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Pennant (PNTG)

Participants
Derek Bunker Chief Investment Officer
Danny Walker Chief Executive Officer
Brent Guerisoli President
Jen Freeman Chief Financial Officer
John Gochnour Chief Operating Officer
Ben Hendrix RBC Capital Markets
Jordan Bernstein Stephens Inc
Call transcript
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Operator

Good day, and thank you for standing by. Welcome to The Pennant Group First Quarter 2022 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Mr. Derek Bunker.

Derek Bunker

you us thank and everyone, for today. joining Welcome,

have our Freeman, CEO; with CFO; me Guerisoli, Walker, I today, COO. our Jennifer Here Brent Daniel our John Gochnour, and our President;

do new circumstances, Except for other as forward-looking a affiliates more to beliefs which those are or by today's for our result we events, p.m. a subsequent that information, also the release website encouraged few expectations, and SEC results undertake required begin, as operate. we We results. to Time earnings remind this made This Mountain forward-looking environment or any Investor be want on our to should assumptions I securities of where May replay they current is a future changing statements Relations We today from to on a could until Listeners made our review will about and of Before undue www.nngroup.com. been statements of place expressed federal forward-looking not housekeeping on updated of Pennant as statements factors statements section our A yesterday. XX-Q June replay in materially call be of have anyone uncertainties XX, and complete based today's statements actual arise implied Friday, filed statements may to all risks revise our X, differ its call. not reason. on subject and listening call. matters. These our these our reliance available X:XX available not the on any discussion management's and will announcement have press on to website that publicly call impact at and Also, changes laws, to are could that XXXX, cause today, business this are nor filings are and of or be that any XXXX. update

In or with payroll, a Inc. Pennant as subsidiaries, holding assets, operating human risk legal, employees, Certain such words addition, consolidated we, Pennant, Pennant accounting, refer its revenues. our center, to contractual to information Group, The resources, subsidiaries to independent through our company and the provide service referred operating other is of the no the Group, direct with Inc. technology, subsidiaries. and management, company, relationships subsidiaries. services us collectively other the and

terms by assets consolidated business, they management, we the measures are believe be Walker, our assets. relied upon of I'll their All viewed understanding a we, that, should us, of in our can revenue And reconciliation should the operating operated Group, service Inc. and separate GAAP reports. When be its of press over subsidiaries imply to yesterday's turn Group. of have and or non-GAAP our center A call metrics. any operated and we company not not the reporting as XX-Q. companies and nor used provide with in more has non-GAAP our to with assets, the it terms results, GAAP the GAAP to to exclusion our CEO. our, available Pennant employees employees is release by with Daniel that similar well available meaning that the GAAP our Also, activities, together meant as subsidiaries complete these and the that are to operating herein the construed own or Pennant that of the as today direct are independent References use and supplement

Danny Walker

our quarterly results. everyone, joining our to first Welcome, quarter for earnings XXXX us today call. to Thank you discuss

represent. forward results this step We are quarter pleased the the with

difficulties We were and impacted across make the the through Although the the organization faced and step uncertainties to was negatively the local our meaningful leaders by a quarter forward. there. still execute variant Omicron able

to While from culture is comes adherence unique leaders, rigorous momentum for and deliver face. forward recommitment to necessary through With when foundation building room lingering culture on work of of the us is the storms take commitment including enables This that operating regardless the those a our inflationary foundation want future, our to today, is to and the financially a greatest our in what hope moment tremendous move short-term weather solid strategy the disciplined to pressures values. organization mind, remain reason This operating to for the adherence that and our to that me navigated, effectively a long-term model the and the and are with both in be clinically the complement headwinds culture. I to results. commitment and we and within core in marketplace and conditions

the And future future collective with our remarkably of I'll as leaders. our slate Pennant a difficulties shaped of their experience. of recent the long of confidence the we have more is and that, values, ability lead that and am I this in help just While deeply, With past of to public are company operating from quarter pandemic, the new ever that in exciting facing it in and write and the we in progress ahead, I'm leaders I'm the that proud to forward that of the by those this the resolve adhering a there. scratching is to been grateful. the deeply Brent road he'll to A bright wisdom confident These experienced provide to to stepped we've made take the ahead, strength and there and years results, details core story of ask has history, of leaders to been our they our unique our quarterly by our enormous and point and forward, than potential, of as lies have hope come. organization born model a surface will the reflective global in attribute future turn results in our animated

Brent Guerisoli

that quarters rigor two, segments; management; local to; that level focus been focus ensure each principles and we high on success. initiatives, in throughout several one, operating three, historical on the core is these continue quarter cost a has key to towards Our team performance do achieved the history. us across elevate at In opportunities will both healthy and executed for executing past our growth core since, of have throughout first a we've fervor with to successfully the over and driven with our growth and we and model propel both segments so XXXX

that results. our focus pleased positive endeavors generating is are We these on key

and of the We first residual in part quarter. the home performance. pressures Turning health posted despite some our first hospice segment to solid COVID-XX-related results

revenue continued and Our XX.X% the on business Medicare experience growth increasing X%, and with quarter. to XX.X% fronts home solid year prior all home over health health total respectively, admissions each increasing admissions and

retaining XXX XXXX. the support talent, We early in cost our patients. ongoing provide challenges exercised part operating our difficulties, and by clinicians attracting inherent help also navigated discipline, resource of and adjusted the compared best fourth us led rigorous points margin that robust labor tailored improvement our These the quarter. these Despite local the Omicron leveraging quarter to exacerbated to model, quarantine EBITDA better tools of basis of new on search during efforts leaders care in to practices

with to X.X a kept stars. par star national Our compared CMS growth, average stars with clinical average rating our X.X of results our at

of XX.X% XX.X%, rate patterns, strong our agencies, average at largely stay. re-hospitalization Our clinical measures. in marks related and length our leaders to other hospice compared the rates headwinds confronted and of to lingering discharge referral national local COVID-XX In challenges average impacting

saw were admissions XX.X% the percentage into the hospice our X.X%. the patients We prior hospice quarter, up later fourth census Our of daily with in a year of began over trend first care as last quarter and of this average begin modestly life quarter, year period. in end down the higher continued

of first much experience our We average quarter. length throughout the discharge continue to on stay pressure of

our However, quarter. ADC as to fall, throughout cases the COVID-XX improved began

So far, March. with up quarter, we in are in daily April X.X% ADC incrementally hospice seeing over higher census second average the

for regulatory our most other a We in a into front, momentum our continue quickly health Ensign fiscal step strong partners hospice landscape. X.XX% closed of our the transfer X.X% our and continue that increase, transaction reflecting of their recovery rate we Senior on we which us communities remaining remainder us to the to among taking metrics. this sequestration XXXX, we in of year more at all generate Living believe Shifting head have key to by our proposed X the forward communities. parties families. projected updates, gives importance of portfolio XXXX, benefits a senior the as we living residents in to more setting our a streamlined allowing This payment CMS increase including in involved, a care segment, rate recognition On before care of

increased as will senior year in We exceptional Senior when been and across of also revenue effort. and segment, several the million talented improvement Living results that and over starts XXXX These contributing quarter year $XX.X of impairment. the quarter. strength segment fruits some improvement this XXXX, building points the $XXX,XXX to our occupied over instrumental $X.X resource XXX leadership we've as fourth occupancy, be million XX beginning excluding operational to increase cost prior local growth in measures of of million key leaders that in per over services of EBITDA revenue we're in room, represents the $X.X our of basis basis reflect prior point quarter with of the the $X.X turnaround in of know in fourth loss when attract was who quarter. board are see to on our leaders basis compared continue revenue living a segment. including and percentage million, points XX Adjusted results of and decrease develop in the support, a and We the to

ADAS, leaders tremendous basis Living upside growth are building pleased operating and is second by markets same-store about the in continuing as into across excited challenging made lingered momentum average persistent labor a over our with and to pace and March. it for wages in average saw up quarter, we These much XXXX, was residents, track that ROI first of force efforts leads to as invested new far up is high we're marketing our as we is occupancy our we resources in environment our are which in us a with contributing portfolio, XX quarter and at first follow line we segment, labor leads, quarter pressures. expectations. remaining better in Overall, headwinds expand solid progress clusters Senior occupancy the While sales than the in and There so multiple the our ongoing our challenges outreach, tick and additional continue saw in improved target Through to we've the allow slower channels. COVID-XX across local and with attract and points execute. April mired

clinicians, resources, on exceptional as to operators, acquisitions. an asked all I'm perform, center Our partners I'm we can continue focus achieve persistence, that, for provide update a on financial and hard single excellence. work, dedication, our operational grateful I've John to share confident and service With recent results. their clinical and and we

John Gochnour

earnings past many that few focus our areas the During in shared and results calls, recently cultural acquired improving foundation operations. our our we've of is operational one key

the local San of CMS are their Over volume have in acquisitions, over In of Diego, joint demonstrated caused prior moved and referrals expected. pandemic, in in of the a over challenges EMR heavy This clinical through we census at not-for-profit relentlessly resource XX star home and Health, improvement the agency through At community to a in to those home cultural some leadership ramp internal clinical new months, a at in last and report focused in transitioning year first a X in It's and months satisfaction the has a of improving system Lund, our Nels growth improved, progress from team. closely of partners, on delays large on our significant X X.X implementations, spin-off-related best health the implemented I'm health recently been some of recently service with XX the the financial quarter McMahon, partners, the time to improving like their examples San pleased our clinical, increase that XXXX. to has the the local leading years, resulting line with I'd team Tina our we the dramatically results. results a to few agencies. Diego, seeing working cultural, little team the health center material in hospice through closed of of capability how share acquired and same time, clinical since QX and lingering transition we financial and agencies. our in Timothy venture Johnson, Scripps in in rating top the pandemic performance improved a and leaders practices, surgeons, acquired and now dial to XX% bottom team California. system our employee and ways quarter

Importantly, in partners and programs Scripps programs helping we to the closely to for have These needs also develop outcomes improve our serve are us reduce worked to cost. that care at patients with allow patient more reduced setting. hospitalizations acute better home chronic a clinical

only While we together what the progress, we in surface with we can our like have of partners. accomplish tremendous San scratching made we are feel Diego

they grateful extremely for are We the trust placed us. in have

and Services, with to been home clinical and Call’s worked we Jesse First tenets. added California based core community. care market, in evaluate Jesse in organizations to Allande. by growing administrator, team a remarkable. Adam led their across As we other of of first create Pennant financial First our recently, have the built quality Pennant and acute culture Call a in to In Care exemplified Sacramento Patient More foundation outcomes. family, the partner results that in health positioned we clinical strategy, hospice team excellence Bohn improved and providing their believe Adam impact this have we new and well are them the Director can has The months and share Hospice and values on XX care

acquisition mid-XXs to to $XXX,XXX First from QX an post-closing increase Call first grew of as in at of time ADC EBITDA its quarter from date in call the and XX the has the this of its increased its of XXXX, XXX%. $XXX,XXX

Hospice the portfolio. years Adam, our of elsewhere agencies we've acquisitions the for market and this, a collectively in generating increase are we year in over provided acquired hospice the XX.X% over EBITDA our Jesse, to Home Health selfless In examples that First Seaport health quarter $X.X quarter. couple and have significant and first contributions home across XXXX, Scripps just acquired to support The of X and are a results. partners Call the to in the prior adjusted team addition past grew of million their California financial XXXX,

growth this relationships, investment provide an turn and disciplined to our Derek Our pattern. With strategy key the that, I'll balance have leadership talent, recent over best activity. fortitude it works, on continue and we to to practices, sheet update

Derek Bunker

Thanks, John.

which communities, We setting quarter, the closed we became partners operations transaction laundry, quarter, would a Montana, Ensign currently As referral services, of at to and expanding and patients we kitchen, sharing will continuum particular staffing, the other these can end the increasingly campus the Ensign in which complex. nursing our address better a settings combining them Brent for campus Since families. In the COVID-impacted and needs mentioned, we care strategic hospice state believe that sources. we're transfer first offer agency during with the affiliated of of refinements allow to residents of all X and environment, with operations. and in skilled health of a we senior care, share costly staff home living the a acquired that provide

we operate. In improved future appreciation and small addition, will Falls, continue living to our Idaho, real care our costs, estate at the this segment. community will continue our which to across underlying XX-unit transaction, and acquired community the capture revolver we fund our we we turnaround Twin in Attacking the this financing and assisted as memory

arrow our and our As is evaluate and living balance use able Senior in being just quiver. to more senior one acquire cost sheet building Living to our in growth of we keep capital competitive momentum opportunities segment operations, the

to through in is key the Bear lots solid underlying health banking acquire. will like pursue finance we with care closely partners, REIT, that and standard segments. new with landlords partners work We continue well opportunity acquisition pipeline their our real our Ensign as living and operations senior of as estate strategically Overall, both help to

be engage the look high-quality into market, as sellers, their and clinical continuing like future. in on that continue disciplined that buyers family employee we capital, to bringing of ourselves we We focused with quality legacy favor to we very an see exceptional of several providing look Pennant strategic them experience business off are both While dynamics regularly forward delivering and and on businesses, we partnering to owners the the care. with deploy and

and this the Our excited a With organic to accomplish Jen can the are for opportunities XXXX on and rest we of front what I'll of strategic investment financials. review it hand we're tremendous, and that, for beyond. in over

Jen Freeman

in XX, Detailed our the press XX-Q March XXXX, yesterday. contained release months financial ended are results for X and filed

fourth the earnings and quarter. of the of lost the include non-GAAP diluted million months Medicare per increase of of adjusted $X.XX benefit XXXX, COVID-related sequestration $X.XX XXXX, we earnings results reported per $XXX.X XX, March that quarter. share year as to and as per GAAP Please X.X% $X.X million, $X.XX, XX, our X or non-GAAP expenses quarter over the revenue all revenue. X XX.X% of ended the over share GAAP effects prior March the months a year note earnings share For increase of an holiday prior equal or XXXX total and the the for well an of adjusted diluted ended

lost negatively difficult the quarter fourth that fourth $X at to both impacted we per were and the increased million compared to perfectly across specifically XXXX in period. amount and wages, and approximately revenue, or including that quarter we $X considering COVID-XX of the approximately earnings identified share, $XXX,XXX, on segments expenses $X.XX While of overtime capture the million, lost by revenue the quarter estimate XXXX, and such of all first expenses were entering trajectory results least

our million and $XX.X of been to and impact compensation of repaid X, X about the credit workers' company's payments EBITDA, hand at for incurred million with to expect adjustment Cash of March quarter the on experience. remaining insurance from million the on for repay Key quarter include we adjusted operations XXXX, to line Additionally, and months liability ended period. revolving quarter $X.X the X.XXx X.XXx reserve drawn the general and align includes the the flows benefit payments. million metrics $XX in May on first the and end. professional $X.X end, claims the cash debt advanced wages began of if net we April within Medicare XX, million and in the provided Automatic advanced advanced as back have XXXX, excluding automatic through which paid approximately XXXX, $X.X payments $XXX,XXX have payback recruitment recruitment of of of

in yesterday, million per affirming million, XXXX adjusted and share revenue the press mentioned we and $XXX between annual As earnings and diluted fiscal are between of annual of year our release our guidance $XXX $X.XX. $X.XX

a Our year slower in modestly with roughly first as are the our to quarter results the we for pandemic to linger start expectations anticipated line into quarter. the first

staffing, census, our leaders. near-term cause are highlight that, in to of a foreseeable these and the continue are and to we results, our the confident other challenges for company it leaders While I'll some of with headwinds, confronting across to John future and will persist operating local and couple our likely hand chop capable strong

John Gochnour

of risk The as stepped and agency XXXX. Wise; few our in Columbia to organization the the care Director, able acquisition no Kennewick, at positioned story Traci Eric Executive we critical began operational that It's leaders Director, agency with the spotlight being At in, agency has time longer River operational Health Home auto of proceedings clinical have my Washington, offer continuum. pleasure services. River led and in the Tri-City in Clinical At a a piece achieved who transformation have to bankruptcy Repko, results was remarkable health the through the Columbia in excellence. a

the stars Over its rate on XX.X%, of published the peers. agencies and last executed a years, hospitalization the in has rating to CMS of the few X.X acute from agency vision local become clinical star team The team apart set the strongest community.

of stronger the their and XX.X% centered The within leaders, These and impact the team growth dramatic as incredible prior the results processes and of of quarter financial first set growth XX.X% of grew with we XXXX, the instill a over exceptional serves. see Kenosha of first XX.X%, are year from occupancy results, in the that, Director led it Executive strategic the quarter vision, values XX.X%. first St. in the Louis; clinical the of core results develop community out practices. and I'll XXXX in team grew platform, Danny. Director, both Development, This year lead over exceptional increase XXXX, a our improvement helped period. local a culture Living of Christine Operations, combined evidence of XX%, the produce people building trust accountability Kenosha, under Melissa turn their a performance. and payer operational Koerber; sets the executes through as to by This on best made of Wisconsin, mix. to consistent prior Columbia segment a progress of vision what's Together, stewardship Similarly, Senior Director our Living other solid on at apart As In right a to River's of the across and while Director revenue foundation the Gomez; actions quarter. back ownership, EBIT of XX.X%, strong of occupancy they Nursing, achievable in Senior XX.X% right and Martin, it a in QX across translated of transform power clinical sets it to first quarter our leadership each team, of community investments financial into drove and focused remarkable the well that drive team these in on of Steven demonstrates Business this many consistently culture and to that that revenue in EBITDA that that application Tabitha

Danny Walker

audience you've on instruct time taken the appreciate the now, please Q&A We Tanya, the could and if procedure? you

Operator

Ben Our Markets. will [Operator Hendrix RBC of Capital first from Instructions] come question

Ben Hendrix

the kind could March, just a it how into average on April shared, in in strong strong give progress of of you course consolidated occupancy really basis, if facilities. then to and growth your with exited occupancy us noted there's looks and like just you improvement and timing? expect established just March the in I'm you over example occupancy the wondering of April year how terms you You

Danny Walker

already. it about talked We

response the a growth. the grows. So, having the specific occupancy getting part of just a we the labor strong our more, right kind seeing the bit into and we as here. stronger things into are numbers, to just pretty environment of as March the as opening I pretty mean year to is little things that's sizable saw numbers improving, like up things mentioned, first a what bit we're April, and of where but inconsistent as saw we're building a occupancy the look as is, struggle, throughout but I'm we Jen these in you progressed have open anticipate then pretty was then I'm response seen growth. significant seeing opened pandemic, as up, we've growth. that's at that, a addition We we're And teams, census little strong up

Jen Freeman

the April by basis points. from So increasing going into we March, see XX occupancy

Ben Hendrix

If I more. just could, one

how Twin ownership real us the Standard just from against estate real give third-party underlying You estate landlords? weigh leasing facility. Falls, of and strategy Idaho overview kind you that your Bear Can either or any of acquisition the of mentioned other you an

Derek Bunker

in of of we has feel pull that lot stakeholders. our We'll operations can continue to growth to we value organic upside, lever strategy. provide a another like can just a it's our pursue lot us, we For

and grow estate we balance to REIT in our work one sometimes banking of continue tool know, that you with is transaction. As senior to those. to living have, sheet through way, partners at finance acquisition may our closely is that landlords over part their time opportunities, Ensign other our partners we that in those own through and a and real continue our we'll Using healthy through

strong we strong the over to a we Over so we had real So, wanted do time our our in relationships what clusters to had we to and of but we different acquisition there with our living as if just in to well. exclusion and to we expect partners and we that leadership with an portfolio, markets, going we like pursue transaction those. ensure one to can senior wanted that there, felt balance those that estate where is expect to finance it, do pull existing levers of we're was time, grow not whom sheet working can closely that is those we add

Operator

Our comes Inc. Scott Fidel of from Stephens next question

Jordan Bernstein

I'd the strategy. bit like to drill down and a M&A on the continue conversation little

As rate the previous the as you anticipate a the the what conversation, just wondering of follow-up on run for M&A rest year?

Derek Bunker

pretty take really feel recently performance We sellers, the with is the our had we acquisition of where to we of good both deploy us, pipeline like of conversations strong with up. and sellers, really care have we in acquisitions, we landscape, for been terms what about want today, the stand balance potential recent where picking our before feel which we've our to as and sheet capital, acquired as and continue well positive we've

it our like in we and to those how for we home strength, good, don't we to will the we signs grow that see so so deploy about there. or optimistic but we're of and where we targets any quotas look out, kind in have particular, really look have health feel what excited continuing and continue hospice over difficult really while segment, capital, that be we're months, next XX it's to continue our will and historical strong, we always As conversations acquisition forecast to pace

Jordan Bernstein

conversations given price valuations retractions? progressing? public To you go positive. in off I would guess sellers that, market Have seen how say are are a with you step private my be follow-up there down

Derek Bunker

Valuations their off see really seismic be A considering continue been when important it lot can sellers to they're all seeing. that just deals built on relationships eye, to objectives. be…there dramatic where we're of market, shift a those intangibles we hasn't uncommon are upon valuation, there, seller strong not and been not our other a to with have but what the

lot a stayed we've we've as going opportunity to see fair so, there, find of that still we forward. disciplined And able in as valuations been

or in the there be both continue in some well maybe lot a their to deals So what other but sellers as as softness priorities. fair landscape, valuation some bigger call consider our pretty we we as might in elsewhere see offer

Jordan Bernstein

I and bit? to approach you're in it but speak COVID that Can guidance. remainder just of COVID year, of in remaining and doesn't amount, a you like the strategy the a out to conservative guess calling conservatism you're gears the seem shifting terms specific to

Brent Guerisoli

the remainder of think, There's as can't is to do appropriately to a we're of How of prepared recognize practices? we how uncertainty robust and the we what the the can something that We and change, focused through do we do we're that successfully? make we're for continue operate the on so year, all want we're in that clinical prepared, we so it sure able we make that sure staffed make do that things environment, the increasing see sure that and control, we how an we're have lot control, most change if about I there, unknown. we you Jordan, that that variant that's think the to still in for number still in exists. cases Northeast is COVID

John Gochnour

leadership the in and well, as throughout COVID last impact team we operations, of strength the seen we the been add X we've and the this, have importance the where just it's strong consistently would what years, talked I leadership, less. have communities our about

development, our the leaders combat some so culture, but been success. help strong there's years of where COVID. put there's to couple things those because are development have and will And direction, people predict to have the we all going positive to of the to there's some related a effort investing But business follow exactly better history practices, to our local efforts but we we confident, resources to a has our returns. strong a in where join developing and strong last and we're leadership, leaders we've develop that the over of happen, vision certainly, so and shown talked team a impact, we challenges as into that, renew an of find what's want Nobody continue can strong recruiting that to and where so And them. and about then that of strength has of

Operator

I for today’s am Thank further This no concludes showing conference call. [Operator you participating. Instructions] questions.

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