The Pennant Group, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Acquisitions: Closed the UnitedHealth Amedisys transaction on October 1, adding 54 locations. The Signature acquisition transition was successful, with acquired operations outpacing financial expectations.
• Clinical Performance: Home Health and Hospice have strong clinical results, e.g., average CMS star rating 4.1 (industry average 3 stars), preventable hospitalizations 8.4% (national average 9.9%).
• Service Center Investment: Significant investment in the service center for transitions and talent attraction to support acquisitions and organic growth.
• Regulatory Focus: Concerns about the 2026 home health rule, but Pennant is diversified and locally driven, advocating against unfavorable policies.

Segment Performance

• Home Health and Hospice:
  • Q3 2025 revenue: $173.6 million, a 27.9% increase from the prior year. Adjusted EBITDA: $26.8 million, up 22.7% from the prior year.
  • Home health: Total admissions 20,426 (+36.2%), same-store admissions +7%, revenue per episode +2.9%.
  • Hospice: Average daily census +17.4%, admissions +16.6%, same-store average daily census +6.1%, average revenue per day +3.3%.
• Senior Living:
  • Q3 2025 revenue: $55.5 million, up 23.2% from the prior year and 3.7% sequentially. Adjusted EBITDA: $5.6 million, up 26.2% from the prior year and 8.4% sequentially.
  • Same-store occupancy: 81.8%, all-store occupancy 80.9%.

Guidance

• Raised full year 2025 guidance:
  • Revenue: $911.4 million to $948.6 million
  • Adjusted EBITDA: $70.9 million to $73.8 million
  • Adjusted EPS: $1.14 to $1.18
• United Amedisys acquisition contribution expected to be light in Q4 2025, with margins between 9.5% and 11% in 2026 after transition.

Risks

• Uncertainty surrounding the 2026 home health rule, which could impact reimbursement.
• Integration challenges with recent acquisitions, potentially causing lumpiness in results.
• Regulatory changes and potential policy impacts on the post-acute care industry.

Question and Answer

Q: About Amedisys integration priorities and 2026 earnings contribution A: Thanks for the question. Focus on identifying and elevating leaders, ensuring exceptional support, and the University of Tennessee joint venture. Initial contribution light in Q4 2025; margins between 9.5% and 11% in 2026 after transition.

Q: Senior living margin trajectory A: Occupancy growth leads to incremental margin improvement. Over the last several years, focus has been on building foundation; with additional occupancy rise, expect incremental bottom line margin improvement.

Q: Margin guidance and NCI impact A: When looking at margin guidance, NCI growth is a factor. Through the third quarter, NCI was $2.4 million, and Q4 is anticipated to have about $1.9 million in NCI impacting EBITDA margin.

Q: Same-store hospice length of stay A: We're returning closer to pre-pandemic levels. There's a small tick up in the percent of care delivered in assisted living. It reflects continued work to identify appropriate patients earlier, allowing longer hospice care.

Q: Amedisys employees reception and senior living occupancy A: Employees have embraced Pennant and the locally driven model. Senior living occupancy driven by investment in leaders, CapEx, revenue quality, and digital marketing efforts.

Q: Senior living M&A and Amedisys synergies A: Active M&A in senior living with pricing varying. Synergies in margin improvement, growth, and contracting; early in process but optimistic about clinical outcomes driving payer negotiations.