PNTG - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to The Pennant Group Q2 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this call maybe recorded. I'd now turn the conference to your host, Mr. Derek Bunker, Pennant's Chief Executive Officer [Sic] [Chief Investment Officer]. Sir, you may begin.

Derek Bunker

Valerie. you, Thank thank and joining today. us Welcome you everyone, for

have our John CEO; Here our with Freeman, Walker, I today and me Jen Danny our COO. Gochnour, CFO

Mountain want reason. update future to by housekeeping earnings other Before based Also for a publicly or for call of of new been these our complete We We reliance available to will our Friday, result laws, forward-looking securities statements and cause are implied federal any management's circumstances of Pennant call. changes on site not and on beliefs made risks on section expressed available events, required that yesterday. revise our a remind These at we XXXX. impact materially I Relations and from could to be we not anyone encouraged that arise our undue today is statements changing or and those not statements our few call. Listeners assumptions business which expectations, filings current also Investor as until listening as in undertake replay about review today's all differ will where uncertainties our more statements a begin, place This SEC or and results announcement made subject affiliates a Except on discussion be of filed operate. could that be release any to actual forward-looking on to today, environment the factors are information, any results. should as are its do X:XX press and XX, Web this of on forward-looking that our to or the and call XXXX have may August www.pennantgroup.com. XX-Q updated XX, have replay of are subsequent this PM matters. statements September site Web today's statements A to

revenues. our a risk direct Pennant independent provide legal, of through the collectively Certain and human subsidiaries. subsidiaries, company our subsidiaries. In Group, to consolidated the addition, Pennant, The resources, information Center, employees such relationships with is words as The and Group, subsidiaries other no contractual Inc., wholly-owned Service The Inc., we, payroll, accounting to holding with and or operating operating assets, company, us management other to technology, refer services Pennant its referred

that reports. to our and operated in exclusion over and is or be and turn Danny the the XX-Q. be With upon The of to their Pennant well employees our Group. that of All results, subsidiaries press of that they I'll metrics. more operating revenue used are yesterday's its by we can complete nor of A of company call use operating together companies the are Service management, our these our business, to and in the the non-GAAP and non-GAAP wholly-owned own by with but GAAP measures provide GAAP understanding release consolidated GAAP Walker, construed terms not available is available reporting our assets activities Danny? assets, Group, subsidiaries with to CEO. us, relied direct herein it our that, are employees References operated assets. viewed we, not reconciliation have today we or the supplement as independent meant Pennant the as Center separate and meaning When imply terms believe a GAAP has our should that Also similar to Inc., the should any as

Danny Walker

quarter to XXXX Pennant's you second joining for today discuss Thank Derek. Thank you, Good morning, results. everyone. us

witnessed as this acts work these referred team industry and with the clinical heroes countless for folks of I'm leaders I here. members. leadership inspired often our deeply and achieved saying local our in We both to quarter by segments. healthcare we've am We heroes the of the and are see pleased each you throughout results service grateful financial one and signs

feel little They heroes they these a and trait, like because real have actual risks facing and people. our actual They hopes that statement organization. in have I for care Sometimes very they're is families. to continue dreams, as are those

quarter-over-quarter. will the of grateful in earnings adjusted We we raising of yesterday but remainder our include are was to announced point benefit with are EBITDA funds, them strong so nearly quarter And a forward. that one identifiable. any the the the nor year. they not as encourage sequestration more release, our out very Overall, Jen they clearly of in detail, and modest increasing press financial of Act results for do guidance not our want do holiday a I each them amount we our include expenses for this earnings and were XX% adjusted continue COVID-related as annual discuss results that CARES

last have we experienced COVID-related of months, million reimbursement change health system home navigated since through significant that the transitions. pandemic, successfully start the of a estimate we In unprecedented we potential have quarter. spin-related addition, In the six the end revenue pandemic of $X.X and the continued an

drive top of to stakeholders local of our a for segments strong Our and number strong exemplify bottom-line value the we these achieved on face measures. clinical ability our of our segment, Health results, serve. both many and resilience communities financial while leadership results in the of long-term and we challenges Hospice In in benefit Home our and improving the the model

average at the Hospice and quarter. grew year June census Our uninterruptedly stands above throughout quarter the prior daily as of XX.X% XX,

Home in by XX, March Home geographies despite end total the through was our in in cases point and elective the continued quarter, census of primarily low many COVID the an overall serve. the stay V-shaped delay improvement Our in number of Home XX pre-COVID the driven has point. to our mid-May, high from of that X.X% procedures. mandates Health a we home Since grow grew increase census our From resulting pattern XX.X% volumes at Health Health experienced June

PPE leaders of prior $XX.X daily the year increase increased and while tracking XX.X% quality our disciplined costs segment X programs our they clinical continue quarter, care drove the all outcomes growth, to our ensuring confront Simultaneously, While number over local pandemic. Home to simultaneously the improve and availability testing an X.X to mechanisms The and frontline establishing the EBITDA a with a of measures deploying for of adequate number areas. staff million, over rating Health prior leading of in quarter. agencies census managed manner, or CMS XX% special star in of year

continue advantage of decentralized and results with highlight needs tremendous to continues can rate quality with to service rehospitalization the These Our to decline our improve. support precision. respond that leadership community center market-by-market various trends Hospice dynamically

progress of our and clinicians during quarter. adjustments are our of population. PDGM, navigating the Though We far are preparation, about also ahead the patient have the we believe so based it's long-term pleased conclusions PDGM and draw operators made current to effects behavioral too with expectations early our results upon

increasingly ability the to confident thrive new in our in We adapt reimbursement and are environment.

our and while second step Turning to forward business, in development. cultural COVID-related another represented quarter our Senior clinical Living obstacles, the strong long-term facing

senior stood additional living our we X.X% living yesterday, pandemic, senior cases six our COVID-XX midst total the communities. XX the occupancy across declined were of the declined during active As XX residents with of an of quarter Despite serving In and occupied COVID-related these in excluding basis cases as and declines, states increased XX last still points concentrated. we revenue in increased months. X.X% communities where are since XX occupancy quarter-over-quarter, the acquired unit our X% higher per the

in care prioritize local quarter is control, our our for the adjusted living and a as operating million and leaders Senior our build years healthcare but delivery that over long-held and nature of model right that for faced strength of there important when our addition in varied an model wellness us of an market-to-market. and pandemic pandemic's starting to a a our that Hospice experiencing now quality business our in adjusted effectively thesis view remind for quality we may headwinds industry providing enormous given growing local take increased operating from ago. infection XX.X% community Health EBITDAR inherent is life complex to our the position care XX saw our to EBITDA that conditions, Living investment the the living leaders address and our segment provides care the What and EBITDAR, to cyclical the There amenities. Senior Living $XX.X tools is is to a upside XX.X% to about well our in also the and everyone time, adapted anticipate demand living communities setting. like high to I'd programs, We prior programs The continue over increasingly Home the $X.X period operating senior setting prices of year time. back is step operators we're part entry significant life to of We million confirming akin robust business senior senior community impact to clinical below-market for our need for including business. spin-adjusted our increased value which local

in disciplined hospice fragmented of off both balance value our discuss and and leadership like true from opportunity for as I'll significant Derek? and of industries. our With business. represents and Living and to disruption. growth to stakeholders we stories highly a home to time Living of our an allocation and consolidator Ensign experience the platform recent within stage in the existing further Hospice can Health strong our cultivation Home in Because long-term by model, business creation sheet, story to opportunistic Derek during value organic our Pennant's of growth the investment compelling activity. comes our pursue our portfolio growth, a early growth Much strong both senior dual-opportunity hand earnings our Senior Our approach continuing a our driving second capital unique Senior entrepreneurial industry health at it simultaneously business similar that, incubated development producing living

Derek Bunker

Danny. Thanks,

executing in During two were Arizona, Utah, our the on the acquisition quarter growth and since, agencies agencies and and health hospice we four through pleased Idaho. strategy disciplined keep home of to second

largely All allowing acquisitions, of those in us to identified local states leverage These markets. these our operators, led agencies transactions strength and opportunities. were in off were our tuck-in market by existing strategic adjacent

best the were practices acquisitions. these on rigorous dozens relative execution to operations With transition our leaders and able partners, of creativity of their of platform local our cluster smoothness, over to developed thanks to support their resource with and

are Pennant within over to We our agencies their to welcome model. family excited cluster-driven the forward and into look growth time these

home make the continue also health progress anticipate closing the early We announced quarter. Health, joint fourth to previously Scripps with venture on we in which

pipeline remains healthy. opportunities acquisition of Our

partners. position part right the for or to opportunities availability As we market cash our shared last offerings, of network quarter, was sourced response move be whether an our improving market quickly to pandemic of revolver and important our cultivated ready off from

with sheet strength beyond balance detail pleased We capital, through hand even transactions year are multiple after it acquisitions. current are of the the access We executing opportunities growth to there many to that, company's With provide Jen? over Jen our more more performance. during and to quarter. the financial I'll and on think for this

Jennifer Freeman

everyone. results Thank three XXXX financial morning, for are in June you, our Detailed ended XX-Q filed XX, press Derek, the yesterday. contained and release good months and

results revenue revenue diluted $X.XX. and months For ended an June quarter we GAAP of of diluted during a of earnings difficult over quarter. field $X.XX year per of results represents $XX million, of XXX% $XX.X to increase leaders of earnings over spin-adjusted the adjusted strong operational share adjusted We increase XXXX, second share $X.XX. diluted share XXXX of share earnings three XX, per or the $X.XX the XX.X% very consistent and environment. per operating execution our of prior had reported due per million GAAP Non-GAAP earnings total

disciplined of key also We as a general million on of Other approximately include, August management of administrative XX, from metrics cash benefited costs. $X hand and XXXX.

and quarter, of XX, generated XX, of August A Medicare $XX full ratio credit $XX.X of second operations June cash the of million excluding of the advanced adjusted net lease-adjusted from X.XXx availability line as as XXXX, debt payment. million EBITDAR $XX.X During XXXX. our million of

any which did for approximately After be the second we quarter, Relief CARES to in it we would not did so we reject of return interest and Provider Relief Act best the the million received which do apply. impact in During include money. Fund the not careful organization determined our analysis, of quarter, during we Fund, results Provider these $XX the funds,

balance subject new received approximately are pay applied payments advanced XX, advanced in the we to which recoupment and to August outstanding used XXXX. also for revolver. Medicare automatic $XX These claims to We our beginning million through down on offset payments

of due half the XXXX. CARES to at program the of are Under half tax these XXXX of $X.X funds approximately deferral of We XXXX. portion employer for also CARES payroll of estimated intend at the and Act end the to taxes delay payroll Act, utilize end the million payment due of

a adjusted million established positive Medicare from note the earnings net sequestration the the per of our that during of from Finally, of we XXXX. Please the the the suspension revenue $X.X impact holiday temporary share saw quarter, through non-GAAP results by in million payment of the as CARES X% GAAP sequestration exclude end additional costs. against We benefit the $X COVID-XX-related impact holiday of estimate sequestration a Act.

our diluted XX.X% As we range to the earnings affirming our $XXX are $X.XX share is which over rate of and the of shares of non-recurring related XXXX per to our we previous annual announced COVID-related million. a based compensation. upon stock-based average million annual costs, an adjusted of the acquisitions $X.XX, approximately outstanding of acquisition-related press to we services earnings effective range The guidance And midpoint inclusion the represents in midpoint tax are operations, XX.X%, a start-up guidance announced year-to-date transition of release exclusion yesterday, of increase $XXX redundant expenses sequestration revenue guidance. or our raising to cost-related common million, to weighted and spin-off cost, guidance revenue and of $XX

changing we be While gives have data available the meet COVID-XX our about enable ability environments, strategy guidance. through depth length of operating successful revised We effects, growth the the point our to us believe included. pandemic operating unknowns this we us at and our and in model confidence to future remain

our new And I'll In addition the needs. adjust presents turn to measures Danny. we and we've back the operators mitigate call pandemic to with resilient revenue to the expenses, are that for Danny? taken believe that, over to impact opportunity local to responsive

Danny Walker

Thank you, Jen.

to are the it open exemplifying of organization, although our our share quarter few had these, it's today for up each values. I best examples custom Q&A, to we like individually more of I'd the like local it across there each core two of Before a our share them. leaders to wish I place many of time

prior Health newly and and Home [Elise Clinical by in financial [ph] and Phoenix, in Hospice going announced produced truly Carpenter] Mitch Emblem the $XXX,XXX, First, Their North outcomes, second Service, quarter clinical quarter prior above led revenue the needs grew and healthcare their local in over partners XX% meet XX% to over of Kristen Directors & the year Allston CEO, has and of EBIT in increase the the community. Arizona, quarter. beyond nearly an while year was remarkable

As Directors Executive to Emblem each internal continued [ph], community needs the team elevated expand [ph] geographically Kathy and to meet grow, local Service, Director, and trusted our [Shawn better Clinical Blue] of Prieto the Stolberg] of local and partners. partners [Sally

pandemic, the Ensign-Pennant the they and creative as and their when driving solutions a in community needs local local Emblem partners. effective the during While established the leadership results, especially these complex the itself implemented of initial post-acute to of of impressive resource in was trusted strong acute partners the has to months continuum. network evident Their care quickly

has over as Cranberry has helped growth, Court caring XXXX, communities' a led team and to they exemplified Assisted Crystal Rapids, top team thanks Wisconsin, as Executive families reputation built of Since and to Director, as over life-changing service preferred Brie shared collective over employer XX% choice. Crystal their Court to second ownership to a it lead Stover Director, taking of and Pendzinski Director, Wisconsin and Since a ago, thanks quarter to Next, and the results. Cranberry to as in improved little providing the community has success dedication year Executive increased disciplined Wellness of the and partner have team employees. Living the financial and steady grown bottom-line EBITDAR a XX%, occupancy residents, revenue culture a

and to becoming again they a the in cluster at centers leaders like support to Wisconsin, for achieve market Crystal Brie, our living Northern and able diligently and partners addition through build for In more local success. the service thanks our as thousands in Court actively express is are helping share and to practices. in each culture solution in want admiration sister senior best to their day. Emblem communities premier results and We drive and examples working and many lives staff of field it that to like It our and the we care community, Cranberry

We Q&A will portion now to the of call. turn our

for you well. Derek instruct questions John about Valerie, who mentioned with our COO, Q&A As as is earlier, available can we're please audience the procedure? on the here operations Gochnour,

Operator

Dupslaff question [Operator you. comes Thank Stephens. with Our from Scott first Instructions]

line open. Your is

Scott Dupslaff

about to progression back is out a do guidance the interested XQ First interested the you quarter, segment. the of fact to think to were relative given in the look terms to is from And to want challenging ramp whether anything obviously half will the business of think of second terms for question, in the XQ call those just think more just the the you year you in of there earnings in of which that updated in senior or able relatively similar? living a EBITDAR grow you as quarter well, if

Just how of in given growth in ticked know year-over-year interested is updated but from back occupancy you COVID? that you're just in thinking the headwinds achieve down senior bit, again of the living year? terms earnings area the growth a in half about seeing I can the guidance, earnings

Danny Walker

quickly half Jen make equipped flows that of the leaders as to Thanks, Generally year, country, responded around note and But Yes. better look the in we we're the to move give you that handle better it. systems types the orders. well operationally as and are second speaking, onset local to adjustments this different equipped I'll and counties continues communities as important of serving this. to our we and and have detail. Obviously, Scott. of the we're ebbs the it's issue COVID at clinically now to

that's second fully the our at to we're circulate year. in expect to We the as So of the and half staff make our ability look keep connected. and general and we view to more affect adjustments, us, continue safe and appropriate confident the the virus residents families but

So in. have the specifics give we on some built Jen you assumptions can

Jennifer Freeman

Scott. Hi,

of doing So census home we're that our at a end looking on on year. modest high-end the health the our we're excluding acquisitions the of the increase at guidance

for in to increase an continuing we're acquisitions in and putting coming census fourth plus And So quarter. of acquisitions in and expect July our we an that the hospice, around in have we third are increasing August. throughout X%

On around basically the we considering are service are decline the a little the flat cost and of G&A census for bit of mostly the high-end, of throughout senior And average the an cost on a living a of side, we low-end, high-end the at in cost living around assuming census. a X% service of In same service, and revenue. then cost the percentage rest increase senior on of the same year. in percentage of as low-end our

the don't that things assuming built is sort to through our we recover. fully able of and of that the big that seasonality are it effectively normal surge. assuming contained also So We've respond we're rest resurgence is that year. there to mostly the We're not a in

Danny Walker

the that acquisition have one venture, contemplated there joint the spoken about And in the Scripps we past. is which is

Scott Dupslaff

to I across know I a each you that That's be the had of it business strong Got pipeline And it. lot M&A on detail. the helpful segments. just that a follow-up and of appears Thanks. highlighted

little you particular in the could as XXXX, Just just towards detail home any half it's you give of living? if do think in back about more bias segments hospice a near-term or terms of see we of whether whether that year end in senior where in of see you the the and more health us opportunity, terms a

Danny Walker

I'll some here. do we've then and deals chime we Yes. kind obviously, to that. of closed give we continued thoughts have But have Derek in seen, and

pressures the to have experienced combination health COVID, PDGM. and health and hospice businesses We disruptive census They've environment do home been that. in able of continue with play a space. expect to Pure be to pretty home the

But I'm Some and see those to we prop-up on effects we're that disruption presuming some year. that's to more this from of have of senior flowing those there the of later space. become available. some to out a related pipeline first little maybe we that. back both. increasing acquisition money expect even will we We pulled from There's maybe be think Derek, half you excited federal year, comment the it's But in those in continue cycle. of the living see can that next available opportunities of the about. the the been a

Derek Bunker

Yes.

that it well. pretty covers I think

stand. our growth way We stand are we disciplined at seen hospice in that of for health, the the and or V-shaped perspective, really balance industry sheet Danny kind strength within choppier strong of or our the been which as COVID-XX from into gradual as home see peek that we impact that and has perspective, which growth kind has with where leadership ball lines across in operations, closed a looked some and we've of seeing our local deals home as relative we've well up crystal well far focused prolonged little And kind sort our business kind the where we've those of always company senior been some so. a of impact mentioned, still the to leadership market of has a we kind in a from and living on great And saw the next XX health as we're so of that some as market we development what mentioned. the months

hospice and want but keeping what about explore look continue very lot opportunistic kind see deals. to a we're looking opportunities living continue and of further. where side still we We're of senior we to but the home to out, for particularly we'll like we stand, on picky we So health just

Scott Dupslaff

last me. then, for And Understood. one

positive. looked have the the working so on we're home as Just updates rate which -- health quite hospice models for we industry, our for if XXXX, and interested

updates if for health the home interested XXXX? be of what your rate Pennant for and you hospice specific have Just would estimate

Jennifer Freeman

again. is Scott, Yes. Jen this

modeling home our hospice and For health about on home it's increase X.X% X.X%. looking a health the proposal, on we're at about

Operator

you. Thank

of Our comes next from Markets. Morgan Capital RBC Frank question

Your open. line is

Frank Morgan

guess, I clarification. is follow-up want question. Scott's a get matter just a first to on housekeeping to I

acquisition, recent expectation there the year acquisitions additional is of putting that an only for yet of terms you're it's announced? these or In for your rest in deals that guidance are the

Jennifer Freeman

No, the been it's only acquisitions announced, that Frank. have

Frank Morgan

great. Okay,

rates coding. Okay. It a the mix how would you a for looks pretty in like think largely on your that Is hospice and or attributed assess early on think see that in healthcare good the the healthcare of side you your are I success part that upside of I where you rate and patient home in done process? look and But as home additional side do to PDGM? still some result perspective of you your from

John Gochnour

able -- resulted agencies changes to clusters were and and like One these within efforts efforts and two sure and very relatively trained we've appreciate and question. small adapting accurately. in size, the at it's described, look our try of we're sample a we But we're so project I where and feel to Yes. out, what and at think about Frank, And capture are we is good as that's We everything I think things. code kind seeing seen and our local we're what operations from of you've staff at. our our -- optimistic making we PDGM preparation, really to as far. the

patient folks different a think been you're of seeing. maybe of bit which the that that little has than our is side mix, the I other other some

the as structure positive are community maybe different. wound a think the patient structure PDGM gone Our care, is that based the needs. we volumes seeing reimbursed were a a strategy less about to under care resource under community reimbursement mix And PDGM are from that's the like better the bit how things our and of as always little that reimbursed some we've on structure. and PPS and to we're neurological reward And care marketing that be

continue percentage sides. make on There think as co-morbidities. to we our capture forward, that make hard continue our we're go Both sure achieving we opportunity the drive is clinical episode, per is accurately our side to we while low, cost sure in. both per capturing working LUPA acuity as As outcomes. that more and also as well visit opportunity there still We're visits we on stays down as to focus extraordinary cost

And the like next project continuing similar sample so the what And mix to for we'll on year I focused be is it's the that's size. at that's results. a said and that achieve small we beginning,

revenue and so about very good both we projections. it's cost with in on still and is very And feel there opportunity think But line we're at our we where the side the side.

Danny Walker

structure in from Yes. rebalancing kind never which therapy of of was were population that. That to of structure the away We John and chasing. of PDGM, under add terms cared the utilization, I'll a this differently the reimbursement we moves just the part Gochnour. PPS Danny is the positioned And were we little high patient And that for.

of And of so favorable I think we're the that. seeing side kind

need remainder good like throughout more kind I work process. about refine on the volume meaningful think we But whole we doing the just we'll the really issues of on feel to are we really that continuing still of work where to and year, be we're spin-related at. the overall,

Frank Morgan

not Thanks this the IL? And color occupancy Thanks. financing you. you much. think deals. mean, seeing very your lower Got benefit our which other say you one But we're Any have how at do about price Maybe an a senior in the is the and then flow difference you're on costs? just point point that acquisition I much that housing occupancy breakeven? around having there just obviously, my question that. I'm trends entry any is you covering of number cash between curious, on the discernible was AL just side,

Danny Walker

question. great Yes,

in so expenditures additional question the It's invested we that and don't then line. condition when particular for red us. like it history somewhere mid-to-low pull operation XX% occupancy even range first would in, what's and depending I honestly. capital irrelevant in. we've and about was on whatever its Estimating put of kind the The the out it consider low our that We at it

really a all the disciplined for really and then of each dollars have that to go set ample leadership those never But on experience our approach there are families tracking from employees we're communities about their us And right room having. there. targets to that and getting front is of into We these there. we and residents should the and if model worry that things the really have

are well point Jen us model at more. that where some probably the we're right suppose below out I could those Derek so at And things into but that it's future concern and now. the

I with there. at and think themselves takeaway continue the we is success. then, to in put COVID room clinical out main still now of right there occupancy, keep families for long-term a to of of their communicate drive sitting so to and resolve obviously, teams ample space of have to prowess safe upside high-XXs everyone terms in continue to really and the And And us for understand we things see and our as factors a variety how work lot

has healthcare choice voluntary is, your Those affected. they part are a families. decisions the for They're than a second of more choice. the IL of been directly more question lifestyle census The are more

top but so, our small the a And basis have head that off not that higher is so I count on my IL have we it's something seen percentage unit of honestly.

issues thesis on and senior there living is what continue matters to drive more primarily decisions. that's there assisted the based our move-ins is see care that true memory we housing and but side, on that pressure caregiver supportive space and placement healthcare exactly So in is living, the IL

So helps. hopefully that

Operator

over turn questions Thank Instructions] the Walker no to you. Danny I'm [Operator this time. I'd closing any the back at CEO, remarks. for showing further to call like

Danny Walker

for been how commitment for principled like hallmark again plan risks We heroes, and and Valerie. would gratitude in and full these We are this years the for for deep are facing all their and men that that are women to really to exist our service ages, the operated that of has sacrifices real are of heroic Thank care real just the the gender, operate people. has and express been future. yet appreciation just call but country to are of our hearts others others people quarter them and the the you, exhibited and in all they we've diversity of in they efforts this and race,

to thank you. are you in and Thank those who team our our stakeholders that So us. to believe

Operator

this today's for and conference. gentlemen, does you Thank conclude you. Thank Ladies participating.

disconnect. may a great day. You Have

The Pennant Group, Inc. (PNTG) 12 Aug 202020 Q2 Earnings call transcript