Q1 2024 The Pennant Group Inc Earnings Call

May 7, 2024

Operator: Good day, and thank you for standing by. Welcome to the Pennant Group First Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode.

Good day, and thank you for standing by walking through the Bank Group first quarter 2024 earnings Conference call. At this time, all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the call over to Kirk Cheney.

The speaker's presentation there'll be a question and answer session.

Kirk Cheney: Please be advised that today's conference is being recorded I would now.

I hand, the call over to Kirk trainee you may begin.

Kirk Cheney: Thank you Michelle welcome everyone and thank you for joining US today here with me today I have been Gary <unk>, our CEO, John Gardner, our president and CFO.

Kirk Cheney: You may begin. Thank you, Michelle. Welcome, everyone, and thank you for joining us today. Here with me today are Brent Guerisoli, our CEO; John Gochnour, our president and COO; and Lynette Walbom, our CFO. Before we begin, I have a few housekeeping matters.

Kirk Cheney: Well then our CFO before we begin I have a few housekeeping matters.

Speaker Change: We filed our earnings press release and 10-Q yesterday.

Kirk Cheney: We filed our earnings press release and 10-Q yesterday. This announcement is available on the investor relations section of our website at www.pennantgroup.com. A replay of this call will also be available on our website until 5 p.m. Mountain Time on May 6, 2025.

Kirk Cheney: So it is available on the Investor Relations section of our website at Www Dot pennant group dotcom.

Kirk Cheney: A replay of this call will also be available on our website until five P. M Mountain time on May six 2025, we want to remind anyone who may be listening to a replay of this call that all statements are made as of today may seven 2024, and these statements have not been nor will they be updated after today's call.

Kirk Cheney: We want to remind anyone who may be listening to a replay of this call that all statements are made as of today, February 27, 2024, and these statements have not been, nor will they be updated after today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions, and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call.

Kirk Cheney: Also any forward looking statements made today are based on management's current expectations assumptions and beliefs about our business and the environment in which we operate.

Kirk Cheney: These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call.

Kirk Cheney: This NERC should not place undue reliance on forward-looking statements and is encouraged to review our SEC filings for more complete discussion of factors that could impact our results. Except as required by federal securities laws, Pennant and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances, or for any other reason. In addition, Pennant Group Inc. is a holding company with no direct operating assets, employees, or revenues.

Kirk Cheney: Listeners should not place undue reliance on forward looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results.

Kirk Cheney: That is required by federal Securities laws pennant and its affiliates do not undertake to publicly update or revise any forward looking statements where changes arise as a result of new information future.

Kirk Cheney: Sure events changing circumstances or for any other reason.

Kirk Cheney: In addition, the pennant group is a holding tank group, Inc. Is a holding company with no direct operating assets employees or revenues certain of our independent subsidiaries collectively referred to as the service center provide accounting payroll human resources information technology legal risk management and other services to the other operating subsidiaries subsidiaries to contractual.

Kirk Cheney: Certain of our independent subsidiaries, collectively referred to as the service center, provide accounting, payroll, human resources, information technology, legal, risk management, and other services to the other operating subsidiaries through contractual relationships with such subsidiaries. Where it's Pennant Company, we are and us refer to the Pennant Group, Inc. and its consolidated subsidiaries. All of our operating subsidiaries and the service center are operated by separate independent companies that have their own management, employees, and assets.

Kirk Cheney: <unk> chips with such subsidiaries.

Kirk Cheney: Whereas Tennant company, we are in us refer to the pennant Group, Inc. And its consolidated subsidiaries all of our operating subsidiaries and the service center are operated by a separate independent companies that have their own management employees and assets.

Kirk Cheney: References herein to the Consolidated Company and its assets and activities, as well as use of the terms we, us, our, and similar terms used today, are not meant to imply, nor should they be construed as meaning, that the Pennant Group, Inc. has direct operating assets, employees, or revenues, or that any of the subsidiaries are operated by the Pennant Group. Also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reporting. The Gap to Non-Gap Reconciliation is available in yesterday's press release and is in an on-time queue.

Kirk Cheney: References herein to the consolidated company and its assets and activities as.

Kirk Cheney: Well as use of the terms, we us our and similar terms used today are not meant to imply nor should it be construed as meaning that the pennant group, Inc. Has direct operating assets in place or revenues or that any of the subsidiaries are operated by the pennant group.

Kirk Cheney: Also we supplement our GAAP reporting with non-GAAP metrics when viewed together with our GAAP results. We believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports a GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our 10-Q.

Brent J. Guerisoli: And with that, I will turn the call over to Brent Guerisoli, our CEO. Thanks, Kirk, and welcome, everyone, to our first quarter, the 2024 earnings call. Before we share results, I want to express deep appreciation to the local leaders and teams who care for our patients and residents each day. You are the foundation of Pennant's success, and we are grateful for all you do.

Kirk Cheney: With that I will turn the call over to Brent <unk>, our CEO Brent <unk>.

Brent J. Guerisoli: Thanks, Kirk and welcome everyone to our first quarter.

Brent J. Guerisoli: 2024 earnings call.

Brent J. Guerisoli: Before we share results I want to express deep appreciation to the local leaders and teams who care for our patients and residents each day.

Brent J. Guerisoli: You are the foundation of pendants success, and we are grateful for all you do.

Brent J. Guerisoli: We are pleased to report that Q1 was a strong quarter and a great start to the year. On a consolidated basis, compared to the prior year quarter, our revenue of $156.9 million increased by $30.5 million, or 24.1%. Our adjusted EBITDA of $11.2 million increased by $3.3 million, or 41.8%.

Brent J. Guerisoli: We are pleased to report that.

Brent J. Guerisoli: Q1 was a strong quarter and a great start to the year.

Brent J. Guerisoli: On a consolidated basis compared to the prior year quarter, a revenue of $156 9 million increased by $35 million or 24, 1%. Our adjusted EBITDA of $11 2 million increased by $3 3 million or 41, 8%.

Brent J. Guerisoli: And our earnings per share of $0.20 increased by $0.07, or 53.8%. We remain committed to our five key focus areas, leadership development, clinical excellence, employee experience, margin improvement, and growth. Focusing on these fundamentals has created a firm foundation in our core business and significant momentum across the company, demonstrating that our investments in people, systems, and growth are bearing fruit.

Brent J. Guerisoli: Our earnings per share of <unk> 20 <unk>.

Brent J. Guerisoli: <unk> increased by seven or 53, 8%.

Brent J. Guerisoli: We remain committed to our five key focus areas leadership development clinical excellence employee experience margin improvement and growth.

Brent J. Guerisoli: <unk> on these fundamentals has created a firm foundation in our core business and significant momentum across the company as.

Brent J. Guerisoli: As our investments in people systems and growth are bearing fruit.

Brent J. Guerisoli: Leadership development remains a top priority as we've consistently discussed in prior quarters. We are diligently focused on developing a robust pipeline of local leaders, we continue to progress and our commitment to devote to develop 100 local Ceos as well as chief clinical officer is in other C level leaders.

Brent J. Guerisoli: As we've consistently discussed in prior quarters, we are diligently focused on developing a robust pipeline of local leaders. We continue to progress in our commitment to develop 100 local CEOs, as well as chief clinical officers, and other C-level leaders. There are now 44 CEOs and 42 CCOs driving results throughout the organization, and we expect their ranks to continue to grow throughout the year. As a reminder, to earn the title of CEO, our leaders must not only achieve extraordinary clinical performance, culture, and growth but also drive significant financial improvement in their operations. We have found that CEOs typically generate roughly $1 million more in annual earnings than our executive directors, as well as better clinical and cultural outcomes.

Brent J. Guerisoli: There are now 44, Ceos and 42 Ccs driving results throughout the organization and we expect their ranks to continue to grow throughout the year.

Brent J. Guerisoli: As a reminder to earn the title of CEO, our look our leaders must not only achieve extraordinary clinical performance.

Brent J. Guerisoli: Culture and growth, but also drive significant financial improvement in their operations.

Brent J. Guerisoli: We have found that Ceos, typically generate roughly $1 million more in annual earnings at our executive directors as well as better clinical and cultural outcomes.

Brent J. Guerisoli: We are also making meaningful progress on margins. Year over year, our consolidated adjusted EBITDA margin improved 90 basis points, from 6.4% to 7.3%, reflecting improvement in each segment. We attribute these margin gains to three factors. First, margin is fundamentally connected to leadership. As we develop talented and entrepreneurial leaders who exercise discipline and diligence in their operations, they deliver exceptional financial results.

Brent J. Guerisoli: We are also making meaningful progress on margin.

Brent J. Guerisoli: Year over year, our consolidated adjusted EBITDA margin improved 90 basis points from six 4% to seven 3% reflecting improvement in each segment. We attribute these margin gains to three factors.

Brent J. Guerisoli: First margin is fundamentally connected to leadership as we develop talented and entrepreneurial leaders, who exercised discipline and diligence and their operation they.

Brent J. Guerisoli: They delivered exceptional financial results second our innovative operating model encourages the sharing and adoption of best practices across the organization.

Brent J. Guerisoli: Second, our innovative operating model encourages the sharing and adoption of best practices across the organization, and as local leaders implement these best practices, they consistently improve performance. Third, we continue to invest in best-in-class technology, tools, and systems that our local leaders leverage to enhance their clinical and operational results. Now, to growth.

Brent J. Guerisoli: And as local leaders implement these best practices they consistently improved performance.

Brent J. Guerisoli: We continue to invest in best in class technology tools and systems that are local leaders leverage to enhance their clinical and operational results.

Brent J. Guerisoli: Turning to growth Q1 represented a culmination of the significant efforts we have made on both the organic and acquisition side.

Brent J. Guerisoli: Q1 represented a culmination of the significant efforts we have made on both the organic and acquisitional sides, leading to a record quarter. This was highlighted by double-digit year-over-year percentage increases in same store total home health admissions and hospice average daily census. This same store growth exemplifies the meaningful potential that exists at our established operations as they mature and expand. Coupled with the successful integration of several recent transitions, our home health and hospice segment revenue increased 27.9% over the prior year quarter, evenly split between organic and acquisitional growth.

Brent J. Guerisoli: Leading to a record quarter.

Brent J. Guerisoli: This was highlighted by double digit year over year percentage increases in same store total home health admissions in hospice average daily census.

Brent J. Guerisoli: This same store growth exemplifies the meaningful potential that exists at our established operations as they mature and expand.

Brent J. Guerisoli: Coupled with the successful integration of several recent transitions our home health and Hospice segment revenue increased 27, 9% over the prior year quarter evenly split between organic and acquisition growth on.

Brent J. Guerisoli: On the senior living side, we have steadily increased our revenue per occupied unit as local teams effectively manage resident mix and adjust their prices to reflect the true costs of services they provide. Along with occupancy improvements and the successful transition of two new buildings in the quarter, our senior living segment revenue increased 14.2% over the prior year quarter. The momentum we've seen in Q1 demonstrates the power of our model to access the latent opportunity that exists in our current operations while also transitioning new operations into the platform. Operational excellence is a key part of the Pennant story and something upon which we pride ourselves.

Brent J. Guerisoli: I'm the senior living side, we have steadily increased our revenue per occupied unit as local teams effectively managed resident mix and adjust their prices to reflect the true cost of services they provide.

Brent J. Guerisoli: Along with occupancy improvements and the successful transition of two new buildings in the quarter, our senior living segment revenue increased 14, 2% over the prior year quarter.

Brent J. Guerisoli: <unk>, we've seen in Q1 demonstrates the power of our model.

Brent J. Guerisoli: Access the latent opportunity that exists in our current operations, while also transitioning new operations into the platform.

Brent J. Guerisoli: Operational excellence is a key part of the pennant story and something upon which we pride ourselves.

Brent J. Guerisoli: We want our investors to understand that when they become pennant owners, they are partnering with a best-in-class operator as we harness our unique operating model to execute and grow. Since our spinoff, and through the challenges of a global pandemic, we have matured as an organization and added leaders across the company and our management team throughout the field and at the service center. As a result, we have produced nine consecutive quarters of strong performance, earnings each quarter that exceeded the prior year period, and we have experienced triple-digit percentage growth in adjusted EBITDA and EPS. We have repeatedly and consistently done what we said we were going to do.

Brent J. Guerisoli: We want our investors to understand when they become tenant owners. They are partnering with a best in class operator, as we harness our unique operating model to execute and grow.

Brent J. Guerisoli: Since our spin off and through the challenges of a global pandemic, we have matured as an organization and added leaders across the company and our management team throughout the field and at the service Center as.

Brent J. Guerisoli: As a result, we have produced nine consecutive quarters of strong performance with earnings each quarter that exceeded the prior year period and have experienced triple digit percentage growth in adjusted EBITDA and EPS.

Brent J. Guerisoli: We have repeatedly and consistently done what we said we were going to do and while we are encouraged by the progress that we've made we're even more excited about the foundation that we've built in the future that lies ahead.

John J. Gochnour: And while we are encouraged by the progress that we've made, we're even more excited about the foundation that we've built and the future that lies ahead. With that, I'll turn the call over to John to provide more details on our first-quarter operational results. Thank you, Brent, and good morning, everyone.

John J. Gochnour: With that I'll turn the call over to John to provide more details on our first quarter operational results.

John: Thank you Brent and good morning, everyone. We are pleased to report strong performance in both operating segments, turning first to our home health and hospice results. Our segment revenue of $116 $5 million is up $25 4 million or 27, 9% and segment adjusted EBITDA.

John J. Gochnour: We are pleased to report strong performance in both operating segments. Turning first to our home health and hospice results, our segment revenue of one hundred and sixteen point five million is up twenty five point four million, or twenty seven point nine percent. The segment adjusted EBITDA of seventeen point nine million is up 4.7 million, or 35.7%, each over the prior year quarter.

John J. Gochnour: Roughly 50% of the year-over-year rise in segment revenue was same-store growth, while the other 50% was attributable to the successful transition and improvement of new operations. In home health, our total admissions grew 34.3% over the prior year quarter, while Medicare home health admissions increased 28.3% over the prior year quarter. We also continued our robust growth, as admissions increased 25.7% over the prior year quarter and 21.3% sequentially. An average hospice daily census increased 21.4% over the prior year quarter and 5.9%. In addition, we continue to see strong rate growth on service lines.

John J. Gochnour: $17 9 million.

John J. Gochnour: Is up $4 7 million or 35, 7% each over the prior year quarter, roughly 50% of the year over year rise in segment revenue was same store growth while the other 50% is attributable to the successful transition and improvement of new operations in home health our total <unk>.

John J. Gochnour: <unk> grew 34, 3% over the prior year quarter, while Medicare home health admissions increased 28, 3% over the prior year quarter.

John J. Gochnour: We also continued our robust hospice growth as admissions increased 25, 7% over the prior year quarter.

John J. Gochnour: 21, 3% sequentially and average hospice daily census, increased 21, 4% over the prior year quarter and five 9% sequentially in.

John J. Gochnour: In addition, we continue to see strong rates across both service lines home health Medicare revenue per episode increased three 4% and hospice revenue per day increased two 2% each over the prior year quarter, our ongoing investment in clinical excellence is also contributing to strong relationships with payers.

John J. Gochnour: Home Health Medicare revenue per episode increased 3.4%, and Hospice Revenue Per Day increased 2.2%, each over the prior year quarter. Our ongoing investment in clinical technology is also contributing to strong relationships with payer partners, which is evident in the 11% growth in our managed care revenue per visit over the prior year quarter. We are encouraged by the upward trends in our reimbursement rates and believe that, over the long run, payer partners will reward high-quality providers.

John J. Gochnour: Partners, which is evident in the 11% growth in our managed care revenue per visit over the prior year quarter. We are encouraged by the upward trends in our reimbursement rates and believe that over the long run payer partners will reward high quality providers.

John J. Gochnour: To that end, we continue to make progress in delivering effective clinical care more efficiently. Our average CMS reported home health star rating of 4.1 stars and acute care hospitalization rate of 13.4% remain well ahead of national averages, even as we transition new operations into them, many of which are underperforming clinically at the time of acquisition. We graduated our first cohort of future leaders from our new clinical leader training program, which mirrors our CEO and training program to help talented, ambitious internal leaders grow their capacity to become chief clinical officers. Our local leaders also use technology and adopted clinical best practices, helping to lower visits per episode by 5% to 12.81 and our total direct cost per visit by 4.3%.

John J. Gochnour: To that end, we continue to make progress in delivering effective clinical care more efficiently. Our average CMS reported home health Star rating of $4, one stars and acute care hospitalization rate of 13, 4% remained well ahead of national averages, even as we transition new operations into the company.

John J. Gochnour: Many of which are underperforming clinically at the time of acquisition. We graduated our first cohort of future leaders from our new clinical leader training program, which mirrors, our CEO and training program to help talented ambitious internal leaders grow their capacity to become chief clinical officer.

John J. Gochnour: Our local leaders also use technology and adopted clinical best practices, helping to lower visits per episode by 5% to $12 81, and our total direct cost per visit by four 3%.

John J. Gochnour: Delivering outstanding clinical outcomes efficiently is the foundation for the growth described above and helped improve our segment adjusted EBITDA margin from 14.8% to 15.7%, an improvement of 90 basis points over the prior year quarter. In summary, we are pleased to report record-breaking census growth, clinical outperformance, and margin improvement in our home health and hospice segment. Our senior living business continued its positive ramp as segment revenue increased to $40.4 million, a $5 million, or 14.2% increase, and Segment Adjusted EBITDA increased to $3.5 million, a $1.3 million, or 55.6% increase, each over the prior year quarter. Additionally, same-store occupancy increased 60 basis points to 79.7 percent, even as our same-store revenue per occupied unit increased 8.1 percent. 4,643 each over the prior year quarter.

John J. Gochnour: Delivering outstanding clinical outcomes efficiently as the foundation for the growth described above and helped improve our segment adjusted EBITDA margin from 14, 8% to 15, 7% an improvement of 90 basis points over the prior year quarter. In summary, we are pleased to report record.

John J. Gochnour: <unk> census growth clinical outperformance and margin improvement in our home health and hospice segment.

John J. Gochnour: Our senior living business continued its positive ramp as segment revenue increased to $40 4 million, a $5 million or 14, 2% increase in segment adjusted EBITDA increased to $3 5 million or $1 3 million or 55, 6% increase each over the prior.

John J. Gochnour: Year quarter. Additionally, same store occupancy increased 60 basis points to 79, 7% even as our same same store revenue per occupied unit increased eight 1% to 4643 each over the prior year quarter <unk>.

John J. Gochnour: The stability of our senior living business now gives us an additional lever to drive shareholder value, specifically purchasing real estate. As an operator of senior living communities with a strong track record of producing excellent clinical and financial results, we are frequently approached by landlords looking to install a new operator under a long-term lease. And depending on the terms of the proposed transaction, we often see value in such lease arrangements.

John J. Gochnour: The stability of our senior living business now gives us an additional lever to drive shareholder value, specifically purchasing real estate as an operator of senior living communities with a strong track record of producing excellent clinical and financial results. We are frequently approached by landlords looking to install a new operator.

John J. Gochnour: Under a long term lease and depending on the terms of the proposed transaction, we often see value in such lease arrangements and other cases, we have the opportunity to purchase the associated real estate and thus capture the upside at a cruise as we improve operating results.

John J. Gochnour: In other cases, we have the opportunity to purchase the associated real estate and thus capture the upside that accrues as we improve operating results. While we believe acquiring senior living real estate represents a meaningful opportunity to create value in the short and long term, we will apply the same disciplined approach to this asset class as we do to our traditional acquisitions, asking first who, then what, evaluating the strength of our local operations, and weighing the opportunity cost of deploying capital to real estate instead of home health, hospice, or senior living operations.

John J. Gochnour: While we believe acquiring senior living real estate represents a meaningful opportunity to create value in the short and long term. We will apply the same disciplined approach to this asset class as we do to our traditional acquisition asking first who then what evaluating the strength of our local operations.

John J. Gochnour: And weighing the opportunity cost of deploying capital to real estate instead of home health hospice, our senior living operations.

John J. Gochnour: To that end, we are pleased to share that in March, we acquired two senior living buildings in Utah, including the real estate connected to the operations. The acquired communities are Capitol Hill Senior Living, a 113-unit community in Salt Lake City, Utah, and Southgate Senior Living, a 75-unit community in St. Jordan, with strong local leadership teams in place, robust cluster support, favorable pricing, and locations in areas where Pennant has significant strength in our home health, hospice, provider services, and home care operations.

John J. Gochnour: To that end, we are pleased to share that in March we acquired two senior living buildings in Utah, including the real estate connected to the operations. We acquired communities are capital Hill Senior living a 113 unit community in Salt Lake City, Utah, and Southgate Senior living 75 unit community in St. George.

John J. Gochnour: With strong local leadership teams in place robust cluster support favorable pricing and locations and areas, where pennant has significant strength in our home health hospice provider services at home care operation the deal perfectly illustrates our ability to execute a win win real estate transaction.

John J. Gochnour: The deal perfectly illustrates our ability to execute a win-win real estate transaction within our disciplined operations-focused acquisition approach. On the home health and hospice side, as we discussed last quarter, we initiated Mueller Home Health, a new home health joint venture with John Mueller Health on January 1st. We are excited about this opportunity to work closely with a leading Bay Area health system to deliver world-class home health services. The venture is off to a strong start as we have effectively implemented HomeCare HomeBase and other technology solutions, put in place and elevated talented local leadership, and established meaningful collaboration with the exceptional clinical and operational leaders at John Muir Health.

John J. Gochnour: Within our disciplined operations focused acquisition approach.

John J. Gochnour: On the home health and hospice side as we discussed last quarter, we initiated newer home health, our new home health joint venture with John Muir Health on January one we are excited about this opportunity to work closely with our leading Bay area health system to deliver World class home Health services. The venture is off to a strong start as we have.

John J. Gochnour: Effectively implemented homecare Homebase and other technology solutions put in place an elevated a talented local leadership team and established meaningful collaboration with the exceptional clinical and operational leaders at John Muir Health.

John J. Gochnour: We look forward to providing additional updates on the joint venture's performance throughout the year. After quarter end on April 12th, we acquired one home health license and certificate of need in King County, Washington. And on May 1st, we acquired South Davis Home Health and Hospice, located in Bountiful, Utah. We also acquired, through a long-term lease arrangement, the operations of Veranda Senior Living at Parham.

John J. Gochnour: We look forward to providing additional updates on the joint venture's performance throughout the year.

John J. Gochnour: After quarter end on April 12, we acquired one home health license and certificate of need in King County, Washington, and on May One we acquired South Davis home health and hospice located in Bountiful, Utah. We also acquired through a long term lease arrangement the operations of Miranda senior living at Paramount 73 units.

Lynette B. Walbom: 73 unit assisted living and memory care community in the Boise area. These acquisitions expand our continuums of care and provide new opportunities for local leaders in markets where we have existing strength and key referral partnerships. With that, I'll hand it over to Lynette for a review of the financials.

John J. Gochnour: <unk> assisted living and memory care community in the Boise area.

Lynette: These acquisitions expand our continuum of care and provide new opportunities for local leaders in markets, where we have existing strength and key referral partnerships.

Lynette B. Walbom: With that I'll hand, it over to Lynette for a review of the financials Lynette.

Lynette B. Walbom: Thank you, John, and good morning, everyone. Detailed financial results for the three months ended March 31, 2021, are contained in our 10-Q and press release filed yesterday. For the quarter ended March 31, 2024, we reported total GAAP revenue of $156.9 million, an increase of $30.4 million, or 24.1% over the prior year quarter. We also reported GAAP diluted earnings per share of $0.16, a 166.7% increase over the prior year quarter, and non-GAAP diluted earnings per share of $0.20, a 53.8% increase over the prior year quarter.

Lynette: Thank you John and good morning, everyone.

Lynette: <unk> financial results for the three months ended March 30.

Lynette B. Walbom: First 2024 are contained in our 10-Q and press release filed yesterday.

Lynette B. Walbom: <unk> ended March 31, 2024, we reported total GAAP revenue of $156 9 million, an increase of $30 4 million or 24, 1% over the prior year quarter. We also reported GAAP diluted earnings per share of <unk> 16, a 166, 7% increase over.

Lynette B. Walbom: The prior year quarter, and non-GAAP diluted earnings per share at 28, 53, 8% increase over the prior year quarter.

Brent J. Guerisoli: Key metrics for the three months ended March 31st, 2024, include 83.3 million outstanding on our 150 million revolving line of credit and 2.7 million in cash on hand at quarter end. Additionally, our leverage ratio of 1.84 times net debt to adjusted EBITDA and cash flows provided from operations of 0.5 million for the quarter. Software Q1 cash flows were primarily driven by timing of our collection of accounts receivable as we transition new operations, including multiple acquisitions executed at the end of 2023, along with the new MURA joint venture, as well as a payment delay from a now-resolved issue with a state payer under a Senior Living Reimbursement Program.

Lynette B. Walbom: Key metrics for the three months ended March 31, 2024 <unk>.

Brent J. Guerisoli: $83 3 million outstanding on our $150 million revolving line of credit and $2 $7 million in cash on hand at quarter end, our leverage ratio of 184 times net debt to adjusted EBITDA and cash flows provided from operations of <unk>.

Brent J. Guerisoli: $5 million for the quarter.

Brent J. Guerisoli: So after Q1 cash flows were primarily driven by timing of our collection of accounts receivable as we transition new operation, including multiple acquisitions executed at the end of 2023, along with the new <unk> joint venture as well as a payment delay from a now resolved issue with estate payer under our senior living.

Brent J. Guerisoli: Reimbursement program.

Brent J. Guerisoli: Consistent with our prior statements, we expect cash flow from operations to ramp throughout 2024 and total $30 to $35 million for the year, reflecting organic revenue growth, strong cash collections, and bottom-line improvement. And with that, I'll hand it back to Brent to highlight a few of our local leaders. Thanks, Lynette.

Brent J. Guerisoli: With our prior statements, we expect cash flow from operations to ramp throughout 2024, and total $30 million to $35 million on the year, reflecting organic revenue growth strong cash collections and bottom line improvement and with that ill hand, it back to Brent to highlight a few of our local leaders. Thanks.

Brent J. Guerisoli: It's my pleasure to spotlight several leaders in our organization who have achieved exceptional results. At Barber Station Senior Living, Executive Director Jacob Velasquez, Clinical Director Ray Holland, and Chief Marketing Officer Gary Connell have created an exceptional community in Boise, Idaho, where residents are treated with love and respect, employees are engaged and happy, and the communities The results reflect their success. Since Pennant acquired Barber Station in July 2022, this stellar team of local leaders has improved every aspect of the community.

Brent: Thanks, Lynette, it's my pleasure to spotlight several leaders in our organization, who have achieved exceptional results.

Brent J. Guerisoli: As a result, occupancy has increased 135%, and EBITDA has improved 159%. In addition, Arbor Station's employee engagement score has improved 21% over the same period. The Barber Station story demonstrates the exciting potential that exists when we acquire underperforming senior living operations, bring in talented local leaders, and implement our unique operating model. Preceptor Home Health and Hospice, based in Milwaukee, Wisconsin, led by newly-acquired CEO Rich Firth, along with Executive Directors Christina Wild and Heather Rogge, clinical leaders Angela Becker, and Michelle Kuczynski, has become the employer and provider of choice across eastern Wisconsin

Speaker Change: Hey, Barbara station Senior living Executive Director Director, Jacob Velasquez, clinical Director Rey, Holland, and Chief Marketing Officer, Gerry Connell I've created an exceptional community in Boise Idaho.

Brent J. Guerisoli: Where residents are treated with love and respect employees are engaged and happy.

Brent J. Guerisoli: And the communities.

Brent J. Guerisoli: Our results reflect the success.

Brent J. Guerisoli: Since pennant acquired Barber station in July 2022. This stellar team of local leaders has improved every aspect of the community.

Brent J. Guerisoli: As a result occupancy has increased 135% and EBITDA improved 159%. In addition, Arbor stations employee engagement score has improved 21% in the same period.

Brent J. Guerisoli: Arbor station story demonstrates the exciting potential that exists when we acquire underperforming senior living operations bring in talented local leaders and implement our unique operating model.

Brent J. Guerisoli: Preceptor home health and hospice based in Milwaukee, Wisconsin.

Brent J. Guerisoli: Newly awarded CEO rich one.

Brent J. Guerisoli: Along with the executive directors, Kristina Wild and Heather Roby and.

Brent J. Guerisoli: Clinical leaders, Angela Becker and Michelle Kosinski.

Brent J. Guerisoli: Become the employer and provider of choice across Eastern Wisconsin.

Brent J. Guerisoli: Preceptor's strong leadership team and its commitment to operational fundamentals, leadership development, and clinical excellence have set a new standard of excellence in the Milwaukee area. Through the quality of its care, Preceptor has earned a 5-star rating and a hospitalization rate of 12.7%, which is well below the state and national averages. The agency's strong culture has produced one of the lowest turnover rates in the company.

Brent J. Guerisoli: Preceptor strong leadership team and its commitment to operational fundamentals leadership development and clinical excellence has set a new standard of excellence in the Milwaukee area.

Brent J. Guerisoli: Through the quality of its care Preceptor has earned a five star rating and hospitalization rate 12, 7% is well below the state and national averages.

Brent J. Guerisoli: The agency has strong culture has produced one of the lowest turnover rates in the company.

Operator: Preceptor has developed meaningful community relationships. Revenue has increased 14.8 percent, and EBITDA has increased 58.8 percent each over the prior year quarter. Receptor is a key component of our Wisconsin care continuum, where we also operate 21 senior living facilities. Both examples of the dramatic improvement we see when sea-level caliber local leaders step into operations. With that, we'll open it up for questions. Michelle, can you please instruct the audience on the Q&A procedure? Thank you. If you'd like to ask a question, please press star 1. If your question has been answered and you'd like to remove yourself from the queue, please press star 11 again.

Brent J. Guerisoli: This receptor is developed meaningful community relationships revenue has increased 14, 8% and EBITDA has increased 58, 8% each over the prior year quarter.

Operator: Receptor as a key component of our Wisconsin care continuum, where we also operate 21 senior living facilities.

Operator: These.

Operator: Are both examples of the dramatic improvement, we see when fee level caliber local leaders stepped into operations.

Michelle: With that we'll open it up for questions.

Michelle: Can you please instruct the audience on the Q&A procedure.

Michelle: Thank you do you like to ask a question. Please press star one one.

Michelle: If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Benjamin Hendrix: Our first question comes from Ben Hendrix with RBC Capital Markets. Your line is open. Great, thank you very much.

Michelle: Our first question comes from Ben Hendrix, with RBC capital markets. Your line is open.

Benjamin Hendrix: Great. Thank you very much and congratulations on the quarter.

Brent J. Guerisoli: Congratulations on the quarter. Question on follow-up on your clinical leadership and your CEO programs. Just wanted to kind of see what that pipeline, the timing of the graduating classes are, and given the given the fragmented nature of these markets, is that the biggest gating item for development? And how can we see that kind of progressing in the two segments? Yeah, great question, Ben.

Benjamin Hendrix: Question on just a follow up on your clinical leadership and your CEO programs, just wanted to kind of see what that pipeline and the timing of the of the graduating classes are and given the.

Brent J. Guerisoli: Given the.

Speaker Change: The fragmented nature of these markets is that the biggest gating item to development.

Brent J. Guerisoli: How can we see that kind of progressing in the two segments.

Brent J. Guerisoli: You know, for the most part, these are ongoing programs that run throughout the year. The cohorts related to the clinical program are more on a quarterly cycle. And the CEO development program is a little bit quicker on the cycle. And in a lot of ways, it is really just based on the individuals that we bring into the organization. So, you know, as we continue to grow, that's why we've talked about leadership as our primary focus.

Speaker Change: Yes, great Great question Ben.

Brent J. Guerisoli: For the most part these are ongoing programs that are going throughout the year.

Brent J. Guerisoli: The cohorts related to the clinical program, it's more on a quarterly cycle.

Brent J. Guerisoli: And we.

Brent J. Guerisoli: <unk> CEO development program is a little bit quicker on the cycle.

Brent J. Guerisoli: A lot of ways. It really is just based on the individuals that we bring into the organization. So we continue to grow that's why we've talked about leadership is our primary focus.

Brent J. Guerisoli: We are going to grow as we bring in great talented leaders. The other thing thats really important to emphasize here.

Brent J. Guerisoli: We are going to grow as we bring in great, talented leaders. The other thing that's really important to emphasize here, and we've talked about it for a long time, is that we are a clinical business. And the most important thing we can do, in addition to bringing in incredible operating leaders, is to partner them with high-caliber clinical leaders that understand how to build a business and also develop other clinical leaders. And so what's exciting to see is that as we're developing our clinical leaders in a more effective way, we're seeing improved clinical results. And I think those financial results just continue to follow. Great, thank you.

Brent J. Guerisoli: And we've talked about it for a long time, we are a clinical business and the most important thing. We can do in addition to bringing an incredible operating leaders is to partner them with high caliber clinical leaders that understand how to build the business and also develop other clinical leaders and so what's exciting to see us.

Brent J. Guerisoli: As we're developing our clinical leaders in a more effective way, we're seeing improved clinical result, and I think those financial results just continue to follow.

Brent J. Guerisoli: And then to follow up on your real estate strategy, can you remind us what percentage of real estate you operate that is owned by Standard Bearer and, are there any? Purchase options on the real estate that kind of stayed with Standard Bear when you spun off from Enzyme. Thanks.

Speaker Change: Great. Thank you and then a follow up on your real estate strategy can you remind us what percentage of real estate you operate that is now owned by standard bear and are there any.

Brent J. Guerisoli: Purchase options on the real estate that that kind of stayed with standard bear when you spun off from enzyme. Thanks.

Brent J. Guerisoli: Yeah, so our real estate strategy really revolves around a couple of things, Ben, and you highlighted a couple of our key partnerships. You know, a large majority of our real estate is owned by Standard Bearer and came with us during the spin, so we don't have purchase options on those properties.

Speaker Change: Yes, so our real estate strategy really revolves around a couple of things been and you highlighted a couple of our key partnerships.

Brent J. Guerisoli: A majority of our real estate is owned by standard bearer and came with us during the spin we don't have purchase options on those properties.

Brent J. Guerisoli: We continue to enjoy a really great relationship with ensign as our landlord as well as our partner in the enzyme pennant care continuum and so that continues to be an avenue, where they see senior living opportunities.

Brent J. Guerisoli: We continue to enjoy a really great relationship with Enzyne as our landlord, as well as our partner in the Enzyne Penning Care Continuum. And so that continues to be an avenue where they see senior living opportunities, and we have opportunities to partner with them. I think what's exciting about what's happening now is that we're in a period where we can look at a potential transaction, and we can determine what's the best way to finance that. Is it to use our own capital?

Brent J. Guerisoli: And we have opportunities to partner with them I think what's exciting about what's happening now is that we're in a period, where we can look at a potential transaction. We can determine what's the best way to finance that is to use our own capital is it to partner with standard bearer is it to partner with another community partner, who we've worked closely to develop a relationship with.

Scott J. Fidel: Is it to partner with Standard Bearer? Is it to partner with another community partner who we've worked closely to develop a relationship with, and then kind of attack that in the way that makes the most sense for our balance sheet and for our operational progress? And so that's what you saw this quarter and then in the after acquired. The key here is that we did the two real estate transactions using our balance sheet, and then we acquired a long-term lease with a landlord that we already had a favorable relationship with.

Scott J. Fidel: And then.

Scott J. Fidel: The attack that in a way that makes the most sense for our balance sheet and for our operational progress and so that's what you saw this quarter and then in the after acquired.

Scott J. Fidel: Each year as we did the two real estate transactions using our balance sheet and then we acquired a long term lease with the landlord that we already had a favorable relationship with us. So excited about standard bearer in the progress that they're making a relationship. We have continue to have with enzyme and with standard. There also we're excited to be kind of tapping. This.

Scott J. Fidel: So excited about Standard Bear and the progress that they're making, the relationship we continue to have with Enzyme and with Standard Bear. Also, we're excited to be kind of tapping this new opportunity for value creation through using our balance sheet for real estate acquisition. Thank you very much, guys. Thanks, Ben. Thank you. Our next question comes from Scott Fidel with Stevens. Your line is open.

Scott J. Fidel: New opportunity for value creation through using our balance sheet for real estate acquisition.

Scott J. Fidel: Thank you very much guys.

Scott J. Fidel: Thanks Ben.

Scott J. Fidel: Thank you. Our next question comes from Scott Fidel with Stephens. Your line is open.

Brent J. Guerisoli: Okay, thanks. Hi everyone. First question, just wanted to get your feedback on how the 1Q results came in relative to your expectations. Results definitely came in above our forecast and consensus. At the same time, you maintained guidance, so just curious about sort of how the 1Q results came in versus plan and then sort of what your triggers would be to look to potentially raise guidance if, you know, these trends continue. Yeah, thanks for the question.

Scott J. Fidel: Okay. Thanks, Tom Hi, everyone first question just wanted to get.

Brent J. Guerisoli: Your feedback on how the <unk> results came in relative to your expectations.

Brent J. Guerisoli: Our results definitely came in above our forecast and consensus.

Brent J. Guerisoli: At the same time, you've maintained guidance. So just curious on sort of how the <unk> results came in versus plan and then sort of what triggers would be.

Brent J. Guerisoli: To look to potentially raise guidance that Bob these trends continue.

Brent J. Guerisoli: I think we're very encouraged by what we saw in Q1. This was certainly a very strong quarter for us, and it really puts us on pace for the top end of our guidance at this point. And, you know, what I would say as well is that we anticipate that the momentum that we've seen in Q1 will continue throughout the end of the year. And we're confident in that. But we also, at the same time, don't want to get too far ahead of ourselves.

Speaker Change: Yes. Thank.

Speaker Change: Thank you for the question I think.

Brent J. Guerisoli: We're very encouraged by what we've seen in Q1. This was certainly a very strong quarter for us.

Brent J. Guerisoli: And it really puts us on pace.

Brent J. Guerisoli: For the top end of our guidance at this point and what I would say as well we anticipate that the momentum that we've seen in Q1 will continue throughout the end of the year.

Brent J. Guerisoli: And we're confident in that but we also at the same time, we don't want to get too far ahead of ourselves.

Brent J. Guerisoli: So, you know, we're taking maybe a conservative approach there. But if we do continue to see the progress that we saw in Q1, then we would anticipate making adjustments to guidance throughout the rest of the year. Okay, understood.

Brent J. Guerisoli: We're taking maybe a conservative approach there, but if we do continue to see the progress that we saw in Q1 than we would anticipate making adjustments to guidance throughout later on in the year.

Scott J. Fidel: And it's certainly fair to remain prudent, but helpful to sort of get some visibility on sort of where you think about the outlook within the range being towards the higher end at this point after the first quarter. Second question, just wanted to get some visibility into your thinking on sort of SL trends from here over the balance of the year. You sort of were able to achieve continued solid rate growth and then had some increase in occupancy. How would you see occupancy trending over the course of the year from here?

Speaker Change: Okay understood and certainly paradigm remained prudent but helpful to try to get the visibility on sort of where you think about.

Scott J. Fidel: The outlook within the range being towards the higher end at this point after the first quarter.

Scott J. Fidel: Second question.

Scott J. Fidel: Wanted to get some visibility answer youre thinking on sort of XL trends from here over the balance of the year.

Scott J. Fidel: No that you sort.

Scott J. Fidel: We're able to achieve continued solid rate growth and that had some increase in occupancy.

Scott J. Fidel: How would you see occupancy trending over the course of the year from here and then remind us on your your rate renewals.

John J. Gochnour: And then remind us about your rate renewals, sort of the pace of that in terms of the percentage of your rooms that were renewed as of the beginning of the year as compared to over the course of the year. Yeah, there's certainly some seasonality that we felt in our occupancy numbers in Q1. And that's been pretty consistent. The end of the year, the beginning of the end, you know, with the holidays and the end and the beginning of the new year, there tends to be a little bit of a downturn in our occupancy. So we saw more or less flat performance there.

John J. Gochnour: Sort of the tempo of that in terms of.

John J. Gochnour: The percentage of.

John J. Gochnour: Rooms that were renewed.

John J. Gochnour: As of the beginning of the year as compared to over the course of the year.

John J. Gochnour: Yes, there is certainly some seasonality that we felt in.

John J. Gochnour: Our occupancy numbers in Q1 and.

John J. Gochnour: Thats been pretty consistent at the end of the year at the beginning of the end of the holidays and the beginning of the new year, there tends to be a little bit of a downturn in our occupancy. So we saw more or less flat performance there.

John J. Gochnour: What's encouraging though and what we've generally seen is increase occupancy.

Scott J. Fidel: What's encouraging, though, and what we've generally seen is increased occupancy that steps up throughout the rest of the year. And so we kind of, that's what we see, and we're expecting to see throughout the end of the year in that regard. Scott, remind me, what was your second question?

Speaker Change: <unk> up throughout the rest of the year and so we've kind of that's what we see and we're expecting to see throughout the end of the year.

Scott J. Fidel: In that regard and Scott remind me what was your second question.

John J. Gochnour: Yeah, we're just on sort of the tempo of the rate renewals on the SL side over the course of the year. Yeah, so we don't necessarily have rate renewals that go into effect across the board all at the same time. That being said, we anticipate increasing rates across the board at different times at each of the locations, and this is part of the function of the local leadership teams. As they look at the market, the communities, and the pressures and whatnot, they're making appropriate adjustments throughout the year. The other thing that's really important to remember is that there are sort of two elements to this.

Scott: Yes, Brian just on sort of the tempo of the rate renewals on the sell side over the course of the year.

John J. Gochnour: Yes, so we don't necessarily have rate renewals that go into effect across the board all at the same time that being said, we anticipate increasing rates across the board at different times at each of the locations and this is part of the function of the local leadership teams as they look at the market the communities and the pressures and whatnot.

John J. Gochnour: Theyre, making appropriate adjustments throughout the year. The other thing that's really important to remember theres sort of two elements to this one is the room and board rate increases and then the second is on what we call our terrace charges or the actual carriers that were providing.

John J. Gochnour: One is the room and board rate increases, and then the second is on what we call our CARES charges, or the actual CARES that we're providing. And so what we're doing there is really focusing on making sure that we're charging for the services that we're providing, ensuring that we're putting the residents at the appropriate clinical levels, and then working with them really on a monthly or at least on a quarterly basis to address those needs and appropriately adjust the rates. So, we were encouraged by strong rate growth, as we talked about, and we would anticipate that growth to continue throughout the year. Okay. And then I just had one more question.

John J. Gochnour: And so what we're doing there is it really focusing on making sure that we're charging for the services that we're providing and ensuring that we are.

John J. Gochnour: Putting the residents at the level the appropriate clinical levels, and then working with them really on a monthly or at least on a quarterly basis to address those needs and appropriately adjust the rates. So.

John J. Gochnour: We were encouraged by strong rate growth as we talked about and we would anticipate that growth to continue throughout the year.

Scott J. Fidel: If you were able to provide us with an update on how your wage inflation trends progressed in the first quarter across the three business lines, I think that you did show traction sequentially and sort of lowering the rate of increase across each of the three business lines, but it would be helpful if you were able to share some figures with us. Yes, Scott, we continue to see some significant wage pressure. And I think you're seeing that it's translating to about a 5% increase in both service lines in overall wage inflation pressure.

Speaker Change: Okay, and then just I had one more question.

Speaker Change: We're able to provide us with an update on how your wage inflation trends progressed in the first quarter across the three business lines. I think that you did show traction sequentially and sort of lowering the rate of increase across each of the three business lines, but would be helpful. If you were able to share some mark some figures.

Scott J. Fidel: Us.

Scott J. Fidel: Yes, Scott we continue to see some significant wage pressure and I think youre seeing that.

Speaker Change: Translating to about a 5% increase in both service lines.

Speaker Change: And overall wage inflation pressure I.

Scott J. Fidel: I think in the first quarter, we actually saw a little bit of a tick back in the wrong direction, which was disappointing, right? We continue to hope that we'll see more and more normalization back to wage inflation that sort of corresponds with the changes in reimbursement that we're receiving. But that's not the case yet.

Scott: I think in the first quarter, we actually saw a little bit of a tick back in the wrong direction, which was was disappointing right. We continue to hope that we will see.

Scott J. Fidel: More and more normalization.

Scott J. Fidel: Back to wage inflation thats sort of corresponds with the changes in reimbursement that we're receiving that's not the case yet I think what we're seeing is there are some positive trends and I think those are manifesting themselves as we are able to.

John J. Gochnour: I think what we're seeing is there are some positive trends, and I think those are manifesting themselves as we're able to, and we've seen improvement in our turnover, we've seen improvement in our employee engagement scores, and what that's driving is the ability to manage more effectively. And so you're seeing improvement on the margin side, in part because we're able to manage that labor even in spite of the inflation and the cost pressure that we're experiencing in a more effective manner.

John J. Gochnour: And we've seen improvement in our turnover, we've seen improvement in our employee engagement scores and what that's driving is the ability to manage more effectively and so youre seeing improvement on the margin side in part because we're able to manage that labor even in spite of inflation.

John J. Gochnour: Inflation in the cost pressure that we're experiencing.

John J. Gochnour: In a more effective manner and so that's kind of what I would say is just it's still 5% in both segments.

John J. Gochnour: And so that's kind of what I would say is just it's still 5% in both segments on a year-over-year basis. I think it ticked up from 0.9% in Q4 to 1.2% this year, but we're still looking at that 5% year-over-year, which is still significant and outside of our long-term expectations. Okay, understood, John.

Speaker Change: On a year over year basis, I think it ticked up from 9% in Q4 to one 2% in <unk>.

Speaker Change: This year, but we're still looking at that 5% year over year, which is still significant and outside of our long term expectations.

Scott J. Fidel: And then just within HH&H, is that pretty consistent across home health and hospice in terms of those 5% trends? Yeah, and we continue to look at that segment combined because so many of our operations operate as both a home health and a hospice provider. So while we bifurcate the data in some cases on the labor inflation side, it makes sense to keep it combined. Okay.

Speaker Change: Okay understood and then just within the HHS agent that pretty consistent across home health and hospice in terms of.

Scott J. Fidel: Those are those 5%.

Scott J. Fidel: Yeah, and we continue to look at that segment combined because so many of our operations operate as both a home health and hospice provider. So while we bifurcate the data in some cases the law.

Scott J. Fidel: Labour inflation side, it makes sense to keep it combined.

Operator: All right. Thank you. Thank you. I'm showing no further questions.

Speaker Change: Okay got it alright, thank you.

Scott J. Fidel: Yes.

Brent J. Guerisoli: I'd like to turn the call back over to Brent Guerisoli for closing remarks. Thank you, Michelle, and thank you, everyone, for joining us today. Thank you for your participation. This does conclude the program, and you may now disconnect.

Speaker Change: Thank you I'm showing no further questions I'd like to turn the call back over to Brent Gareth Sally for closing remarks.

Brent J. Guerisoli: Thank you Michelle and thank you everyone for joining us today.

Operator: Everyone have a great day. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Music Music Music Music Music ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day and thank you for standing by. Welcome to the Pennant Group first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode.

Brent J. Guerisoli: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.

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Kirk Cheney: After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the call over to Kirk Cheney. You may begin.

Speaker Change: Good day and thank you for standing by welcome to the Bank Group first quarter 2024 earnings Conference call. At this time, all participants are in listen only mode.

Kirk Cheney: After the Speakers' presentation, there'll be a question and answer session.

Kirk Cheney: Please be advised that today's conference is being recorded I would now.

Kirk Cheney: Like to hand, the call over to Cook, Jamie you may begin.

Kirk Cheney: Thank you, Michelle. Welcome, everyone, and thank you for joining us today. Here with me today are Brent Guerisoli, our CEO; John Gochnour, our President and COO; and Lynette Walbom, our CFO. Before we begin, I have a few housekeeping matters.

Kirk Cheney: Thank you Michelle and welcome everyone and thank you for joining US today here with me today I have been Gary Kelly, our CEO, John Gardner, our president and CFO.

Kirk Cheney: Well then our CFO before we begin I have a few housekeeping matters.

Kirk Cheney: We filed our earnings press release and 10-Q yesterday.

Kirk Cheney: Announcement is available on the Investor Relations section of our website at Www Dot pennant group dotcom.

Kirk Cheney: We want to remind anyone who may be listening to a replay of this call that all statements are made as of today. These statements have not been, nor will they be updated after today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions, and beliefs about our business and the environment in which we operate. These statements are subject to risk and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call.

Kirk Cheney: Statements have not been nor will they be updated after today's call.

Kirk Cheney: Also any forward looking statements made today are based on management's current expectations assumptions and beliefs about our business and the environment in which we operate.

Kirk Cheney: These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call.

Kirk Cheney: Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for more complete discussion of factors that could impact our results. Except as required by federal securities laws, Pennant and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances, or for any other reason. In addition, Pennant Group Inc. is a holding company with no direct operating assets, employees, or revenues.

Kirk Cheney: Except as required by federal Securities laws pennant and its affiliates do not undertake to publicly update or revise any forward looking statements where changes arise as a result of new information.

Kirk Cheney: Sure events changing circumstances or for any other reason.

Kirk Cheney: With such subsidiaries.

Kirk Cheney: The words pennant Anthony we are in us refer to the pennant Group, Inc. And its consolidated subsidiaries all of our operating subsidiaries and the service center are operated by a separate independent companies that have their own management employees and assets.

Kirk Cheney: References herein to the Consolidated Company and its assets and activities, as well as use of the terms we, us, our, and similar terms used today, are not meant to imply, nor should they be construed as meaning that the Pennant Group Inc. has direct operating assets, employees, or revenues, or that any of the subsidiaries are operated by Pennant. Also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reporting. The Gap to Non-Gap reconciliation is available in yesterday's press release and is available in our time queue. And with that, I will turn the call over to Brent Guerisoli, our CEO. Okay?

Kirk Cheney: This herein to the consolidated company and its assets and activities as.

Kirk Cheney: As well as use of the terms, we us our and similar terms used today are not meant to imply nor should it be construed as meaning that the pennant group, Inc. Has direct operating assets in place our revenues with it.

Brent J. Guerisoli: Any of the subsidiaries are operated by the pennant group.

Kirk Cheney: Also we supplement our GAAP reporting with non-GAAP metrics when viewed together with our GAAP results. We believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports the GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our 10-Q.

Brent J. Guerisoli: And with that I will turn the call over to Brent <unk>, our CEO Brent.

Brent J. Guerisoli: Thanks, Kirk, and welcome, everyone, to our first quarter, the 2024 earnings call. Before we share results, I want to express deep appreciation to the local leaders and teams who care for our patients and residents each day. You are the foundation of Pennant's success, and we are grateful for all you do.

Brent J. Guerisoli: Thanks, Kirk and welcome everyone to our first quarter.

Brent J. Guerisoli: 2024 earnings call.

Brent J. Guerisoli: Before we share results I want to express deep appreciation to the local leaders and teams who care for our patients and residents each day.

Brent J. Guerisoli: You are the foundation of pennant success, and we are grateful for all you do.

Speaker Change: We are pleased to report that.

Brent J. Guerisoli: Q1 was a strong quarter and a great start to the year.

Brent J. Guerisoli: And our earnings per share of $0.20 increased by $0.07, or 53.8%. We remain committed to our five key focus areas, leadership development, clinical excellence, employee experience, margin improvement, and growth. Focusing on these fundamentals has created a firm foundation in our core business and significant momentum across the company, with our investments in people, systems, and growth bearing fruit.

Brent J. Guerisoli: Increased by seven or 53, 8%.

Brent J. Guerisoli: We remain committed to our five key focus areas leadership development clinical excellence employee experience margin improvement and growth.

Brent J. Guerisoli: <unk> on these fundamentals has created a firm foundation in our core business and significant momentum across the company.

Brent J. Guerisoli: As our investments in people systems and growth are bearing fruit.

Brent J. Guerisoli: Leadership development remains a top priority as we've consistently discussed in prior quarters. We are diligently focused on developing a robust pipeline of local leaders.

Brent J. Guerisoli: We continue to progress and our commitment to develop 100 local Ceos.

Brent J. Guerisoli: Well as Chief clinical officer is than other C level leaders.

Brent J. Guerisoli: There are now 44, Ceos and 42 Ccs driving results throughout the organization and we expect their ranks to continue to grow throughout the year.

Brent J. Guerisoli: As a reminder to earn the title of CEO, our look our leaders must not only achieve extraordinary clinical performance.

Brent J. Guerisoli: Sure and growth, but also drive significant financial improvement in their operations.

Brent J. Guerisoli: We have found that Ceos, typically generate roughly $1 million more in annual earnings and our executive directors as well as better clinical and cultural outcomes.

Brent J. Guerisoli: We are also making meaningful progress on margins. Year over year, our consolidated adjusted EBITDA margin improved 90 basis points from 6.4% to 7.3%, reflecting improvement in each segment. We attribute these margin gains to three factors. First, margin is fundamentally connected to leadership. As we develop talented and entrepreneurial leaders who exercise discipline and diligence in their operations, they deliver exceptional financial results.

Brent J. Guerisoli: We are also making meaningful progress on margin.

Brent J. Guerisoli: Year over year, our consolidated adjusted EBITDA margin improved 90 basis points from six 4% to seven 3% reflecting improvement in each segment.

Brent J. Guerisoli: Attribute these margin gains to three factors.

Brent J. Guerisoli: First margin is fundamentally connected to leadership as we develop talented and entrepreneurial leaders, who exercised discipline and diligence and their operation they.

Brent J. Guerisoli: They delivered exceptional financial results second.

Brent J. Guerisoli: Our innovative operating model encourages the sharing and adoption of best practices across the organization.

Brent J. Guerisoli: And as local leaders implement these best practices they consistently improved performance.

Brent J. Guerisoli: We continue to invest in best in class technology tools and systems that are local leaders leverage to enhance their clinical and operational results.

Brent J. Guerisoli: Turning to growth.

Brent J. Guerisoli: Q1 represented a culmination of the significant efforts we have made on both the organic and acquisitional sides, leading to a record quarter. This was highlighted by double-digit year-over-year percentage increases in same store, total home health admissions, and hospice average daily census. This same store growth exemplifies the meaningful potential that exists at our established operations as they mature and expand. Coupled with the successful integration of several recent transitions, our home health and hospice segment revenue increased 27.9% over the prior year quarter, evenly split between organic and acquisitional growth.

Brent J. Guerisoli: Q1 represented a culmination of the significant efforts we have made on both the organic and acquisition side.

Brent J. Guerisoli: Leading to a record quarter. This was highlighted by double digit year over year percentage increases in same store total home health admissions in hospice average daily census.

Brent J. Guerisoli: This same store growth exemplifies the meaningful potential that exists at our established operations as they mature and expand.

Brent J. Guerisoli: Coupled with successful integration of several recent transitions, our home health and Hospice segment revenue increased 27, 9% over the prior year quarter evenly split between organic and acquisition growth on.

Brent J. Guerisoli: On the senior living side, we have steadily increased our revenue per occupied unit as local teams effectively managed resident mix and adjust their prices to reflect the true cost of services they provide.

Brent J. Guerisoli: Mentum, we've seen in Q1 demonstrates the power of our model.

Brent J. Guerisoli: Access the latent opportunity that exists in our current operations, while also transitioning new operations into the platform.

Brent J. Guerisoli: Operational excellence is a key part of the pennant story and something upon which we pride ourselves.

Brent J. Guerisoli: We want our investors to understand that when they become pennant owners, they are partnering with a best-in-class operator as we harness our unique operating model to execute and grow. Since our spinoff and through the challenges of a global pandemic, we have matured as an organization and added leaders across the company and our management team throughout the field and at the service center. As a result, we have produced nine consecutive quarters of strong performance, earnings each quarter that exceeded the prior year period, and we have experienced triple-digit percentage growth in adjusted EBITDA and EPS.

Brent J. Guerisoli: Since our spinoff and through the challenges of a global pandemic, we have matured as an organization.

Brent J. Guerisoli: Good leaders across the company and our management team throughout the field and at the service Center as.

Brent J. Guerisoli: We have repeatedly and consistently done what we said we were going to do, and while we are encouraged by the progress that we've made, we're even more excited about the foundation that we've built and the future that lies ahead. With that, I'll turn the call over to John to provide more details on our first quarter operational results. Thank you, Brent, and good morning, everyone.

Brent J. Guerisoli: With that I'll turn the call over to John to provide more details on our first quarter operational results.

John: Thank you Brent and good morning, everyone. We are pleased to report strong performance in both operating segments, turning first to our home health and hospice results. Our segment revenue of $116 5 million is up $25 4 million or 27, 9% and segment adjusted EBITDA.

John J. Gochnour: We are pleased to report strong performance in both operating segments. Turning first to our home health and hospice results, our segment revenue of one hundred and sixteen point five million is up twenty five point four million, or twenty seven point nine percent. And the segment adjusted EBITDA of seventeen point nine million is up 4.7 million, or 35.7 percent, over the prior year quarter.

John J. Gochnour: Roughly 50 percent of the year-over-year rise in segment revenue was same-store growth, while the other 50 percent was attributable to the successful transition and improvement of new operations. In home health, our total admissions grew 34.3% over the prior year quarter, while Medicare home health admissions increased 28.3% over the prior year quarter. We also continued our robust hospitality, as admissions increased 25.7% over the prior year quarter and 21.3% sequentially, and average hospice daily census increased 21.4% over the prior year quarter and 5.9%.

John J. Gochnour: $17 9 million.

John J. Gochnour: <unk> grew 34, 3% over the prior year quarter, while Medicare home health admissions increased 28, 3% over the prior year quarter.

John J. Gochnour: We also continued our robust hospice growth as admissions increased 25, 7% over the prior year quarter.

John J. Gochnour: 21, 3% sequentially and average hospice daily census, increased 21, 4% over the prior year quarter and five 9% sequentially in.

John J. Gochnour: In addition, we continue to see strong rate growth across both services. Home Health Medicare revenue per episode increased 3.4%, and Hospice Revenue Per Day increased 2.2%, each over the prior year quarter. Our ongoing investment in clinical expertise is also contributing to strong relationships with payer partners, which is evident in the 11% growth in our managed care revenue per visit over the prior year quarter. We are encouraged by the upward trends in our reimbursement rates and believe that, over the long run, payer partners will reward high-quality providers.

John J. Gochnour: In addition, we continue to see strong rates across both service lines will now Medicare revenue per episode increased three 4% and hospice revenue per day increased two 2% each over the prior year quarter, our ongoing investment in clinical excellence is also contributing to strong relationships with payers.

John J. Gochnour: Our local leaders also use technology and adopted clinical best practices, helping to lower visits per episode by 5% to $12 81, and our total direct cost per visit by four 3%.

John J. Gochnour: Delivering outstanding clinical outcomes efficiently is the foundation for the growth described above and helped improve our segment adjusted EBITDA margin from 14.8% to 15.7%, an improvement of 90 basis points over the prior year quarter. In summary, we are pleased to report record-breaking census growth, clinical outperformance, and margin improvement in our home health and hospice segment. Our senior living business continued its positive ramp as segment revenue increased to $40.4 million, a $5 million, or 14.2% increase, and Segment Adjusted EBITDA increased to $3.5 million, a $1.3 million, or 55.6% increase, each over the prior year quarter. Additionally, same store occupancy increased 60 basis points to 79.7 percent, even as our same store revenue per occupied unit increased 8.1 percent. 4,643 each over the prior year quarter.

John J. Gochnour: <unk> census growth clinical outperformance and margin improvement in our home health and hospice segment.

John J. Gochnour: And weighing the opportunity cost of deploying capital to real estate instead of home health hospice, our senior living operations.

John J. Gochnour: To that end, we are pleased to share that in March, we acquired two senior living buildings in Utah, including the real estate connected to the operations. The acquired communities are Capitol Hill Senior Living, a 113-unit community in Salt Lake City, Utah, and Southgate Senior Living, a 75-unit community in St. George, with strong local leadership teams in place, robust cluster support, favorable pricing, and locations in areas where Pennant has significant strength in our home health, hospice, provider services, and home care operations.

John J. Gochnour: Deepak with strong local leadership teams in place robust cluster support favorable pricing and locations and areas, where pennant has significant strength in our home health hospice provider services at home care operations. The deal perfectly illustrates our ability to execute a win win real estate transaction.

John J. Gochnour: The deal perfectly illustrates our ability to execute a win-win real estate transaction within our disciplined, operations-focused acquisition approach. On the home health and hospice side, as we discussed last quarter, we initiated Mueller Home Health, a new home health joint venture with John Mueller Health on January 1st. We are excited about this opportunity to work closely with a leading Bay Area health system to deliver world-class home health services. The venture is off to a strong start as we have effectively implemented HomeCare HomeBase and other technology solutions, put in place and elevated talented local leadership, and established meaningful collaboration with the exceptional clinical and operational leaders at John Muir Health.

John J. Gochnour: Within our disciplined operations focused acquisition approach.

John J. Gochnour: On the home health and hospice side as we discussed last quarter, we initiated newer home health and new home health joint venture with John Muir Health on January one we are excited about this opportunity to work closely with our leading Bay area health system to deliver World class home Health services. The venture is off to a strong start as we have.

John J. Gochnour: We look forward to providing additional updates on the joint venture's performance throughout the year.

John J. Gochnour: 73 unit assisted living and memory care community in the Boise area. These acquisitions expand our continuums of care and provide new opportunities for local leaders in markets where we have existing strength and key referral partnerships. With that, I'll hand it over to Lynette for a review of the financials. Lynette?

John J. Gochnour: Knit assisted living and memory care community in the Boise area.

Lynette: These acquisitions expand our continuum of care and provide new opportunities for local leaders in markets, where we have existing strength and key referral partnerships.

John J. Gochnour: With that I'll hand, it over to Lynette for a review of the financials Lynette.

Lynette B. Walbom: Thank you, John, and good morning, everyone. Detailed financial results for the three months ended March 31st, 2024, are contained in our 10-Q and press release filed yesterday. For the quarter ended March 31st, 2024, we reported total GAAP revenue of $156.9 million, an increase of $30.4 million, or 24.1% over the prior year quarter. We also reported GAAP diluted earnings per share of $0.16, a 166.7% increase over the prior year quarter, and non-GAAP diluted earnings per share of $0.20, a 53.8% increase over the prior year quarter.

Lynette: Thank you John and good morning, everyone detailed financial results for the three months ended March 30.

Lynette B. Walbom: <unk> 2024 are contained in our 10-Q and press release filed yesterday.

Lynette B. Walbom: Order ended March 31, 2024, we reported total GAAP revenue of $156 9 million, an increase of $34 million or 24, 1% over the prior year quarter. We also reported GAAP diluted earnings per share of <unk> 16, a 166, 7% increase over.

Lynette B. Walbom: The prior year quarter, and non-GAAP diluted earnings per share at 28, 53, 8% increase over the prior year quarter.

Lynette B. Walbom: Key metrics for the three months ended March 31st, 2024, include 83.3 million outstanding on our 150 million revolving line of credit and 2.7 million in cash on hand at quarter end. Additionally, our leverage ratio of 1.84 times net debt to adjusted EBITDA and cash flows provided from operations of 0.5 million for the quarter. Softer Q1 cash flows were primarily driven by timing of our collection of accounts receivable as we transition new operations, including multiple acquisitions executed at the end of 2023, along with the new MIRROR joint venture, as well as a payment delay from a now-resolved issue with a state payer under a senior living reimbursement program.

Lynette B. Walbom: Key metrics for the three months ended March 31, 2024 <unk>.

Lynette B. Walbom: $83 3 million outstanding on our $150 million revolving line of credit and $2 $7 million in cash on hand at quarter end, our leverage ratio of 184 times net debt to adjusted EBITDA and cash flows provided from operations of <unk>.

Lynette B. Walbom: $5 million for the quarter so.

Lynette B. Walbom: After Q1 cash flows were primarily driven by timing of our collection of accounts receivable as we transition new operation, including multiple acquisitions executed at the end of 2023, along with the new <unk> joint venture as well as a payment delay from a now resolved issue with estate payer under our senior living.

Lynette B. Walbom: Reimbursement program consistent with our prior statements, we expect cash flow from operations to ramp throughout 2024 and total.

Lynette B. Walbom: Consistent with our prior statements, we expect cash flow from operations to ramp throughout 2024 and total $30 to $35 million for the year, reflecting organic revenue growth, strong cash collections, and bottom-line improvement. And with that, I'll hand it back to Brent to highlight a few of our local leaders. Thanks, Lynette. It's my pleasure to spotlight several leaders in our organization who have achieved exceptional results. At Barber Station Senior Living, Executive Director Jacob Velasquez, Clinical Director Ray Holland, and Chief Marketing Officer Gary Connell have created an exceptional community in Boise, Idaho, where residents are treated with love and respect, employees are engaged and happy, and the communities

Lynette B. Walbom: <unk> to $35 million on the year, reflecting organic revenue growth strong cash collections and bottom line improvement and with that I'll hand, it back to Brent to highlight a few of our local leaders.

Brent: Thanks, Lynette, it's my pleasure to spotlight several leaders in our organization, who have achieved exceptional results.

Brent: Barber station senior living executive direct director, Jacob Velasquez, clinical director Rey, Holland, and Chief Marketing Officer, Gerry Connell I've created an exceptional community in Boise, Idaho, where.

Brent: Where residents are treated with love and respect employees are engaged and happy.

Brent: And the communities.

Brent J. Guerisoli: The results reflect the success. Since Pennant acquired Barber Station in July 2022, this stellar team of local leaders has improved every aspect of the community. As a result, occupancy has increased 135%, and EBITDA improved 159%.

Brent: Our results reflect the success.

Brent J. Guerisoli: In addition, Arbor Station's employee engagement score has improved 21% in the same period. The Barber Station story demonstrates the exciting potential that exists when we acquire underperforming senior living operations, bring in talented local leaders, and implement our unique operating model. Preceptor Home Health and Hospice is based in Milwaukee, Wisconsin, led by newly-acquired CEO Rich Firth, along with Executive Directors Christina Wild and Heather Rogge.

Brent: Since pennant acquired Barber station in July 2022. This stellar team of local leaders has improved every aspect of the community.

Brent J. Guerisoli: As a result occupancy has increased 135% and EBITDA improved 159%. In addition, Arbor stations employee engagement score has improved 21% in the same period.

Brent J. Guerisoli: Preceptor home health and hospice based in Milwaukee, Wisconsin led by newly awarded CEO Rich FERC.

Brent J. Guerisoli: Along with the executive directors, Kristina Wild and Heather Roby and clinical leaders, Angela Becker and Michelle Kosinski has become the employer and provider of choice across eastern Wisconsin.

Brent J. Guerisoli: Clinical Leaders Angela Becker and Michelle Kuczynski have become the employer and provider of choice across eastern Wisconsin. Preceptor's strong leadership team and its commitment to operational fundamentals, leadership development, and clinical excellence have set a new standard of excellence in the Milwaukee area. Through the quality of its care, Preceptor has earned a 5-star rating and a hospitalization rate of 12.7%, which is well below the state and national averages. The agency's strong culture has produced one of the lowest turnover rates in the company.

Brent J. Guerisoli: Through the quality of its care Preceptor has earned a five star rating and hospitalization rate 12, 7% is well below the state and national averages.

Brent J. Guerisoli: The agency has strong culture has produced one of the lowest turnover rates in the company.

Brent J. Guerisoli: Preceptor has developed meaningful community relationships. Revenue has increased 14.8%, and EBITDA has increased 58.8% each over the prior year quarter. Receptor is a key component of our Wisconsin care continuum, where we also operate 21 senior living facilities. Both examples of the dramatic improvement we see when sea-level caliber local leaders step into operations. With that, we'll open it up for questions. Michelle, can you please instruct the audience on the Q&A procedure? Thank you. If you'd like to ask a question, please press star 1. If your question has been answered and you'd like to remove yourself from the queue, please press star 11 again.

Brent J. Guerisoli: This receptor is developed meaningful community relationships revenue has increased 14, 8% and EBITDA has increased 58, 8% each over the prior year quarter.

Brent J. Guerisoli: <unk> receptor as a key component of our Wisconsin care continuum, where we also operate 21 senior living facilities.

Brent J. Guerisoli: These.

Brent J. Guerisoli: Are both examples of the dramatic improvement, we see when fee level caliber local leaders stepped into operations.

Brent J. Guerisoli: With that we'll open it up for questions. Michelle can you. Please instruct the audience on the Q&A procedure.

Michelle: Thank you do you like to ask a question. Please press star one.

Michelle: Your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Benjamin Hendrix: Our first question comes from Ben Hendrix with RBC Capital Markets. Your line is open. Great, thank you very much. Congratulations on the quarter. Question on follow-up on your clinical leadership and your CEO programs. Just wanted to kind of see what that pipeline, the timing of the graduating classes, and given the given the fragmented nature of these markets. Is that the biggest gating item to development? And how can we see that kind of progress in the two segments? Yeah, a great question, Ben.

Michelle: Our first question comes from Ben Hendrix, with RBC capital markets. Your line is open.

Speaker Change: Great. Thank you very much and congratulations on the quarter.

Benjamin Hendrix: A question on just to follow up on your clinical leadership and your CEO programs. So just wanted to kind of see what that pipeline and the timing of the of the graduating classes are and given the given the <unk>.

Benjamin Hendrix: Fragmented nature of these markets is that the biggest gating item to development.

Benjamin Hendrix: How can we see that kind of progressing in the two segments.

Speaker Change: Yes, great Great question Ben.

Brent J. Guerisoli: For the most part these are ongoing programs that are going throughout the year.

Brent J. Guerisoli: The cohorts related to the clinical program, it's more on a quarterly cycle.

Brent J. Guerisoli: And we.

Brent J. Guerisoli: <unk> CEO development program is a little bit quicker on the cycle.

Brent J. Guerisoli: We are going to grow as we bring in great, talented leaders. The other thing that's really important to emphasize here, and we've talked about it for a long time, is that we are a clinical business. And the most important thing we can do, in addition to bringing in incredible operating leaders, is to partner them with high-caliber clinical leaders that understand how to build a business and also develop other clinical leaders. And so what's exciting to see is that as we're developing our clinical leaders in a more effective way, we're seeing improved clinical results, and I think those financial results just continue to follow.

Brent J. Guerisoli: We are going to grow as we bring in great talented leaders. The other thing thats really important to emphasize here.

Brent J. Guerisoli: And we've talked about it for a long time, we are a clinical business and the most important thing we can do.

Brent J. Guerisoli: In addition to bringing an incredible operating leaders is to partner them with high caliber clinical leaders that understand how to build the business and also develop other clinical leaders and so what's exciting to see is as we as we're developing our clinical leaders and a more effective way, we're seeing improved clinical result, and I think.

Brent J. Guerisoli: Those financial results just continue to follow.

Brent J. Guerisoli: Great, thank you. And then to follow up on your real estate strategy, can you remind us what percentage of the real estate you operate that is owned by Standard Bearer? And are there any... purchase options on the real estate that kind of stayed with Standard Bear when you spun off from Enzyme? Thanks.

Brent J. Guerisoli: <unk> options on the real estate that that kind of stayed with standard bear when you spun off from enzyme. Thanks.

Speaker Change: Yes, so our real estate strategy really revolves around a couple of things been and you highlighted a couple of our key partnerships.

Brent J. Guerisoli: A majority of our real estate is owned by standard bearer and came with US starting to spend we don't have purchase options on those properties.

Brent J. Guerisoli: Is it to partner with Standard Bearer? Is it to partner with another community partner who we've worked closely to develop a relationship with, and then kind of attack that in the way that makes the most sense for our balance sheet and for our operational progress? And so that's what you saw this quarter and then in the after acquired. The key here is that we did the two real estate transactions using our balance sheet, and then we acquired a long-term lease with a landlord that we already had a favorable relationship with. I'm so excited about Standard Bear and the progress that they're making, and the relationship we continue to have with Enzyme and with Standard Bear.

Brent J. Guerisoli: And then.

Brent J. Guerisoli: The attack that in a way that makes the most sense for our balance sheet and for our operational progress and so that's what you saw this quarter and then in the after acquired.

Brent J. Guerisoli: Each year as we did the two real estate transactions using our balance sheet and then we acquired a long term lease with the landlord that we already had a favorable relationship with us. So excited about standard bearer in the progress that they're making a relationship. We have continue to have with enzyme analyst standard-bearer also we're excited to be kind of tapping. This.

Brent J. Guerisoli: Also, we're excited to be kind of tapping this new opportunity for value creation through using our balance sheet for real estate acquisition. Thank you very much, guys. Thanks, Ben.

Brent J. Guerisoli: New opportunity for value creation through using our balance sheet for real estate acquisition.

Speaker Change: Thank you very much guys.

Speaker Change: Thanks Ben.

Scott J. Fidel: Thank you. Our next question comes from Scott Fidel with Stevens. Your line is open. Okay, thanks. Hi, everyone.

Brent J. Guerisoli: Thank you. Our next question comes from Scott Fidel with Stephens. Your line is open.

Scott J. Fidel: First question, just wanted to get your feedback on how the 1Q results came in relative to your expectations. Results definitely came in above our forecast and consensus. At the same time, you maintained guidance, so just curious about sort of how the 1Q results came in versus plan and then sort of what your triggers would be to look to potentially raise guidance if, you know, these trends continue. Yeah, thanks for the question.

Scott J. Fidel: Okay. Thanks, Tom Hi, everyone first question just wanted to get.

Scott J. Fidel: Your feedback on how the <unk> results came in relative to your expectations.

Scott J. Fidel: Our results definitely came in above our forecast and consensus.

Scott J. Fidel: At the same time, you've maintained guidance. So just curious on sort of how the <unk> results came in versus plan and then sort of what your target would be.

Speaker Change: <unk> actually raised guidance that Bob these trends continue.

Brent J. Guerisoli: I think we're very encouraged by what we saw in Q1. This was certainly a very strong quarter for us. And it really puts us on pace for the top end of our guidance at this point. And, you know, what I would say as well is that we anticipate that the momentum that we've seen in Q1 will continue throughout the end of the year. And we're confident in that. But, also, at the same time, we don't want to get too far ahead of ourselves.

Speaker Change: Yes. Thank.

Speaker Change: Thank you for the question I think.

Brent J. Guerisoli: We're very encouraged by what we've seen in Q1. This was certainly a very strong quarter for us.

Brent J. Guerisoli: And it really puts us on pace.

Brent J. Guerisoli: For the top end of our guidance at this point and what I would say as well we anticipate that the momentum that we've seen in Q1 will continue throughout the end of the year.

Brent J. Guerisoli: And we're confident in that but we also at the same time, we don't want to get too far ahead of ourselves.

Scott J. Fidel: And certainly fair to remain prudent, but helpful to sort of get the visibility on sort of where you think about the outlook within the range being towards the higher end at this point after the first quarter. Second question, just wanted to get sort of some visibility into your thinking on sort of SL trends from here over the balance of the year, you know, knowing that you were able to achieve continued solid rate growth and then had some increase in occupancy. How would you see occupancy trending over the course of the year from here?

Speaker Change: Okay understood and certainly paradigm remained prudent but helpful. Ted sorry to get the visibility on sort of where you think about.

Scott J. Fidel: The outlook within the range being towards the higher end at this point after the first quarter.

Scott J. Fidel: Second question just.

Scott J. Fidel: Wanted to get some visibility answer youre thinking on sort of XL trends from here over the balance of the year.

Scott J. Fidel: No that new sort.

Scott J. Fidel: We're able to achieve continued solid rate growth and then had some increase in occupancy.

Scott J. Fidel: How would you see occupancy trending over the course of the year from here and then remind us on your your rate renewals.

Scott J. Fidel: And then remind us about your rate renewals, sort of the tempo of that, in terms of, you know, the percentage of your rooms that were renewed as of the beginning of the year as compared to over the course of the year. Yeah, there's certainly some seasonality that we felt in our occupancy numbers in Q1. And that's been pretty consistent. The end of the year, the beginning of the end, you know, with the holidays and the end and the beginning of the new year, there tends to be a little bit of a downturn in our occupancy. So we saw more or less flat performance there.

Scott J. Fidel: Tempo of that in terms of Bob.

Scott J. Fidel: The percentage of.

Scott J. Fidel: Your room.

Scott J. Fidel: Were renewed.

Scott J. Fidel: As of the beginning of the year as compared to over the course of the year.

Speaker Change: Yes, there is certainly some.

Scott J. Fidel: Seasonality that we felt in.

Scott J. Fidel: Our occupancy numbers in Q1 and.

Scott J. Fidel: That's been pretty consistent at the end of the year at the beginning of the end of the holidays and the beginning of the new year, there tends to be a little bit of a downturn in our occupancy. So we saw more or less flat performance there what's.

John J. Gochnour: What's encouraging, though, and what we've generally seen is increased occupancy that steps up throughout the rest of the year. And so we kind of, that's what we see, and we're expecting to see throughout the end of the year in that regard. Scott, remind me, what was your second question?

John J. Gochnour: What's encouraging though and what we've generally seen is increased occupancy.

Scott: Up throughout the rest of the year and so we've kind of that's what we see and we're expecting to see throughout the end of the year.

John J. Gochnour: In that regard and Scott remind me what was your second question.

Scott J. Fidel: Yeah, we're just on sort of the tempo of the rate renewals on the XL side over the course of the year. Yeah, so we don't necessarily have rate renewals that are going to affect us across the board all at the same time. That being said, we anticipate increasing rates across the board at different times at each of the locations. And this is part of the function of the local leadership teams as they look at the market, the communities, and the pressures and whatnot. They're making appropriate adjustments throughout the year. The other thing that's really important to remember is that there are sort of two elements to this.

Scott: Yes, Brian just on sort of the tempo of the rate renewals on the sell side over the course of the year.

Scott J. Fidel: Yes, so we don't necessarily have rate renewals that go into effect across the board all at the same time that being said, we anticipate increasing rates across the board at different times at each of the locations and this is part of the function of the local leadership teams as they look at the market the communities and the pressures and whatnot.

Scott J. Fidel: Theyre, making appropriate adjustments throughout the year. The other thing that's really important to remember theres sort of two elements to this one is the room and board rate increases and then the second is on what we call. Our <unk> charges are the actual carriers that were providing.

John J. Gochnour: One is the room and board rate increases. And then the second is on what we call our care charges or the actual care that we're providing. And so what we're doing there is really focusing on making sure that we're charging for the services that we're providing, ensuring that we're, you know, putting the residents at the appropriate clinical levels, and then working with them really on a monthly or at least on a quarterly basis to address those needs and appropriately adjust the rates. So, we were encouraged by strong rate growth, as we talked about, and we would anticipate that growth to continue Okay, and then I just had one more question.

John J. Gochnour: And so what we're doing there is it really focusing on making sure that we're charging for the services that we're providing and ensuring that we are.

John J. Gochnour: We were encouraged by strong rate growth as we talked about and we would anticipate that growth to continue throughout the year.

Speaker Change: Okay, and then just I had one more question.

Scott J. Fidel: We're able to provide us with an update on how your wage inflation trends progressed in the first quarter across the three business lines. I think that you did show traction sequentially and sort of lowering the rate of increase across each of the three business lines, but would be helpful. If you were able to share some mark some figures with.

Scott J. Fidel: Yes.

Speaker Change: Yes, Scott we continue to see some significant wage pressure and I think youre seeing that.

Speaker Change: Translating to about a 5% increase in both service lines.

Scott: And overall wage inflation pressure.

Speaker Change: I think in the first quarter, we actually saw a little bit of a tick back in the wrong direction, which was was disappointing right. We continue to hope that we'll see.

John J. Gochnour: We continue to hope that we'll see more and more normalization back to wage inflation that sort of corresponds with the changes in reimbursement that we're receiving. But that's not the case yet. I think what we're seeing is there are some positive trends, and I think those are manifesting themselves as we're able to, and we've seen improvement in our turnover, we've seen improvement in our employee engagement scores, and what that's driving is the ability to manage more effectively.

John J. Gochnour: More and more normalization.

John J. Gochnour: Back to wage inflation thats sort of corresponds with the changes in reimbursement that we're receiving that's not the case yet I think what we're seeing is there are some positive trends and I think those are manifesting themselves as we are able to.

John J. Gochnour: And we've seen improvement in our turnover, we've seen improvement in our employee engagement scores and what that's driving is the ability to manage more effectively.

John J. Gochnour: And so you're seeing improvement on the margin side, in part because we're able to manage that labor even in spite of the inflation and the cost pressure that we're experiencing in a more effective manner. And so that's kind of what I would say is just that it's still 5% in both segments on a year over year basis. I think it ticked up from 0.9% in Q4 to 1.2% this year, but we're still looking at that 5% year over year, which is still significant and outside of our long-term expectations.

John J. Gochnour: So youre seeing improvement on the margin side in part because we're able to manage that labor even in spite of the <unk>.

John J. Gochnour: Inflation in the cost pressure that we're experiencing.

John J. Gochnour: In a more effective manner and so that's kind of what I would say is just it's still 5% in both segments.

John J. Gochnour: On a year over year basis, I think it ticked up from 9% in Q4 to one 2% in this year, but we're still looking at that 5% year over year, which is still significant and outside of our long term expectations.

Scott J. Fidel: Okay, I understood that. And then just within HH&H, is that pretty consistent across home health and hospice in terms of those 5% trends? Yeah, and we continue to look at that segment combined because so many of our operations operate as both a home health and a hospice provider. So while we bifurcate the data in some cases on the labor inflation side, it makes sense to keep it combined.

Speaker Change: Okay understood and then just within the Hh and agents that pretty consistent across home health and hospice in terms of.

Scott J. Fidel: Those are the 5% rise.

John J. Gochnour: Okay, got it. All right. Thank you. Thank you. I'm showing no further questions. I'd like to turn the call back over to Brent Guerisoli for closing remarks. Thank you, Michelle, and thank you, everyone, for joining us today. Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone have a great day.

Speaker Change: Okay got it alright, thank you.

John J. Gochnour: Yes.

Brent J. Guerisoli: Thank you I'm showing no further questions I'd like to turn the call back over to Brent Gareth Sally for closing remarks.

Brent J. Guerisoli: Thank you Michelle and thank you everyone for joining us today.

Brent J. Guerisoli: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.

Q1 2024 The Pennant Group Inc Earnings Call

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