PNTG - Pennant Reports Fourth Quarter and Full Year 2021 Results

EAGLE, Idaho, Feb. 28, 2022 (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 fourth quarter and fiscal year 2021, reporting GAAP diluted earnings per share of $0.09 and $(0.08) for the full year ended December 31, 2021 and the fourth quarter, respectively. Pennant also reported adjusted diluted earnings per share of $0.46 for the year and $0.07 for the quarter ⁽¹⁾ .

Full Year and Quarter Highlights

• Total revenue was $439.7 million for the fiscal year 2021, an increase of $48.7 million or 12.5% over the prior year, and total revenue for the quarter was $111.8 million, an increase of $3.8 million or 3.5% over the prior year quarter;

• Net income/(loss) for the full year and fourth quarter was $2.7 million and $(2.1) million, respectively, which includes a $2.6 million impairment incurred in the fourth quarter related to the recently-announced transfer of five senior living communities discussed in more detail below; adjusted EBITDA for the full year and fourth quarter was $26.4 million and $5.0 million, respectively; and adjusted EBITDAR for the full year and fourth quarter was $66.9 million and $15.3 million, respectively;

• Home Health and Hospice Services segment revenue for the full ar was $309.6 million, an increase of $55.9 million or 22.0% over the prior year, and segment revenue for the fourth quarter was $77.9 million, an increase of $3.3 million or 4.5% over the prior year quarter;

• Home Health and Hospice Services segment adjusted EBITDAR from operations ⁽²⁾ was $55.6 million for the year, an increase of $6.1 million or 12.3% over the prior year, and segment adjusted EBITDAR from operations was $12.4 million for the quarter, a decrease of $2.4 million or 16.1% over the prior year quarter;

• Total home health admissions for the full year and fourth quarter increased 40.1% and 9.0%, respectively, over the prior comparable periods, and total Medicare home health admissions for the full year increased 33.8%, while total Medicare home health admissions for the fourth quarter decreased 1.1%, both over the prior comparable periods;

• Hospice average daily census for the full year was 2,291, an increase of 10.0% over the prior year, and hospice average daily census for the fourth quarter was 2,256, a decrease of 2.3% compared to the prior year quarter;

• Senior Living Services segment revenue for full year was $130.1 million, segment revenue for the fourth quarter was $33.9 million, an increase of $0.5 million or 1.4% over the prior year quarter, and segment adjusted EBITDAR from operations ⁽²⁾ for the full year and fourth quarter was $37.5 million and $9.8 million, respectively; and

• Senior living average occupancy for the full year and fourth quarter was 72.7% and 72.4%, respectively, and average monthly revenue per occupied unit for the full year and fourth quarter was $3,207 and $3,291, respectively.

Operating Results

“Overall, our fourth quarter results were lower than we anticipated as we navigated through another surge of COVID-19, and our efforts to fully mitigate these headwinds fell short of our expectations,” said Daniel Walker, Pennant’s Chief Executive Officer. “However, despite the headwinds faced throughout 2021, we produced record full year results in our home health and hospice segment, achieving double digit top and bottom line growth and quality clinical outcomes, while adding 11 agencies to our portfolio. Our senior living segment weathered three waves of COVID-19 surges in 2021 and is poised for a stronger 2022 with deeper leadership throughout the segment, stronger clusters and markets, better data and systems and indications of an improving operating environment. In the fourth quarter and since, we executed on the key initiatives we shared last quarter: we continue to focus our efforts on the most important opportunities in both segments, reinforce the core principles of our operating model, and ensure every team is operating at a high level without distractions. After a careful review of our portfolio, we’ve executed a one-time strategic repositioning of our senior living portfolio with our Ensign partners, representing an extension of the ongoing benefits of the Ensign Pennant Care Continuum to our organizations and to our patients, residents and employees; we’ve restructured our mobile physician services and home care ventures to better contain expenses while largely retaining the upside of each; and we’re consolidating our field and service center resources around key opportunities in our core businesses. The track record of strong results in our home health and hospice segment and the momentum building in our senior living segment give us confidence in our ability to achieve better financial, clinical and cultural results in 2022.”

Brent Guerisoli, Pennant’s President, commented, “We are pleased with the strong clinical and financial results of our home health and hospice business in the fourth quarter. For the full year 2021, segment revenue grew 22.0% over 2020 to $309.6 million, and segment adjusted EBITDA grew 10.9% over 2020 to $51.0 million. In the fourth quarter, our home health agencies grew total admissions 0.8% over the third quarter 2021 and 9.0% over the prior year quarter, despite ongoing elevated levels of quarantined staff as a result of the Omicron variant of COVID-19. Our clinical quality scores continue to shine and are evidence that our relentless focus on providing life-changing patient care is yielding strong results across many quality measures. On the hospice side, our results were impacted by a decline in our average daily census, largely the result of slightly fewer admissions as well as a higher mix of referrals from more acute settings that tend to have a lower average length of stay. This softness was somewhat attributable to the effects of higher COVID-19 cases in the quarter, which continued into the first quarter. However, as we focus on meeting the needs of our local healthcare communities, we are strengthening relationships with new and existing key partners, which we are confident will accelerate our ability to grow census and produce stronger results as operating conditions continue to improve.”

“Our senior living segment continues its recovery, having experienced another surge of COVID-19 cases that impacted our staffing and census in the quarter as it has throughout 2021,” said Mr. Guerisoli. “While the effects of this most recent wave will spill-over into the first quarter, in the fourth quarter and since we made significant progress in building a stronger leadership foundation, developing market and cluster leaders, expanding our marketing and sales expertise by elevating and recruiting talented professionals and equipping them with better data analytics and tools, and driving rigorous accountability around the key focus areas that will accelerate our ongoing turnaround in the segment. In the fourth quarter, these efforts contributed to segment revenue growth of $0.5 million, or 1.4%, over the prior year quarter, despite occupancy declining by 310 basis points during the same period. We achieved a 3.9% increase in our average revenue per occupied room as a result of modest rent and care rate increases rolled out in the fourth quarter. As we look at the opportunities we have in 2022 and beyond, there is significant potential to drive further revenue growth across our portfolio on the back of both occupancy and rate improvements, and so far in the first quarter we are seeing occupancy grow sequentially as our local leaders continue to win the trust of new residents and their families. At the same time, with developing leadership teams, better data and systems, and accountability around our core opportunities, we know we can drive improved segment earnings if we execute with operational excellence.”

Following year-end, the Company announced a series of strategic transactions to reposition its senior living segment for stronger results. The Company agreed to transfer the operations of five campus-based senior living communities to affiliates of The Ensign Group, Inc., which transaction is expected to close in March and April of 2021. In addition, the Company entered into a letter of intent to operate a high-quality senior living asset in a key market, which is expected to close in the second quarter of 2022. “The combination of these strategic transactions immediately sets our senior living business on a path to achieve better results in 2022 while establishing an avenue for future expansion as we continue to build a strong operational foundation. The five communities we are transferring to Ensign affiliates share a campus setting with skilled nursing facilities operated by Ensign subsidiaries. This one-time reconstitution is the result of an ongoing strategic review of the senior living operations we maintained when we spun from Ensign and represents just one instance of the many benefits the Ensign Pennant Care Continuum brings our organization, in addition to benefits it provides our patients through improved care coordination, staffing and quality outcomes. This win-win transaction benefits both organizations and, most importantly, should benefit the residents and caregivers as each campus and the dynamic services provided therein are brought together under a single operation. Our retooled portfolio allows our growing senior living talent to concentrate our resources on a tighter portfolio of predominantly stand-alone communities in core markets and immediately improves our segment earnings,” said Derek Bunker, Pennant’s Chief Investment Officer.

“As we comprehensively assessed our portfolio to limit distractions and focus on our core opportunities, we also integrated our mobile position services teams into our home health agencies to provide physician services to our healthcare partners at significantly reduced costs, and we restructured several of our home care agencies to narrow our focus while maintaining upside. These actions and many others aimed at leveraging our efforts around the most important opportunities position both segments with more strength and focus going into 2022,” continued Mr. Bunker. “At the same time, our pipeline of potential home health and hospice acquisitions is expanding. We continue to find exciting opportunities to add quality home health and hospice agencies to the Pennant family and look forward to reporting more activity on this front as the year progresses. Our recently acquired agencies are developing strength as they continue maturing within our portfolio and, while there is still significant opportunity in these operations for organic growth for many years to come, we are excited to invest in additional agencies throughout this year.”

Jennifer Freeman, Pennant's Chief Financial Officer, reported that the Company ended the fourth quarter with strong liquidity, noting $5.2 million of cash on hand and $92.3 million of availability on its revolving line of credit. Ms. Freeman reported that the Company had a net debt-to-adjusted EBITDA ratio of 1.75x and a lease-adjusted net debt-to-adjusted EBITDAR ratio of 5.58x as of December 31, 2021. “Our cash position and liquidity remain strong despite the challenges of the full year and fourth quarter. As the recoupment of the Medicare advance payments winds down over the next several months, we look forward to improved cash flow and deploying our dry powder toward further growth across the organization,” said Ms. Freeman. Noting that the Company is now subject to Sarbanes-Oxley compliance, Ms. Freeman added, “I am grateful for the thoroughness, tireless effort and conscientiousness of our finance and accounting team to work together with leaders throughout our organization to establish and maintain required internal controls at a high level, all while they provide support to and accelerate the results of our partners in the field.”

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 Annual Report on Form 10-K for the twelve months ended December 31, 2021, which has been filed with the SEC today and can be viewed on the company’s website at www.pennantgroup.com .

2022 Guidance

As a result of the impact of the recently announced strategic senior living transactions and with better insight into the operating landscape following the fourth quarter 2021, the Company provided revised fiscal year 2022 guidance.

Total revenue is anticipated to be in the range of $450.0 million to $460.0 million, the midpoint of which represents an increase of 7.5% over our full year 2021 revenue results if it had been adjusted for the disposition of the five senior living communities. Adjusted earnings per share is anticipated to be in the range of $0.60 to $0.72 per diluted share, the midpoint of which represents an increase of 43.5% over our full year 2021 adjusted earnings per share results.

The Company’s 2022 annual guidance is based on diluted weighted average shares outstanding of approximately 31.2 million and a 26.1% effective tax rate. The guidance assumes, among other things, anticipated reimbursement rate adjustments, no unannounced acquisitions, and the lingering effects of COVID-19. It excludes costs at start-up operations, share-based compensation, acquisition-related costs, assets held for sale, and losses of disposed operations.

Commenting on full year 2022 guidance, Ms. Freeman stated, “We are providing revised 2022 annual guidance based on the impact of the disposition of five senior living communities, our read of the current operating environment and considering the headwinds that arose during the fourth quarter, which we see lingering into the first quarter of 2022. While census, staffing and other operating challenges will likely persist for the foreseeable future and may continue to cause short-term chop in our first half results, we are confident leaders across our organization are stronger and more capable of confronting these headwinds than ever before. Our revised guidance reflects confidence that the measures we are taking to emphasize the core opportunities across both segments and reinforce the principles of our unique operating model will lead to improvement in our recently-acquired home health and hospice agencies, continued strength in our same store operations, and healthier performance in our senior living business. We are excited for 2022 and our return to the kind of steady growth we experienced in our history and we know is achievable by executing on our playbook.”

Conference Call

A live webcast will be held tomorrow, March 1, 2022 at 10:00 a.m. Mountain time (12:00 p.m. Eastern time) to discuss Pennant’s full year and fourth quarter 2021 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 until 5:00 p.m. Mountain time on Friday, March 25, 2022.

About Pennant

The Pennant Group, Inc. is a holding company of independent operating subsidiaries that provide healthcare services through 88 home health and hospice agencies and 54 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-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

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

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

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:

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

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

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:

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

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:

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:

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

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

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:

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

The following tables 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”:

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