• Pennant Reports Third Quarter 2024 Results

    Source: Nasdaq GlobeNewswire / 06 Nov 2024 15:11:46   America/Chicago

    EAGLE, Idaho, Nov. 06, 2024 (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 third quarter of 2024, reporting GAAP diluted earnings per share of $0.20 for the third quarter of 2024. Pennant also reported adjusted diluted earnings per share of $0.26 for the quarter (1).

    Third Quarter Highlights

    • Total revenue for the third quarter was $180.7 million, an increase of $40.5 million or 28.9% over the prior year quarter;
    • Net income for the third quarter was $6.2 million, an increase of $1.8 million or 41.6% over the prior year quarter;
    • Adjusted net income for the third quarter was $8.2 million, an increase of $2.2 million or 36.8% over the prior year quarter;
    • Segment Adjusted EBITDAR from Operations for the third quarter was $26.0 million, an increase of $5.4 million or 25.9% over the prior year quarter;
    • Adjusted EBITDA for the third quarter was $15.1 million, an increase of $4.3 million or 39.2% over the prior year quarter;
    • Home Health and Hospice Services segment revenue for the third quarter was $135.7 million, an increase of $34.2 million or 33.7% over the prior year quarter;
    • Home Health and Hospice Services segment adjusted EBITDAR from operations for the third quarter was $23.7 million, an increase of $6.5 million or 37.4% over the prior year quarter; and segment adjusted EBITDA from operations the third quarter was $21.9 million, an increase of $6.0 million or 37.5% over the prior year quarter;
    • Total home health admissions for the third quarter were 14,993, an increase of 4,164 or 38.5% over the prior year quarter; total Medicare home health admissions for the third quarter were 6,071, an increase of 1,431 or 30.8% over the prior year quarter;
    • Hospice average daily census for the third quarter was 3,444, an increase of 746 or 27.7% compared to the prior year quarter;
    • Senior Living Services segment revenue for the third quarter was $45.0 million, an increase of $6.3 million or 16.3% over the prior year quarter; average occupancy for the third quarter was 79.1%, an increase of 20 basis points over the prior year quarter, and average monthly revenue per occupied room for the third quarter was $4,836 an increase of $350 or 7.8% over the prior year quarter;
    • Senior Living segment adjusted EBITDAR from operations for the third quarter was $13.4 million, an increase of $1.9 million or 16.9% over the prior year quarter; and segment adjusted EBITDA from Operations for the third quarter was $4.4 million, an increase of $1.3 million or 43.8% over the prior year quarter.
    (1) See "Reconciliation of GAAP to Non-GAAP Financial Information.”
        

    Operating Results

    “Our strong third quarter financial results demonstrate the momentum we are building across the business, and we are pleased to see robust performance in our existing operations even as we integrate new ones. The equity offering we executed after quarter end, coupled with the expansion of our revolving credit facility during the quarter, position us exceptionally well for future growth. With these operating results and a healthy balance sheet, we are poised for success through the remainder of 2024 and beyond,” said Brent Guerisoli, the Company’s Chief Executive Officer.

    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 three and nine months ended September 30, 2024, which has been filed with the SEC today and can be viewed on the Company’s website at www.pennantgroup.com.

    2024 Guidance

    Management is updating its annual guidance as follows: total revenue is anticipated to be between $665.3 million and $706.5 million; full year 2024 adjusted earnings per diluted share is anticipated to be between $0.90 and $0.96; and full year 2024 adjusted EBITDA is anticipated to be between $51.9 million and $55.2 million.

    “The Company’s updated guidance reflects the continued momentum in the business, and incorporates current operations and organic growth, diluted weighted average shares outstanding of approximately 32.5 million, and a 26.0% effective tax rate,” stated Lynette Walbom, Pennant’s Chief Financial Officer. “It anticipates consistent operating performance through the end of the year, hospice reimbursement rate adjustments, decreased interest expense, and contributions from our joint ventures and management agreements. It excludes unannounced acquisitions, the announced purchase of Signature’s Oregon assets, start-ups, share-based compensation, acquisition-related costs, or one-time implementation and unusual items.”

    Conference Call

    A live webcast will be held tomorrow, November 7, 2024 at 10:00 a.m. Mountain time (12:00 p.m. Eastern time) to discuss Pennant’s third quarter 2024 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 122 home health and hospice agencies and 54 senior living communities located throughout Arizona, California, Colorado, Idaho, 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
    September 30,    		 Nine Months Ended
    September 30,
      2024   2023   2024   2023 
            
    Revenue$180,688  $140,192  $506,348  $398,937 
            
    Expense       
    Cost of services 144,468   112,384   405,776   321,162 
    Rent—cost of services 10,906   10,006   31,814   29,439 
    General and administrative expense 13,023   9,417   36,337   26,913 
    Depreciation and amortization 1,493   1,323   4,292   3,817 
    Loss (gain) on disposition of property and equipment, net 4   1   (751)  4 
    Total expenses 169,894   133,131   477,468   381,335 
    Income from operations 10,794   7,061   28,880   17,602 
    Other (expense) income, net:       
    Other income (expense) 109   (37)  192   28 
    Interest expense, net (2,892)  (1,496)  (6,306)  (4,355)
    Other expense, net (2,783)  (1,533)  (6,114)  (4,327)
    Income before provision for income taxes 8,011   5,528   22,766   13,275 
    Provision for income taxes 1,354   1,066   4,957   3,894 
    Net income 6,657   4,462   17,809   9,381 
    Less: Net income attributable to noncontrolling interest 452   79   1,008   351 
    Net income attributable to The Pennant Group, Inc.$6,205  $4,383  $16,801  $9,030 
    Earnings per share:       
    Basic$0.20  $0.15  $0.56  $0.30 
    Diluted$0.20  $0.15  $0.54  $0.30 
    Weighted average common shares outstanding:       
    Basic 30,281   29,912   30,157   29,825 
    Diluted 31,363   30,206   30,869   30,178 


     
    THE PENNANT GROUP, INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (in thousands, except par value)
     
     September 30, 2024 December 31, 2023
    Assets   
    Current assets:   
    Cash$4,464  $6,059 
    Accounts receivable—less allowance for doubtful accounts of $313 and $259, respectively 84,025   61,116 
    Prepaid expenses and other current assets 13,307   12,902 
    Total current assets 101,796   80,077 
    Property and equipment, net 41,865   28,598 
    Right-of-use assets 265,441   262,923 
    Deferred tax assets, net 245   — 
    Restricted and other assets 12,173   9,337 
    Goodwill 129,337   91,014 
    Other indefinite-lived intangibles 95,902   67,742 
       Total assets$646,759  $539,691 
    Liabilities and equity   
    Current liabilities:   
    Accounts payable$15,888  $10,841 
    Accrued wages and related liabilities 36,565   28,256 
    Operating lease liabilities—current 19,113   17,122 
    Other accrued liabilities 19,029   15,330 
    Total current liabilities 90,595   71,549 
    Long-term operating lease liabilities—less current portion 248,907   248,596 
    Deferred tax liabilities, net 818   1,855 
    Other long-term liabilities 10,277   8,262 
    Long-term debt, net 108,875   63,914 
    Total liabilities 459,472   394,176 
    Commitments and contingencies   
    Equity:   
    Common stock, $0.001 par value; 100,000 shares authorized; 30,565 and 30,308 shares issued and outstanding, respectively, at September 30, 2024; and 30,297 and 29,948 shares issued and outstanding, respectively, at December 31, 2023 31   29 
    Additional paid-in capital 117,947   105,712 
    Retained earnings 51,464   34,663 
    Treasury stock, at cost, 3 shares at September 30, 2024 and December 31, 2023 (65)  (65)
    Total The Pennant Group, Inc. stockholders’ equity 169,377   140,339 
    Noncontrolling interest 17,910   5,176 
    Total equity 187,287   145,515 
    Total liabilities and equity$646,759  $539,691 


     
    THE PENNANT GROUP, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (in thousands)
     
    The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented:
     
     Nine Months Ended September 30,
      2024   2023 
    Net cash provided by operating activities$18,729  $27,910 
    Net cash used in investing activities (66,287)  (17,576)
    Net cash provided by (used in) financing activities 45,963   (9,030)
    Net (decrease) increase in cash (1,595)  1,304 
    Cash beginning of period 6,059   2,079 
    Cash end of period$4,464  $3,383 


     
    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 September 30,
      2024   2023 
     Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage
            
    Home health and hospice services       
    Home health$60,988  33.8% $44,921  32.0%
    Hospice 62,757  34.7   50,371  35.9 
    Home care and other(a) 11,927  6.6   6,182  4.4 
    Total home health and hospice services 135,672  75.1   101,474  72.3 
    Senior living services 45,016  24.9   38,718  27.7 
    Total revenue$180,688  100.0% $140,192  100.0%


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


     Nine Months Ended September 30,
      2024   2023 
     Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage
            
    Home health and hospice services       
    Home health$172,773  34.1% $129,112  32.4%
    Hospice 176,711  34.9   140,222  35.1 
    Home care and other(a) 27,979  5.5   18,239  4.6 
    Total home health and hospice services 377,463  74.5   287,573  72.1 
    Senior living services 128,885  25.5   111,364  27.9 
    Total revenue$506,348  100.0% $398,937  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
    September 30,    		    
      2024   2023  Change % Change
    Total agency results:        
    Home health and hospice revenue$135,672  $101,474   34,198  33.7%
            
    Home health services:       
    Total home health admissions 14,993   10,829   4,164  38.5%
    Total Medicare home health admissions 6,071   4,640   1,431  30.8%
    Average Medicare revenue per 60-day completed episode(a)$3,760  $3,480  $280  8.0%
    Hospice services:       
    Total hospice admissions 2,987   2,433   554  22.8%
    Average daily census 3,444   2,698   746  27.7%
    Hospice Medicare revenue per day$183  $183  $—  —%


     Three Months Ended
    September 30,    		    
      2024   2023  Change % Change
    Same agency(b) results:        
    Home health and hospice revenue$110,748  $98,732  $12,016  12.2%
            
    Home health services:       
    Total home health admissions 12,221   10,570   1,651  15.6%
    Total Medicare home health admissions 5,008   4,521   487  10.8%
    Average Medicare revenue per 60-day completed episode(a)$3,587  $3,488  $99  2.8%
    Hospice services:       
    Total hospice admissions 2,624   2,351   273  11.6%
    Average daily census 2,995   2,650   345  13.0%
    Hospice Medicare revenue per day$184  $186  $(2) (1.1)%


     Nine Months Ended
    September 30,    		    
      2024   2023  Change % Change
    Total agency results:        
    Home health and hospice revenue$377,463  $287,573  $89,890  31.3%
            
    Home health services:       
    Total home health admissions 43,782   32,180   11,602  36.1%
    Total Medicare home health admissions 18,155   14,437   3,718  25.8%
    Average Medicare revenue per 60-day completed episode(a)$3,646  $3,467  $179  5.2%
    Hospice services:       
    Total hospice admissions 9,118   7,206   1,912  26.5%
    Average daily census 3,209   2,544   665  26.1%
    Hospice Medicare revenue per day$182  $184  $(2) (1.1)%


     Nine Months Ended
    September 30,    		    
      2024   2023  Change % Change
    Same agency(b) results:        
    Home health and hospice revenue$322,941  $284,228  $38,713  13.6%
            
    Home health services:       
    Total home health admissions 36,623   31,710   4,913  15.5%
    Total Medicare home health admissions 15,441   14,221   1,220  8.6%
    Average Medicare revenue per 60-day completed episode(a)$3,546  $3,469  $77  2.2%
    Hospice services:       
    Total hospice admissions 7,970   7,104   866  12.2%
    Average daily census 2,851   2,528   323  12.8%
    Hospice Medicare revenue per day$185  $186  $(1) (0.5)%


    (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, 2023.


     
    The following table summarizes our senior living performance indicators for the periods indicated:
     
     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
      2024   2023   2024   2023 
    Total senior living results:       
    Senior living revenue$45,016  $38,718  $128,885  $111,364 
            
    Occupancy 79.1%  78.9%  78.9%  78.4%
    Average monthly revenue per occupied unit$4,836  $4,486  $4,758  $4,401 


     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
      2024   2023   2024   2023 
    Same store senior living(a) results:        
    Senior living revenue$41,030  $38,126  $119,625  $110,225 
            
    Occupancy 80.2%  80.1%  79.7%  79.6%
    Average monthly revenue per occupied unit$4,790  $4,454  $4,724  $4,380 


    (a) Same store senior living results is defined as all senior living communities excluding affiliate memory care units in transition, and new senior living operations acquired in 2023 or 2024.


     
    THE PENNANT GROUP, INC.
    REVENUE BY PAYOR SOURCE
    (unaudited, dollars in thousands)
     
    The following table presents our total revenue by payor source as a percentage of total revenue for the periods indicated:
     
      Three Months Ended September 30,
       2024   2023 
      Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage
             
    Revenue:        
    Medicare $86,919  48.1% $67,925  48.5%
    Medicaid  22,715  12.6   19,893  14.2 
    Subtotal  109,634  60.7   87,818  62.7 
    Managed Care  24,652  13.6   19,158  13.6 
    Private and Other(a)  46,402  25.7   33,216  23.7 
    Total revenue $180,688  100.0% $140,192  100.0%


    (a) Private and other payors includes revenue from all payors generated in the Company’s home care operations and management services agreement.


      Nine Months Ended September 30,
       2024   2023 
      Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage
             
    Revenue:        
    Medicare $245,746  48.5% $192,895  48.3%
    Medicaid  66,386  13.1   56,455  14.2 
    Subtotal  312,132  61.6   249,350  62.5 
    Managed Care  66,084  13.1   53,538  13.4 
    Private and Other(a)  128,132  25.3   96,049  24.1 
    Total revenue $506,348  100.0% $398,937  100.0%


    (a) Private and other payors includes revenue from all payors generated in the Company’s home care operations and management services agreement.


     
    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
    September 30,    		 Nine Months Ended
    September 30,
      2024   2023   2024   2023 
            
    Net income attributable to The Pennant Group, Inc.$6,205  $4,383  $16,801  $9,030 
            
    Non-GAAP adjustments       
    Costs at start-up operations(a) 66   59   244   1,060 
    Share-based compensation expense(b) 2,342   1,391   5,817   4,164 
    Acquisition related costs and credit allowances(c) 494   71   996   175 
    Interest expense - write off deferred financing fees(e) 428   —   428   — 
    Costs associated with transitioning operations(d) 68   90   (418)  759 
    Unusual, non-recurring or redundant charges(e) 239   1,009   546   1,633 
    Provision for income taxes on Non-GAAP adjustments(f) (1,675)  (1,031)  (2,942)  (1,562)
    Non-GAAP net income$8,167  $5,972  $21,472  $15,259 
            
    Dilutive Earnings Per Share As Reported       
    Net Income$0.20  $0.15  $0.54  $0.30 
    Average number of shares outstanding 31,363   30,206   30,869   30,178 
            
    Adjusted Diluted Earnings Per Share        
    Net Income$0.26  $0.20  $0.70  $0.51 
    Average number of shares outstanding 31,363   30,206   30,869   30,178 


    (a) Represents results related to start-up operations.
         Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
          2024   2023   2024   2023 
      Revenue$—  $(2,928) $(4,956) $(8,821)
      Cost of services 65   2,820   4,884   8,981 
      Rent —   162   306   885 
      Depreciation & amortization 1   5   10   15 
      Total Non-GAAP adjustment$66  $59  $244  $1,060 
                
    (b) Represents share-based compensation expense incurred for the periods presented.
         Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
          2024   2023   2024   2023 
      Cost of services$1,069  $819  $2,814  $2,288 
      General and administrative 1,273   572   3,003   1,876 
      Total Non-GAAP adjustment$2,342  $1,391  $5,817  $4,164 
                
    (c) Represents costs incurred to acquire an operation that are not capitalizable.


    (d) During the nine months ended September 30, 2023, an affiliate of the Company placed its memory care units into transition and began 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 an entity transitioned to Ensign.
       
         Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
          2024   2023   2024   2023 
      Revenue$—  $(4) $(1) $(4)
      Cost of services 12   14   (582)  599 
      Rent 53   77   157   156 
      Depreciation 3   3   8   8 
      Total Non-GAAP adjustment$68  $90  $(418) $759 
                
    (e) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses.
                
    (f) Represents an adjustment to the provision for income tax to the year-to-date effective tax rate of 26.0% and 25.9% for the nine months ended September 30, 2024 and 2023, respectively. This rate excludes the tax benefit of share-based payment awards.


    The table below reconciles Consolidated net income to the Consolidated Non-GAAP financial measures, Consolidated Adjusted EBITDA, and to the Non-GAAP valuation measure, Consolidated Adjusted EBITDAR, for the periods presented:
     
     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
      2024   2023   2024   2023 
            
    Consolidated net income$6,657  $4,462  $17,809  $9,381 
    Less: Net income attributable to noncontrolling interest 452   79   1,008   351 
    Add: Provision for income taxes 1,354   1,066   4,957   3,894 
    Net interest expense 2,892   1,496   6,306   4,355 
    Depreciation and amortization 1,493   1,323   4,292   3,817 
    Consolidated EBITDA 11,944   8,268   32,356   21,096 
    Adjustments to Consolidated EBITDA       
    Add: Costs at start-up operations(a) 65   (108)  (72)  160 
    Share-based compensation expense(b) 2,342   1,391   5,817   4,164 
    Acquisition related costs and credit allowances(c) 494   71   996   175 
    Costs associated with transitioning operations(d) 12   10   (583)  595 
    Unusual, non-recurring or redundant charges(e) 239   1,009   546   1,633 
    Rent related to items (a) and (d) above 53   239   463   1,041 
    Consolidated Adjusted EBITDA 15,149   10,880   39,523   28,864 
    Rent—cost of services 10,906   10,006   31,814   29,439 
    Rent related to items (a) and (d) above (53)  (239)  (463)  (1,041)
    Adjusted rent—cost of services 10,853   9,767   31,351   28,398 
    Consolidated Adjusted EBITDAR(f)$26,002    $70,874   


    (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, credit allowances, and write offs for amounts in dispute with the prior owners of certain acquired operations.
    (d) During the nine months ended September 30, 2023, an affiliate of the Company placed its memory care units into transition and began 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 an entity transitioned to Ensign.
    (e) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses.
    (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”:
     
     Home Health
    and Hospice
    Services    		 Senior Living
    Services    		 All Other Total
    Segment GAAP Financial Measures:       
    Three Months Ended September 30, 2024       
    Revenue$135,672  $45,016  $—  $180,688 
    Segment Adjusted EBITDAR from Operations$23,724  $13,411  $(11,133) $26,002 
    Three Months Ended September 30, 2023       
    Revenue$101,474  $38,718  $—  $140,192 
    Segment Adjusted EBITDAR from Operations$17,271  $11,473  $(8,097) $20,647 


     Home Health
    and Hospice
    Services    		 Senior Living
    Services    		 All Other Total
    Segment GAAP Financial Measures:       
    Nine Months Ended September 30, 2024       
    Revenue$377,463  $128,885  $—  $506,348 
    Segment Adjusted EBITDAR from Operations$64,488  $38,226  $(31,840) $70,874 
    Nine Months Ended September 30, 2023       
    Revenue$287,573  $111,364  $—  $398,937 
    Segment Adjusted EBITDAR from Operations$47,364  $33,394  $(23,496) $57,262 


    The table below provides a reconciliation of Segment Adjusted EBITDAR from Operations above to Condensed Consolidated Income from Operations:
     
     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
      2024   2023   2024   2023 
            
    Segment Adjusted EBITDAR from Operations(a)$26,002  $20,647  $70,874  $57,262 
    Less: Depreciation and amortization 1,493   1,323   4,292   3,817 
    Rent—cost of services 10,906   10,006   31,814   29,439 
    Other income 109   (37)  192   28 
    Adjustments to Segment EBITDAR from Operations:       
    Less: Costs at start-up operations(b) 65   (108)  (72)  160 
    Share-based compensation expense(c) 2,342   1,391   5,817   4,164 
    Acquisition related costs and credit allowances(d) 494   71   996   175 
    Costs associated with transitioning operations(e) 12   10   (583)  595 
    Unusual, non-recurring or redundant charges(f) 239   1,009   546   1,633 
    Add: Net income attributable to noncontrolling interest 452   79   1,008   351 
    Consolidated Income from Operations$10,794  $7,061  $28,880  $17,602 


    (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, credit allowances, and write offs for amounts in dispute with the prior owners of certain acquired operations.
    (e) During the nine months ended September 30, 2023, an affiliate of the Company placed its memory care units into transition and began 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 an entity transitioned to Ensign.
    (f) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses.


    The tables below reconcile Segment Adjusted EBITDAR from Operations to Segment Adjusted EBITDA from Operations for each reportable segment for the periods presented:
     
     Three Months Ended September 30,
     Home Health and
    Hospice    		 Senior Living
      2024   2023   2024   2023 
            
    Segment Adjusted EBITDAR from Operations$23,724  $17,271  $13,411  $11,473 
    Less: Rent—cost of services 1,861   1,439   9,045   8,567 
    Rent related to start-up and transitioning operations —   (72)  (53)  (167)
    Segment Adjusted EBITDA from Operations$21,863  $15,904  $4,419  $3,073 


     Nine Months Ended September 30,
     Home Health and
    Hospice    		 Senior Living
      2024   2023   2024   2023 
            
    Segment Adjusted EBITDAR from Operations$64,488  $47,364  $38,226  $33,394 
    Less: Rent—cost of services 5,254   4,136   26,560   25,303 
    Rent related to start-up and transitioning operations (122)  (248)  (341)  (793)
    Segment Adjusted EBITDA from Operations$59,356  $43,476  $12,007  $8,884 


    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) interest expense, net (b) (benefits) provisions for income taxes, (c) depreciation and amortization, (d) costs incurred for start-up operations, including rent and excluding depreciation, interest and income taxes, (e) share-based compensation expense, (f) non-capitalizable acquisition related costs and credit allowances, (g) net costs associated with transitioning operations, (h) unusual, non-recurring or redundant charges and (i) 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 credit allowances, (h) redundant or non-recurring transition services costs, (i) costs associated with transitioning operations, (j) unusual, non-recurring or redundant 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.


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