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 first
quarter of 2023, reporting GAAP diluted earnings per share $0.06
for the three months ended March 31, 2023. Pennant also reported
adjusted diluted earnings per share of $0.13 for the quarter (1).
First Quarter Highlights
- Total revenue for the quarter was $126.5 million, an increase
of $12.6 million or 11.0% over the prior year quarter;
- Net income for the first quarter was $1.9 million, an increase
of $0.8 million or 82.4% over the prior year quarter, and adjusted
net income of the first quarter was $3.8 million, an increase of
$0.5 million or 15.6% over the prior year quarter;
- Adjusted EBITDA was $7.9 million
for the first quarter, an increase of $1.8 million or 28.8% over
the prior year quarter; adjusted EBITDAR for the first quarter was
$17.1 million, an increase of $1.9 million or 12.5% over the prior
year quarter;
- Home Health and Hospice Services
segment revenue for the first quarter was $91.1 million, an
increase of $10.6 million or 13.2% over the prior year
quarter;
- Home Health and Hospice Services
segment adjusted EBITDA from operations was $13.2 million for the
first quarter, an increase of $0.5 million or 3.7% over the prior
year quarter; segment adjusted EBITDAR from operations was $14.4
million for the first quarter, an increase of $0.5 million or 3.3%
over the prior year quarter;
- Total home health admissions were
10,910 for the first quarter, an increase of 728 or 7.1% over the
prior year quarter; total Medicare home health admissions were
4,948 for the first quarter, an increase of 315 or 6.8% over the
prior year quarter;
- Total hospice admissions for the
first quarter were 2,451, an increase of 42 or 1.7% over the prior
year quarter, and an increase of 205 or 9.1% over the fourth
quarter of 2022. Hospice average daily census for the first quarter
was 2,439, an increase of 9.3% compared to the prior year
quarter;
- Senior Living Services segment
revenue for the first quarter was $35.4 million, an increase of
$2.0 million or 5.8% over the prior year quarter; average occupancy
for the first quarter was 78.1%, an increase of 550 basis points
over the prior year quarter, and average monthly revenue per
occupied room for the first quarter was $3,846 an increase of $475
or 14.1% over the prior year quarter;
- Same store(2) Senior Living
Services segment revenue was $34.6 million for the first quarter,
an increase of $4.5 million or 15.0% over the prior year quarter;
same store senior living average occupancy for the first quarter
was 79.1%, an increase of 370 basis points over the prior year
quarter, and average monthly revenue per occupied room for the
first quarter was $3,850 an increase of $397 or 11.5% over the
prior year quarter;
- Senior Living segment adjusted
EBITDA from Operations was $2.2 million for the first quarter, an
increase of $0.7 million or 42.2% over the prior year quarter;
segment adjusted EBITDAR from operations for the first quarter was
$10.2 million, an increase of $0.8 million or 8.6% 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 solid growth in the
first quarter,” said Brent Guerisoli, Pennant’s Chief Executive
Officer. “We drove top-line growth in both segments and are focused
on pushing that growth to the bottom line throughout the remainder
of the year. The recovery in our senior living business continues
to gather strength. Our leadership and acquisition pipelines are
strong. Our first quarter performance puts us on track to meet our
2023 expectations.”
Mr. Guerisoli also commented on the Company’s
improving cash position: “Our operations produced $9.0 million
of cash in the first quarter. This cash generation improved our
leverage ratios and positions us well to take advantage of an
increasing number of attractive acquisition targets flowing our
direction.” He noted that the Company had $3.0 million of cash on
hand and $87.3 million available on its revolving line of credit,
with a net debt-to-adjusted EBITDA ratio of 1.62x and a
lease-adjusted net debt-to-adjusted EBITDAR ratio of 5.07x.
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 March
31, 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,
May 5, 2023 at 10:00 a.m. Mountain time (12:00 p.m. Eastern
time) to discuss Pennant’s first 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 96 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 RelationsThe Pennant Group, Inc.(208)
506-6100ir@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 March 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
Revenue |
$ |
126,464 |
|
|
$ |
113,910 |
|
|
|
|
|
Expense |
|
|
|
Cost of services |
|
102,602 |
|
|
|
90,261 |
|
Rent—cost of services |
|
9,597 |
|
|
|
10,051 |
|
General and administrative expense |
|
8,705 |
|
|
|
10,033 |
|
Depreciation and amortization |
|
1,280 |
|
|
|
1,147 |
|
Loss on asset dispositions and impairment, net |
|
— |
|
|
|
92 |
|
Total expenses |
|
122,184 |
|
|
|
111,584 |
|
Income from operations |
|
4,280 |
|
|
|
2,326 |
|
Other income (expense): |
|
|
|
Other income |
|
30 |
|
|
|
3 |
|
Interest expense, net |
|
(1,406 |
) |
|
|
(629 |
) |
Other expense, net |
|
(1,376 |
) |
|
|
(626 |
) |
Income before provision for
income taxes |
|
2,904 |
|
|
|
1,700 |
|
Provision for income
taxes |
|
907 |
|
|
|
542 |
|
Net income |
|
1,997 |
|
|
|
1,158 |
|
Less: net income attributable
to noncontrolling interest |
|
147 |
|
|
|
144 |
|
Net income and other
comprehensive income attributable to The Pennant Group, Inc. |
$ |
1,850 |
|
|
$ |
1,014 |
|
Earnings per share: |
|
|
|
Basic |
$ |
0.06 |
|
|
$ |
0.04 |
|
Diluted |
$ |
0.06 |
|
|
$ |
0.03 |
|
Weighted average common shares
outstanding: |
|
|
|
Basic |
|
29,751 |
|
|
|
28,572 |
|
Diluted |
|
30,147 |
|
|
|
30,143 |
|
|
|
|
|
|
|
|
|
THE PENNANT GROUP,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(unaudited, in thousands, except par
value)
|
March 31, 2023 |
|
December 31, 2022 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash |
$ |
2,952 |
|
|
$ |
2,079 |
|
Accounts receivable—less allowance for doubtful accounts of $573
and $592, respectively |
|
50,660 |
|
|
|
53,420 |
|
Prepaid expenses and other current assets |
|
13,140 |
|
|
|
18,323 |
|
Total current assets |
|
66,752 |
|
|
|
73,822 |
|
Property and equipment,
net |
|
26,947 |
|
|
|
26,621 |
|
Right-of-use assets |
|
264,109 |
|
|
|
260,868 |
|
Deferred tax assets, net |
|
1,372 |
|
|
|
2,149 |
|
Restricted and other
assets |
|
10,652 |
|
|
|
10,545 |
|
Goodwill |
|
79,497 |
|
|
|
79,497 |
|
Other indefinite-lived
intangibles |
|
58,827 |
|
|
|
58,617 |
|
Total assets |
$ |
508,156 |
|
|
$ |
512,119 |
|
Liabilities and
equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
12,161 |
|
|
$ |
13,647 |
|
Accrued wages and related liabilities |
|
20,495 |
|
|
|
23,283 |
|
Operating lease liabilities—current |
|
16,856 |
|
|
|
16,633 |
|
Other accrued liabilities |
|
16,116 |
|
|
|
16,684 |
|
Total current liabilities |
|
65,628 |
|
|
|
70,247 |
|
Long-term operating lease
liabilities—less current portion |
|
250,041 |
|
|
|
247,042 |
|
Other long-term
liabilities |
|
6,240 |
|
|
|
6,281 |
|
Long-term debt, net |
|
57,023 |
|
|
|
62,892 |
|
Total liabilities |
|
378,932 |
|
|
|
386,462 |
|
Commitments and
contingencies |
|
|
|
Equity: |
|
|
|
Common stock, $0.001 par value; 100,000 shares authorized; 30,203
and 29,729 shares issued and outstanding, respectively, at March
31, 2023; and 30,149 and 29,692 shares issued and outstanding,
respectively, at December 31, 2022 |
|
29 |
|
|
|
29 |
|
Additional paid-in capital |
|
101,334 |
|
|
|
99,764 |
|
Retained earnings |
|
23,134 |
|
|
|
21,284 |
|
Treasury stock, at cost, 3 shares at March 31, 2023 and 2022 |
|
(65 |
) |
|
|
(65 |
) |
Total Pennant Group, Inc. stockholders’ equity |
|
124,432 |
|
|
|
121,012 |
|
Noncontrolling interest |
|
4,792 |
|
|
|
4,645 |
|
Total equity |
|
129,224 |
|
|
|
125,657 |
|
Total liabilities and equity |
$ |
508,156 |
|
|
$ |
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:
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
Net cash provided by (used in)
operating activities |
$ |
8,996 |
|
|
$ |
(4,071 |
) |
Net cash used in investing
activities |
|
(2,326 |
) |
|
|
(2,582 |
) |
Net cash (used in) provided by
financing activities |
|
(5,797 |
) |
|
|
5,090 |
|
Net increase (decrease) in cash |
|
873 |
|
|
|
(1,563 |
) |
Cash beginning of period |
|
2,079 |
|
|
|
5,190 |
|
Cash end of period |
$ |
2,952 |
|
|
$ |
3,627 |
|
|
|
|
|
|
|
|
|
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 March 31, |
|
|
2023 |
|
|
|
2022 |
|
|
Revenue Dollars |
|
Revenue Percentage |
|
Revenue Dollars |
|
Revenue Percentage |
|
|
|
|
|
|
|
|
Home health and hospice
services |
|
|
|
|
|
|
|
Home health |
$ |
41,780 |
|
|
|
33.0 |
% |
|
$ |
37,420 |
|
|
|
32.9 |
% |
Hospice |
|
43,289 |
|
|
|
34.2 |
|
|
|
37,823 |
|
|
|
33.2 |
|
Home care and other(a) |
|
6,010 |
|
|
|
4.8 |
|
|
|
5,232 |
|
|
|
4.5 |
|
Total home health and hospice services |
|
91,079 |
|
|
|
72.0 |
|
|
|
80,475 |
|
|
|
70.6 |
|
Senior living services |
|
35,385 |
|
|
|
28.0 |
|
|
|
33,435 |
|
|
|
29.4 |
|
Total revenue |
$ |
126,464 |
|
|
|
100.0 |
% |
|
$ |
113,910 |
|
|
|
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 March 31, |
|
|
|
|
|
|
2023 |
|
|
|
2022 |
|
|
Change |
|
% Change |
Total agency
results: |
|
|
|
|
|
|
|
Home health and hospice revenue |
$ |
91,079 |
|
|
$ |
80,475 |
|
|
|
10,604 |
|
|
|
13.2 |
% |
|
|
|
|
|
|
|
|
Home health services: |
|
|
|
|
|
|
|
Total home health admissions |
|
10,910 |
|
|
|
10,182 |
|
|
|
728 |
|
|
|
7.1 |
% |
Total Medicare home health admissions |
|
4,948 |
|
|
|
4,633 |
|
|
|
315 |
|
|
|
6.8 |
% |
Average Medicare revenue per 60-day completed episode(a) |
$ |
3,504 |
|
|
$ |
3,495 |
|
|
$ |
9 |
|
|
|
0.3 |
% |
Hospice services: |
|
|
|
|
|
|
|
Total hospice admissions |
|
2,451 |
|
|
|
2,409 |
|
|
|
42 |
|
|
|
1.7 |
% |
Average daily census |
|
2,439 |
|
|
|
2,232 |
|
|
|
207 |
|
|
|
9.3 |
% |
Hospice Medicare revenue per day |
$ |
183 |
|
|
$ |
179 |
|
|
$ |
4 |
|
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
2023 |
|
|
|
2022 |
|
|
Change |
|
% Change |
Same
agency(b) results: |
|
|
|
|
|
|
|
Home health and hospice revenue |
$ |
88,611 |
|
|
$ |
80,475 |
|
|
$ |
8,136 |
|
|
|
10.1 |
% |
|
|
|
|
|
|
|
|
Home health services: |
|
|
|
|
|
|
|
Total home health admissions |
|
10,488 |
|
|
|
10,182 |
|
|
|
306 |
|
|
|
3.0 |
% |
Total Medicare home health admissions |
|
4,665 |
|
|
|
4,633 |
|
|
|
32 |
|
|
|
0.7 |
% |
Average Medicare revenue per 60-day completed episode(a) |
$ |
3,525 |
|
|
$ |
3,495 |
|
|
$ |
30 |
|
|
|
0.9 |
% |
Hospice services: |
|
|
|
|
|
|
|
Total hospice admissions |
|
2,388 |
|
|
|
2,409 |
|
|
|
(21 |
) |
|
|
(0.9 |
)% |
Average daily census |
|
2,375 |
|
|
|
2,232 |
|
|
|
143 |
|
|
|
6.4 |
% |
Hospice Medicare revenue per day |
$ |
182 |
|
|
$ |
179 |
|
|
$ |
3 |
|
|
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
2023 |
|
|
|
2022 |
|
|
Change |
|
% Change |
New
agency(c) results: |
|
|
|
|
|
|
|
Home health and hospice revenue |
$ |
2,468 |
|
|
$ |
— |
|
|
$ |
2,468 |
|
|
|
— |
% |
|
|
|
|
|
|
|
|
Home health services: |
|
|
|
|
|
|
|
Total home health admissions |
|
422 |
|
|
|
— |
|
|
|
422 |
|
|
|
— |
% |
Total Medicare home health admissions |
|
283 |
|
|
|
— |
|
|
|
283 |
|
|
|
— |
% |
Average Medicare revenue per 60-day completed episode(a) |
$ |
2,923 |
|
|
$ |
— |
|
|
$ |
2,923 |
|
|
|
— |
% |
Hospice services: |
|
|
|
|
|
|
|
Total hospice admissions |
|
63 |
|
|
|
— |
|
|
|
63 |
|
|
|
— |
% |
Average daily census |
|
64 |
|
|
|
— |
|
|
|
64 |
|
|
|
— |
% |
Hospice Medicare revenue per day |
$ |
185 |
|
|
$ |
— |
|
|
$ |
185 |
|
|
|
— |
% |
(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 communities purchased or licensed
prior to January 1, 2022. |
(c) |
|
New agency results represent all agencies acquired on or subsequent
to January 1, 2022 and all startup operations that have a start
date or license date subsequent to January 1, 2022. |
|
|
|
The following table summarizes our senior living
performance indicators for the periods indicated:
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
Occupancy |
|
78.1 |
% |
|
|
72.6 |
% |
Average monthly revenue per
occupied unit |
$ |
3,846 |
|
|
$ |
3,371 |
|
|
|
|
|
|
|
|
|
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 March 31, |
|
|
2023 |
|
|
|
2022 |
|
|
Revenue Dollars |
|
Revenue Percentage |
|
Revenue Dollars |
|
Revenue Percentage |
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
Medicare |
$ |
60,756 |
|
|
|
48.0 |
% |
|
$ |
55,078 |
|
|
|
48.4 |
% |
Medicaid |
|
17,631 |
|
|
|
14.0 |
|
|
|
15,394 |
|
|
|
13.5 |
|
Subtotal |
|
78,387 |
|
|
|
62.0 |
|
|
|
70,472 |
|
|
|
61.9 |
|
Managed Care |
|
17,126 |
|
|
|
13.5 |
|
|
|
14,036 |
|
|
|
12.3 |
|
Private and Other(a) |
|
30,951 |
|
|
|
24.5 |
|
|
|
29,402 |
|
|
|
25.8 |
|
Total revenue |
$ |
126,464 |
|
|
|
100.0 |
% |
|
$ |
113,910 |
|
|
|
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 March 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
Net income attributable to The
Pennant Group, Inc. |
$ |
1,850 |
|
|
$ |
1,014 |
|
|
|
|
|
Non-GAAP
adjustments |
|
|
|
Net income attributable to
noncontrolling interest(a) |
|
— |
|
|
|
144 |
|
Costs at start-up
operations(b) |
|
530 |
|
|
|
155 |
|
Share-based compensation
expense(c) |
|
1,419 |
|
|
|
2,440 |
|
Acquisition related costs and
credit allowances(d) |
|
32 |
|
|
|
— |
|
Costs associated with
transitioning operations(e) |
|
99 |
|
|
|
181 |
|
Unusual, non-recurring or
redundant charges (f) |
|
398 |
|
|
|
37 |
|
Provision for income taxes on
Non-GAAP adjustments(g) |
|
(482 |
) |
|
|
(645 |
) |
Non-GAAP net
income |
$ |
3,846 |
|
|
$ |
3,326 |
|
|
|
|
|
Dilutive Earnings Per
Share As Reported |
|
|
|
Net Income |
$ |
0.06 |
|
|
$ |
0.03 |
|
Average number of shares
outstanding |
|
30,147 |
|
|
|
30,143 |
|
|
|
|
|
Adjusted Diluted
Earnings Per Share |
|
|
|
Net Income |
$ |
0.13 |
|
|
$ |
0.11 |
|
Average number of shares
outstanding |
|
30,147 |
|
|
|
30,143 |
|
(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 March 31, |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
|
Revenue |
$ |
(2,607 |
) |
|
$ |
(486 |
) |
|
|
Cost of services |
|
2,810 |
|
|
|
617 |
|
|
|
Rent |
|
322 |
|
|
|
24 |
|
|
|
Depreciation |
|
5 |
|
|
|
— |
|
|
|
Total Non-GAAP adjustment |
$ |
530 |
|
|
$ |
155 |
|
|
|
|
|
|
|
(c) |
|
Represents
share-based compensation expense incurred for the periods
presented. |
|
|
|
Three Months Ended March 31, |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
|
Cost of services |
$ |
688 |
|
|
$ |
593 |
|
|
|
General and
administrative |
|
731 |
|
|
|
1,847 |
|
|
|
Total Non-GAAP adjustment |
$ |
1,419 |
|
|
$ |
2,440 |
|
|
|
|
|
|
|
(d) |
|
Represents costs incurred to acquire an operation that are not
capitalizable. |
(e) |
|
During the three months ended March 31, 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.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 March 31, |
|
|
|
|
2023 |
|
|
|
2022 |
|
|
|
Revenue |
$ |
— |
|
|
$ |
(3,336 |
) |
|
|
Cost of services |
|
47 |
|
|
|
2,579 |
|
|
|
Rent |
|
52 |
|
|
|
938 |
|
|
|
Loss on asset dispositions and
impairment |
$ |
— |
|
|
$ |
— |
|
|
|
Total Non-GAAP adjustment |
$ |
99 |
|
|
$ |
181 |
|
|
|
|
|
|
|
(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 $273 for the three
months ended March 31, 2023, and $643 for the three months ended
March 31, 2022. |
|
|
|
|
|
|
(g) |
|
Represents an adjustment to the provision for income tax to our
year-to-date effective tax rate of 25.8% and 26.3% for the three
months ended March 31, 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 March 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
Consolidated net income |
$ |
1,997 |
|
|
$ |
1,158 |
|
Less: Net income (loss)
attributable to noncontrolling interest |
|
147 |
|
|
|
144 |
|
Add: Provision for income
taxes (benefit) |
|
907 |
|
|
|
542 |
|
Net interest expense |
|
1,406 |
|
|
|
629 |
|
Depreciation and amortization |
|
1,280 |
|
|
|
1,147 |
|
Consolidated EBITDA |
|
5,443 |
|
|
|
3,332 |
|
Adjustments to Consolidated
EBITDA |
|
|
|
Add: Costs at start-up
operations(a) |
|
203 |
|
|
|
131 |
|
Share-based compensation expense(b) |
|
1,419 |
|
|
|
2,440 |
|
Acquisition related costs and credit allowances(c) |
|
32 |
|
|
|
— |
|
Costs associated with transitioning operations(d) |
|
47 |
|
|
|
(757 |
) |
Unusual, non-recurring or redundant charges(e) |
|
398 |
|
|
|
37 |
|
Rent related to items (a) and (d) above |
|
374 |
|
|
|
962 |
|
Consolidated Adjusted EBITDA |
|
7,916 |
|
|
|
6,145 |
|
Rent—cost of services |
|
9,597 |
|
|
|
10,051 |
|
Rent related to items (a) and (d) above |
|
(374 |
) |
|
|
(962 |
) |
Adjusted rent—cost of services |
|
9,223 |
|
|
|
9,089 |
|
Consolidated Adjusted EBITDAR |
$ |
17,139 |
|
|
|
(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 three months ended March 31, 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.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 $273 for the three
months ended March 31, 2023, and $643 for the three months ended
March 31, 2022. |
|
|
|
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 March 31, |
|
Home Health and Hospice Services |
|
Senior Living Services |
|
All Other |
|
Total |
Segment GAAP Financial
Measures: |
|
|
|
|
|
|
|
Three Months Ended
March 31, 2023 |
|
|
|
|
|
|
|
Revenue |
$ |
91,079 |
|
|
$ |
35,385 |
|
|
$ |
— |
|
|
$ |
126,464 |
|
Segment Adjusted EBITDAR from
Operations |
$ |
14,412 |
|
|
$ |
10,241 |
|
|
$ |
(7,514 |
) |
|
$ |
17,139 |
|
Three Months Ended
March 31, 2022 |
|
|
|
|
|
|
|
Revenue |
$ |
80,475 |
|
|
$ |
33,435 |
|
|
$ |
— |
|
|
$ |
113,910 |
|
Segment Adjusted EBITDAR from
Operations |
$ |
13,948 |
|
|
$ |
9,432 |
|
|
$ |
(8,146 |
) |
|
$ |
15,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below provides a reconciliation of Segment Adjusted
EBITDAR from Operations above to Condensed Consolidated Income from
Operations:
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
Segment Adjusted EBITDAR from
Operations(a) |
$ |
17,139 |
|
|
$ |
15,234 |
|
Less: Depreciation and
amortization |
|
1,280 |
|
|
|
1,147 |
|
Rent—cost of services |
|
9,597 |
|
|
|
10,051 |
|
Other Income |
|
30 |
|
|
|
3 |
|
Adjustments to Segment EBITDAR
from Operations: |
|
|
|
Less: Costs at start-up
operations (b) |
|
203 |
|
|
|
131 |
|
Share-based compensation expense (c) |
|
1,419 |
|
|
|
2,440 |
|
Acquisition related costs and credit allowances(d) |
|
32 |
|
|
|
— |
|
Costs associated with transitioning operations(e) |
|
47 |
|
|
|
(757 |
) |
Unusual, non-recurring or redundant charges(f) |
|
398 |
|
|
|
37 |
|
Add: Net loss attributable to
noncontrolling interest |
|
147 |
|
|
|
144 |
|
Consolidated Income from
Operations |
$ |
4,280 |
|
|
$ |
2,326 |
|
(a) |
|
Segment Adjusted EBITDAR from Operations is net income 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 three months ended March 31, 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.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 $273 for the three
months ended March 31, 2023, and $643 for the three months ended
March 31, 2022. |
|
|
|
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 March 31, |
|
Home Health and Hospice |
|
Senior Living |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDAR from
Operations |
$ |
14,412 |
|
|
$ |
13,948 |
|
|
$ |
10,241 |
|
|
$ |
9,432 |
|
Less: Rent—cost of
services |
|
1,323 |
|
|
|
1,262 |
|
|
|
8,274 |
|
|
|
8,789 |
|
Rent related to start-up and transitioning operations |
|
(93 |
) |
|
|
(24 |
) |
|
|
(281 |
) |
|
|
(938 |
) |
Segment Adjusted EBITDA from
Operations |
$ |
13,182 |
|
|
$ |
12,710 |
|
|
$ |
2,248 |
|
|
$ |
1,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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