was $132.3 million, an increase of $16.0 million or 13.7% over the prior year quarter;
    • Net income for the second quarter was $2.8 million, an increase of $5.5 million or 204.5% over the prior year quarter, and adjusted net income for the second quarter was $5.4 million, an increase of $1.3 million or 30.4% over the prior year quarter;
    • Segment Adjusted EBITDAR from Operations for the second quarter was $19.5 million, an increase of $2.8 million or 17.1% over the prior year quarter; adjusted EBITDA for the second quarter was $10.1 million, an increase of $2.5 million or 32.3% over the prior year quarter;
    • Home Health and Hospice Services segment revenue for the second quarter was $95.0 million, an increase of $9.7 million or 11.3% over the prior year quarter;
    • Home Health and Hospice Services segment adjusted EBITDAR from operations for the second quarter was $15.7 million, essentially flat to the prior year quarter; and segment adjusted EBITDA from operations for the second quarter was $14.4 million, a decrease of $0.1 million or 1.0% over the prior year quarter;
    • Total home health admissions for the second quarter were 10,441, an increase of 386 or 3.8% over the prior year quarter; total Medicare home health admissions for the second quarter were 4,849, an increase of 167 or 3.6% over the prior year quarter;
    • Total hospice admissions for the second quarter were 2,322, an increase of 203 or 9.6% over the prior year quarter. Hospice average daily census for the second quarter was 2,494, an increase of 209 or 9.1% compared to the prior year quarter;
    • Senior Living Services segment revenue for the second quarter was $37.3 million, an increase of $6.3 million or 20.3% over the prior year quarter; average occupancy for the second quarter was 78.0%, an increase of 150 basis points over the prior year quarter, and average monthly revenue per occupied room for the second quarter was $3,939 an increase of $469 or 13.5% over the prior year quarter;
    • Same store(2) Senior Living Services segment revenue for the second quarter was $36.0 million, an increase of $5.0 million or 16.1% over the prior year quarter; same store senior living average occupancy for the second quarter was 79.6%, an increase of 240 basis points over the prior year quarter, and average monthly revenue per occupied room for the second quarter was $3,929 an increase of 459 or 13.2% over the prior year quarter;
    • Senior Living segment adjusted EBITDAR from operations for the second quarter was $11.7 million, an increase of $2.9 million or 33.2% over the prior year quarter; and segment adjusted EBITDA from Operations for the second quarter was $3.6 million, an increase of $2.6 million or 277.4% over the prior year quarter.
    (1) See "Reconciliation of GAAP to Non-GAAP Financial Information.”
    (2) “Same store Senior Living Services” is defined as all senior living communities excluding those transferred to Ensign and new senior living operations acquired in 2022 or 2023.
        

    Operating Results

    “We are pleased to report continued growth and sound execution in the second quarter,” said Brent Guerisoli, Pennant’s Chief Executive Officer. “In addition to robust top line growth, we saw increased census and improved margin and earnings on a consolidated basis. The leaders in our senior living segment have produced an inspiring turnaround and our home health and hospice segment continued to accelerate its growth ramp. We are well-positioned to execute throughout the remainder of the year and deliver on our 2023 commitments.”

    Lynette Walbom, Pennant’s Chief Financial Officer, also commented on the Company’s solid cash and balance sheet position: “Our operations produced $15.5 million of cash in the first half of the fiscal year. With this cash, and its positive impact on our leverage ratios, we are well-positioned to take advantage of an increasing number of attractive acquisition opportunities flowing our direction.” She noted that the Company had $2.8 million of cash on hand and $85.3 million available on its revolving line of credit, with a net debt-to-adjusted EBITDA ratio of 1.57x and a lease-adjusted net debt-to-adjusted EBITDAR ratio of 4.99x.

    A discussion of the Company's use of Non-GAAP financial measures is set forth below. A reconciliation of net income to EBITDA, adjusted EBITDAR and adjusted EBITDA, as well as a reconciliation of GAAP earnings per share, net income to adjusted net earnings per share and adjusted net income, appear in the financial data portion of this release. More complete information is contained in the Company’s Form 10-Q for the quarter ended June 30, 2023, which has been filed with the SEC today and can be viewed on the Company’s website at www.pennantgroup.com.

    Conference Call

    A live webcast will be held tomorrow, August 9, 2023 at 10:00 a.m. Mountain time (12:00 p.m. Eastern time) to discuss Pennant’s second quarter 2023 financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Pennant’s website at https://investor.pennantgroup.com. The webcast will be recorded and will be available for replay via the website.

    About Pennant

    The Pennant Group, Inc. is a holding company of independent operating subsidiaries that provide healthcare services through 101 home health and hospice agencies and 51 senior living communities located throughout Arizona, California, Colorado, Idaho, Iowa, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming. Each of these businesses is operated by a separate, independent operating subsidiary that has its own management, employees and assets. References herein to the consolidated "company" and "its" assets and activities, as well as the use of the terms "we," "us," "its" and similar verbiage, are not meant to imply that The Pennant Group, Inc. has direct operating assets, employees or revenue, or that any of the home health and hospice businesses, senior living communities or the Service Center are operated by the same entity. More information about Pennant is available at www.pennantgroup.com.

    Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

    This press release contains, and the related conference call and webcast will include, forward-looking statements that are based on management’s current expectations, assumptions and beliefs about its business, financial performance, operating results, the industry in which it operates and other future events. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding growth prospects, future operating and financial performance, and acquisition activities. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to materially and adversely differ from those expressed in any forward-looking statement.

    These risks and uncertainties relate to the company’s business, its industry and its common stock and include: reduced prices and reimbursement rates for its services; its ability to acquire, develop, manage or improve operations, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of operations; its ability to access capital on a cost-effective basis to continue to successfully implement its growth strategy; its operating margins and profitability could suffer if it is unable to grow and manage effectively its increasing number of operations; competition from other companies in the acquisition, development and operation of facilities; its ability to defend claims and lawsuits, including professional liability claims alleging that our services resulted in personal injury, and other regulatory-related claims; and the application of existing or proposed government regulations, or the adoption of new laws and regulations, that could limit its business operations, require it to incur significant expenditures or limit its ability to relocate its operations if necessary. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the company’s periodic filings with the Securities and Exchange Commission, including its Form 10-Q and/or 10-K, for a more complete discussion of the risks and other factors that could affect Pennant’s business, prospects and any forward-looking statements. Except as required by the federal securities laws, Pennant does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.

    Contact Information

    Investor Relations
    The Pennant Group, Inc.
    (208) 506-6100
    ir@pennantgroup.com

    SOURCE: The Pennant Group, Inc.


    THE PENNANT GROUP, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF INCOME
    (unaudited, in thousands, except for per-share amounts)

     Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
      2023   2022   2023   2022 
            
    Revenue$132,281  $116,316  $258,745  $230,226 
            
    Expense       
    Cost of services 106,176   92,716   208,778   182,978 
    Rent—cost of services 9,836   9,078   19,433   19,129 
    General and administrative expense 8,791   9,741   17,496   19,774 
    Depreciation and amortization 1,214   1,279   2,494   2,426 
    Loss on asset dispositions and impairment, net 3   6,617   3   6,708 
    Total expenses 126,020   119,431   248,204   231,015 
    Income (loss) from operations 6,261   (3,115)  10,541   (789)
    Other income (expense):       
    Other income (expense) 35   (35)  65   (32)
    Interest expense, net (1,453)  (821)  (2,859)  (1,450)
    Other expense, net (1,418)  (856)  (2,794)  (1,482)
    Income (loss) before provision for income taxes 4,843   (3,971)  7,747   (2,271)
    Provision (benefit) for income taxes 1,921   (1,375)  2,828   (833)
    Net income (loss) 2,922   (2,596)  4,919   (1,438)
    Less: net income attributable to noncontrolling interest 125   80   272   224 
    Net income (loss) and other comprehensive income attributable to The Pennant Group, Inc.$2,797  $(2,676) $4,647  $(1,662)
    Earnings (loss) per share:       
    Basic$0.09  $(0.09) $0.16  $(0.06)
    Diluted$0.09  $(0.09) $0.15  $(0.06)
    Weighted average common shares outstanding:       
    Basic 29,809   28,605   29,780   28,589 
    Diluted 30,193   28,605   30,171   28,589 


    THE PENNANT GROUP, INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (unaudited, in thousands, except par value)

     June 30, 2023 December 31, 2022
    Assets   
    Current assets:   
    Cash$2,838  $2,079 
    Accounts receivable—less allowance for doubtful accounts of $957 and $592, respectively 57,252   53,420 
    Prepaid expenses and other current assets 11,549   18,323 
    Total current assets 71,639   73,822 
    Property and equipment, net 27,252   26,621 
    Right-of-use assets 260,730   260,868 
    Deferred tax assets, net 214   2,149 
    Restricted and other assets 10,940   10,545 
    Goodwill 83,614   79,497 
    Other indefinite-lived intangibles 61,025   58,617 
    Total assets$515,414  $512,119 
    Liabilities and equity   
    Current liabilities:   
    Accounts payable$12,037  $13,647 
    Accrued wages and related liabilities 22,848   23,283 
    Operating lease liabilities—current 17,412   16,633 
    Other accrued liabilities 16,180   16,684 
    Total current liabilities 68,477   70,247 
    Long-term operating lease liabilities—less current portion 246,307   247,042 
    Other long-term liabilities 7,779   6,281 
    Long-term debt, net 59,153   62,892 
    Total liabilities 381,716   386,462 
    Commitments and contingencies   
    Equity:   
    Common stock, $0.001 par value; 100,000 shares authorized; 30,251 and 29,799 shares issued and outstanding, respectively, at June 30, 2023; and 30,149 and 29,692 shares issued and outstanding, respectively, at December 31, 2022 29   29 
    Additional paid-in capital 102,886   99,764 
    Retained earnings 25,931   21,284 
    Treasury stock, at cost, 3 shares at June 30, 2023 and 2022 (65)  (65)
    Total Pennant Group, Inc. stockholders’ equity 128,781   121,012 
    Noncontrolling interest 4,917   4,645 
    Total equity 133,698   125,657 
    Total liabilities and equity$515,414  $512,119 


    THE PENNANT GROUP, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (unaudited, in thousands)

    The following table presents selected data from our condensed consolidated statement of cash flows for the periods presented:

     Six Months Ended June 30,
      2023   2022 
        
    Net cash provided by operating activities$15,533  $4,899 
    Net cash used in investing activities (11,226)  (8,750)
    Net cash (used in) provided by financing activities (3,548)  1,861 
    Net increase (decrease) in cash 759   (1,990)
    Cash beginning of period 2,079   5,190 
    Cash end of period$2,838  $3,200 


    THE PENNANT GROUP, INC.
    REVENUE BY SEGMENT
    (unaudited, dollars in thousands)

    The following table sets forth our total revenue by segment and as a percentage of total revenue for the periods indicated:

     Three Months Ended June 30,
      2023   2022 
     Revenue
    Dollars    		 Revenue
    Percentage    		 Revenue
    Dollars    		 Revenue
    Percentage
            
    Home health and hospice services       
    Home health$42,411 32.1% $40,669 35.0%
    Hospice 46,562 35.2   39,359 33.8 
    Home care and other(a) 6,047 4.6   5,316 4.6 
    Total home health and hospice services 95,020 71.9   85,344 73.4 
    Senior living services 37,261 28.1   30,972 26.6 
    Total revenue$132,281 100.0% $116,316 100.0%


    (a) Home care and other revenue is included with home health revenue in other disclosures in this press release.


     Six Months Ended June 30,
      2023   2022 
     Revenue
    Dollars    		 Revenue
    Percentage    		 Revenue
    Dollars    		 Revenue
    Percentage
            
    Home health and hospice services       
    Home health$84,191 32.5% $78,089 33.9%
    Hospice 89,851 34.7   77,182 33.5 
    Home care and other(a) 12,057 4.7   10,548 4.6 
    Total home health and hospice services 186,099 71.9   165,819 72.0 
    Senior living services 72,646 28.1   64,407 28.0 
    Total revenue$258,745 100.0% $230,226 100.0%


    (a) Home care and other revenue is included with home health revenue in other disclosures in this press release.


    THE PENNANT GROUP, INC.
    SELECT PERFORMANCE INDICATORS
    (unaudited, total revenue dollars in thousands)

    The following table summarizes our overall home health and hospice performance indicators for the each of the dates or periods indicated:

     Three Months Ended
    June 30,    		    
      2023  2022 Change % Change
    Total agency results:        
    Home health and hospice revenue$95,020 $85,344  9,676 11.3%
            
    Home health services:       
    Total home health admissions 10,441  10,055  386 3.8%
    Total Medicare home health admissions 4,849  4,682  167 3.6%
    Average Medicare revenue per 60-day completed episode(a)$3,595 $3,580 $15 0.4%
    Hospice services:       
    Total hospice admissions 2,322  2,119  203 9.6%
    Average daily census 2,494  2,285  209 9.1%
    Hospice Medicare revenue per day$189 $176 $13 7.4%


     Three Months Ended
    June 30,    		    
      2023  2022 Change % Change
    Same agency(b) results:        
    Home health and hospice revenue$91,209 $85,190 $6,019  7.1%
            
    Home health services:       
    Total home health admissions 9,866  9,989  (123) (1.2)%
    Total Medicare home health admissions 4,445  4,639  (194) (4.2)%
    Average Medicare revenue per 60-day completed episode(a)$3,621 $3,580 $41  1.1%
    Hospice services:       
    Total hospice admissions 2,181  2,119  62  2.9%
    Average daily census 2,406  2,285  121  5.3%
    Hospice Medicare revenue per day$188 $176 $12  6.8%


     Six Months Ended
    June 30,    		    
      2023  2022 Change % Change
    Total agency results:        
    Home health and hospice revenue$186,099 $165,819 $20,280  12.2%
            
    Home health services:       
    Total home health admissions 21,351  20,237  1,114  5.5%
    Total Medicare home health admissions 9,797  9,315  482  5.2%
    Average Medicare revenue per 60-day completed episode(a)$3,531 $3,539 $(8) (0.2)%
    Hospice services:       
    Total hospice admissions 4,773  4,528  245  5.4%
    Average daily census 2,467  2,259  208  9.2%
    Hospice Medicare revenue per day$186 $177 $9  5.1%


     Six Months Ended
    June 30,    		    
      2023  2022 Change % Change
    Same agency(b) results:        
    Home health and hospice revenue$179,820 $165,665 $14,155  8.5%
            
    Home health services:       
    Total home health admissions 20,354  20,171  183  0.9%
    Total Medicare home health admissions 9,110  9,272  (162) (1.7)%
    Average Medicare revenue per 60-day completed episode(a)$3,554 $3,539 $15  0.4%
    Hospice services:       
    Total hospice admissions 4,569  4,528  41  0.9%
    Average daily census 2,391  2,259  132  5.8%
    Hospice Medicare revenue per day$185 $177 $8  4.5%


    (a) The year to date average for Medicare revenue per 60-day completed episode includes post period claim adjustments for prior periods.
    (b) Same agency results represent all agencies purchased or licensed prior to January 1, 2022.
       

    The following table summarizes our senior living performance indicators for the periods indicated:

     Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
      2023   2022   2023   2022 
    Total senior living results:       
    Senior living revenue$37,261  $30,972  $72,646  $64,407 
            
    Occupancy 78.0%  76.5%  78.1%  74.4%
    Average monthly revenue per occupied unit$3,939  $3,470  $3,893  $3,418 


     Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
      2023   2022   2023   2022 
    Same store senior living(a) results:        
    Senior living revenue$35,972  $30,972  $70,573  $61,070 
            
    Occupancy 79.6%  77.2%  79.3%  76.3%
    Average monthly revenue per occupied unit$3,929  $3,470  $3,890  $3,694 


    (a) Same store senior living results is defined as all senior living communities excluding those transferred to Ensign and new senior living operations acquired in 2022 or 2023.


    THE PENNANT GROUP, INC.
    REVENUE BY PAYOR SOURCE
    (unaudited, dollars in thousands)

    The following table presents our total revenue by payor source and as a percentage of total revenue for the periods indicated:

      Three Months Ended June 30,
       2023   2022 
      Revenue
    Dollars    		 Revenue
    Percentage    		 Revenue
    Dollars    		 Revenue
    Percentage
             
    Revenue:        
    Medicare $64,214 48.5% $57,698 49.6%
    Medicaid  18,931 14.3   15,343 13.2 
    Subtotal  83,145 62.8   73,041 62.8 
    Managed Care  17,254 13.1   15,413 13.3 
    Private and Other(a)  31,882 24.1   27,862 23.9 
    Total revenue $132,281 100.0% $116,316 100.0%


    (a) Private and other payors in our home health and hospice services segment includes revenue from all payors generated in home care operations.


      Six Months Ended June 30,
       2023   2022 
      Revenue
    Dollars    		 Revenue
    Percentage    		 Revenue
    Dollars    		 Revenue
    Percentage
             
    Revenue:        
    Medicare $124,970 48.3% $112,776 49.0%
    Medicaid  36,562 14.1   30,737 13.4 
    Subtotal  161,532 62.4   143,513 62.4 
    Managed Care  34,380 13.3   29,449 12.7 
    Private and Other(a)  62,833 24.3   57,264 24.9 
    Total revenue $258,745 100.0% $230,226 100.0%


    (a) Private and other payors in our home health and hospice services segment includes revenue from all payors generated in home care operations.


    THE PENNANT GROUP, INC.
    RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
    (unaudited, in thousands, except per share data)

    The following table reconciles net income to Non-GAAP net income for the periods presented:

     Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
      2023   2022   2023   2022 
            
    Net income (loss) attributable to The Pennant Group, Inc.$2,797  $(2,676) $4,647  $(1,662)
            
    Non-GAAP adjustments       
    Net income attributable to noncontrolling interest(a) —   80   —   224 
    Costs at start-up operations(b) 471   431   1,001   586 
    Share-based compensation expense(c) 1,354   2,380   2,773   4,820 
    Acquisition related costs and credit allowances(d) 72   14   104   14 
    Costs associated with transitioning operations(e) 570   6,701   669   6,882 
    Unusual, non-recurring or redundant charges (f) 226   40   624   77 
    Provision for income taxes on Non-GAAP adjustments(g) (49)  (2,796)  (531)  (3,441)
    Non-GAAP net income$5,441  $4,174  $9,287  $7,500 
            
    Dilutive Earnings Per Share As Reported       
    Net Income (Loss)$0.09  $(0.09) $0.15  $(0.06)
    Average number of shares outstanding 30,193   28,605   30,171   28,589 
            
    Adjusted Diluted Earnings Per Share        
    Net Income$0.18  $0.14  $0.31  $0.25 
    Average number of shares outstanding 30,193   30,231   30,171   30,188 


    (a) Effective the three months ended September 30, 2022 we updated our definition of non-GAAP net income to exclude an adjustment for net income attributable to noncontrolling interest.
    (b) Represents results related to start-up operations.
       
         Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
          2023   2022   2023   2022 
      Revenue$(3,286) $(1,103) $(5,893) $(1,589)
      Cost of services 3,351   1,480   6,161   2,097 
      Rent 401   47   723   71 
      Depreciation 5   7   10   7 
      Total Non-GAAP adjustment$471  $431  $1,001  $586 
                
    (c) Represents share-based compensation expense incurred for the periods presented.
       
         Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
          2023   2022   2023   2022 
      Cost of services$781  $528  $1,469  $1,121 
      General and administrative 573   1,852   1,304   3,699 
      Total Non-GAAP adjustment$1,354  $2,380  $2,773  $4,820 
                


    (d) Represents costs incurred to acquire an operation that are not capitalizable.
    (e) During the six months ended June 30, 2023, an affiliate of the Company placed its memory care units into transition and is actively seeking to sublease the units to an unrelated third party. The amount above represents the net operating impact attributable to the units in transition. The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with one of the entities transitioned to Ensign.

    During January 2022, affiliates of the Company entered into Transfer Agreements with affiliates of Ensign, providing for the transfer of the operations of certain senior living communities (the “Transaction”) from affiliates of the Company to affiliates of Ensign. The closing of the Transaction was completed in two phases with the transfer of two operations on March 1, 2022 and the remainder transferred on April 1, 2022. The amount above represents the net impact on revenue and cost of service attributable to all of the transferred entities. The amounts reported exclude rent and depreciation and amortization expense related to such operations.
       
        Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
         2023  2022  2023  2022 
      Revenue$— $— $— $(3,336)
      Cost of services 538  74  585  2,556 
      Rent 27  10  79  948 
      Depreciation 5  —  5  — 
      Loss on asset dispositions and impairment —  6,617  —  6,714 
      Total Non-GAAP adjustment$570 $6,701 $669 $6,882 
               
    (f) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative expenses.

    Costs identified as redundant or non-recurring incurred by the Company for additional services provided by Ensign. All amounts are included in general and administrative expense. Fees incurred were $192 and $465 for the three and six months ended June 30, 2023, respectively, and $458 and $1,101 for the three and six months ended June 30, 2022, respectively.
    (g) Represents an adjustment to the provision for income tax to our year-to-date effective tax rate of 26.0% and 25.8% for the six months ended June 30, 2023 and 2022, respectively. This rate excludes the tax benefit of shared-based payment awards.
       

    The tables below reconcile Consolidated net income to the consolidated Non-GAAP financial measures, Consolidated and Consolidated Adjusted EBITDA, and to the Non-GAAP valuation measure, Consolidated Adjusted EBITDAR, for the periods presented:

     Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
      2023   2022   2023   2022 
            
    Consolidated net income (loss)$2,922  $(2,596) $4,919  $(1,438)
    Less: Net income attributable to noncontrolling interest 125   80   272   224 
    Add: Provision for income taxes (benefit) 1,921   (1,375)  2,828   (833)
    Net interest expense 1,453   821   2,859   1,450 
    Depreciation and amortization 1,214   1,279   2,494   2,426 
    Consolidated EBITDA 7,385   (1,951)  12,828   1,381 
    Adjustments to Consolidated EBITDA       
    Add: Costs at start-up operations(a) 65   377   268   508 
    Share-based compensation expense(b) 1,354   2,380   2,773   4,820 
    Acquisition related costs and credit allowances(c) 72   14   104   14 
    Costs associated with transitioning operations(d) 538   6,691   585   5,934 
    Unusual, non-recurring or redundant charges(e) 226   40   624   77 
    Rent related to items (a) and (d) above 428   57   802   1,019 
    Consolidated Adjusted EBITDA 10,068   7,608   17,984   13,753 
    Rent—cost of services 9,836   9,078   19,433   19,129 
    Rent related to items (a) and (d) above (428)  (57)  (802)  (1019)
    Adjusted rent—cost of services 9,408   9,021   18,631   18,110 
    Consolidated Adjusted EBITDAR(f)$19,476    $36,615   


    (a) Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations.
    (b) Share-based compensation expense and related payroll taxes incurred. Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense.
    (c) Non-capitalizable costs associated with acquisitions and credit allowances for amounts in dispute with the prior owners of certain acquired operations.
    (d) During the six months ended June 30, 2023, an affiliate of the Company placed its memory care units into transition and is actively seeking to sublease the units to an unrelated third party. The amount above represents the net operating impact attributable to the units in transition. The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with one of the entities transitioned to Ensign.

    During January 2022, affiliates of the Company entered into Transfer Agreements with affiliates of Ensign, providing for the transfer of the operations of certain senior living communities (the “Transaction”) from affiliates of the Company to affiliates of Ensign. The closing of the Transaction was completed in two phases with the transfer of two operations on March 1, 2022 and the remainder transferred on April 1, 2022. The amount above represents the net impact on revenue and cost of service attributable to all of the transferred entities. The amounts reported exclude rent and depreciation and amortization expense related to such operations.
    (e) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative expenses. Costs identified as redundant or non-recurring incurred by the Company for additional services provided by Ensign. All amounts are included in general and administrative expense. Fees incurred were $192 and $465 for the three and six months ended June 30, 2023, respectively, and $458 and $1,101 for the three and six months ended June 30, 2022, respectively.
    (f) This measure is a valuation measure and is displayed thusly, it is not a performance measure as it excludes rent expense, which is a normal and recurring operating expense and, as such, does not reflect our cash requirements for leasing commitments. Our presentation of Consolidated Adjusted EBITDAR should not be construed as a financial performance measure.
       

    The following table present certain financial information regarding our reportable segments. General and administrative expenses are not allocated to the reportable segments and are included in “All Other”:

     Three Months Ended June 30,
     Home Health
    and Hospice
    Services    		 Senior Living
    Services    		 All Other Total
    Segment GAAP Financial Measures:       
    Three Months Ended June 30, 2023       
    Revenue$95,020 $37,261 $—  $132,281
    Segment Adjusted EBITDAR from Operations$15,681 $11,680 $(7,885) $19,476
    Three Months Ended June 30, 2022       
    Revenue$85,344 $30,972 $—  $116,316
    Segment Adjusted EBITDAR from Operations$15,728 $8,771 $(7,870) $16,629


     Six Months Ended June 30,
     Home Health
    and Hospice
    Services    		 Senior Living
    Services    		 All Other Total
    Segment GAAP Financial Measures:       
    Six Months Ended June 30, 2023       
    Revenue$186,099 $72,646 $—  $258,745
    Segment Adjusted EBITDAR from Operations$30,093 $21,921 $(15,399) $36,615
    Six Months Ended June 30, 2022       
    Revenue$165,819 $64,407 $—  $230,226
    Segment Adjusted EBITDAR from Operations$29,676 $18,203 $(16,016) $31,863


    The table below provides a reconciliation of Segment Adjusted EBITDAR from Operations above to Condensed Consolidated Income from Operations:

     Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
      2023  2022   2023  2022 
            
    Segment Adjusted EBITDAR from Operations(a)$19,476 $16,629  $36,615 $31,863 
    Less: Depreciation and amortization 1,214  1,279   2,494  2,426 
    Rent—cost of services 9,836  9,078   19,433  19,129 
    Other Income 35  (35)  65  (32)
    Adjustments to Segment EBITDAR from Operations:       
    Less: Costs at start-up operations (b) 65  377   268  508 
    Share-based compensation expense (c) 1,354  2,380   2,773  4,820 
    Acquisition related costs and credit allowances(d) 72  14   104  14 
    Costs associated with transitioning operations(e) 538  6,691   585  5,934 
    Unusual, non-recurring or redundant charges(f) 226  40   624  77 
    Add: Net loss attributable to noncontrolling interest 125  80   272  224 
    Consolidated Income from Operations$6,261 $(3,115) $10,541 $(789)


    (a) Segment Adjusted EBITDAR from Operations is net income (loss) attributable to the Company's reportable segments excluding interest expense, provision for income taxes, depreciation and amortization expense, rent, and, in order to view the operations performance on a comparable basis from period to period, certain adjustments including: (1) costs at start-up operations, (2) share-based compensation, (3) acquisition related costs and credit allowances, (4) the costs associated with transitioning operations, (5) unusual, non-recurring or redundant charges, and (6) net income attributable to noncontrolling interest. General and administrative expenses are not allocated to the reportable segments, and are included as “All Other”, accordingly the segment earnings measure reported is before allocation of corporate general and administrative expenses. The Company's segment measures may be different from the calculation methods used by other companies and, therefore, comparability may be limited.
    (b) Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations.
    (c) Share-based compensation expense and related payroll taxes incurred. Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense.
    (d) Non-capitalizable costs associated with acquisitions and credit allowances for amounts in dispute with the prior owners of certain acquired operations.
    (e) During the six months ended June 30, 2023, an affiliate of the Company placed its memory care units into transition and is actively seeking to sublease the units to an unrelated third party. The amount above represents the net operating impact attributable to the units in transition. The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with one of the entities transitioned to Ensign.

    During January 2022, affiliates of the Company entered into Transfer Agreements with affiliates of Ensign, providing for the transfer of the operations of certain senior living communities (the “Transaction”) from affiliates of the Company to affiliates of Ensign. The closing of the Transaction was completed in two phases with the transfer of two operations on March 1, 2022 and the remainder transferred on April 1, 2022. The amount above represents the net impact on revenue and cost of service attributable to all of the transferred entities. The amounts reported exclude rent and depreciation and amortization expense related to such operations.
    (f) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative expenses.

    Costs identified as redundant or non-recurring incurred by the Company for additional services provided by Ensign. All amounts are included in general and administrative expense. Fees incurred were $192 and $465 for the three and six months ended June 30, 2023, respectively, and $458 and $1,101 for the three and six months ended June 30, 2022, respectively.
       

    The table below reconcile Segment Adjusted EBITDAR from Operations to Segment Adjusted EBITDA from Operations for each reportable segment for the periods presented:

     Three Months Ended June 30,
     Home Health and
    Hospice    		 Senior Living
      2023   2022   2023   2022 
            
    Segment Adjusted EBITDAR from Operations$15,681  $15,728  $11,680  $8,771 
    Less: Rent—cost of services 1,374   1,241   8,462   7,837 
    Rent related to start-up and transitioning operations (83)  (47)  (345)  (10)
    Segment Adjusted EBITDA from Operations$14,390  $14,534  $3,563  $944 


     Six Months Ended June 30,
     Home Health and
    Hospice    		 Senior Living
      2023   2022   2023   2022 
            
    Segment Adjusted EBITDAR from Operations$30,093  $29,676  $21,921  $18,203 
    Less: Rent—cost of services 2,697   2,503   16,736   16,626 
    Rent related to start-up and transitioning operations (176)  (71)  (626)  (948)
    Segment Adjusted EBITDA from Operations$27,572  $27,244  $5,811  $2,525 


    Discussion of Non-GAAP Financial Measures

    EBITDA consists of net income before (a) interest expense, net, (b) (benefits) provisions for income taxes, and (c) depreciation and amortization. Adjusted EBITDA consists of net income attributable to the Company before (a) (benefits) provisions for income taxes, (b) depreciation and amortization, (c) costs incurred for start-up operations, including rent and excluding depreciation, interest and income taxes, (d) share-based compensation expense, (e) non-capitalizable acquisition related costs and credit allowances, (f) net costs associated with transitioning operations, (g) usual or non-recurring charges and (h) net income attributable to noncontrolling interest. Consolidated Adjusted EBITDAR is a valuation measure applicable to current periods only and consists of net income attributable to the Company before (a) interest expense, net, (b) (benefits) provisions for income taxes, (c) depreciation and amortization, (d) rent-cost of services, (e) costs incurred for start-up operations, excluding rent, depreciation, interest and income taxes, (f) share-based compensation expense, (g) acquisition related costs and and credit allowances, (h) redundant or non-recurring transition services costs, (i) costs associated with transitioning operations, (j) usual or non-recurring charges and (j) net income attributable to noncontrolling interest. The company believes that the presentation of EBITDA, adjusted EBITDA, consolidated adjusted EBITDAR, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the company’s operating performance. The company believes disclosure of adjusted net income, adjusted net income per share, EBITDA, adjusted EBITDA and consolidated adjusted EBITDAR has economic substance because the excluded revenues and expenses are infrequent in nature and are variable in nature, or do not represent current revenues or cash expenditures. A material limitation associated with the use of these measures as compared to the GAAP measures of net income and diluted earnings per share is that they may not be comparable with the calculation of net income and diluted earnings per share for other companies in the company's industry. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. For further information regarding why the company believes that this non-GAAP measure provides useful information to investors, the specific manner in which management uses this measure, and some of the limitations associated with the use of this measure, please refer to the company's periodic filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The company’s periodic filings are available on the SEC's website at www.sec.gov or under the "Financial Information" link of the Investor Relations section on Pennant’s website at http://www.pennantgroup.com.


    Primary Logo

شارك على،