Pennant Group Inc
For the period ended Dec 31, 2024. Filed Feb 27, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 27, 2025
PNTG$36.36-9.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-28.
0001766400-24-000022
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-27.
0001766400-25-000024
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 124 previous paragraphs and 124 current paragraphs.
99 unchanged; 23 reworded; 2 added; 2 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 24 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
On October 2, 2024, the Company closed the public offering (the “Offering”) of 4,025 shares of its common stock, $0.001 par value per share (“common stock”). The net proceeds to the Company from the offering, after underwriting discounts, commissions, and expenses, was approximately $118.1 million. The majority of the proceeds were subsequently used to pay the outstanding balance on our Amended Revolving Credit Facility.
Current report
Our net cash provided by financing activities increased by $48.5 million for the year ended December 31, 2024 when compared to the year ended December 31, 2023 primarily due to an issuance of equity through a secondary offering totaling $118.1 million offset by a net repayment of debt totaling $65.0 million and payments for deferred financing costs of $3.9 million during the year ended December 31, 2024.
Removed paragraphs (2)
Previous report
•redundant or nonrecurring costs associated with the Transition Services Agreement(as defined in Note 3, Transactions with Ensign);
Previous report
Our net cash provided by financing activities decreased by $11.0 million for the year ended December 31, 2023 when compared to the year ended December 31, 2022 primarily due to a decrease in our net borrowings.
Reworded paragraphs (23)
Previous wording
We are a leading provider of high-quality healthcare services to patients and residents of all ages, including the growing senior population, in the United States. We strive to be the provider of choice in the communities we serve through our innovative operating model. We operate in multiple lines of businesses including home health, hospice and senior living services across Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming. As of December 31, 2023, our home health and hospice business provided home health, hospice and home care services from 111 agencies operating across 13 states, and our senior living business operated 51 senior living communities throughout six states.
Current wording
We are a leading provider of high-quality healthcare services to patients and residents of all ages, including the growing senior population, in the United States. We strive to be the provider of choice in the communities we serve through our innovative operating model. We operate in multiple lines of businesses including home health, hospice and senior living services across Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming. We also provide home health and hospice operational support through a management service agreement in Connecticut. As of December 31, 2024, our home health and hospice business provided home health, hospice and home care services from 123 agencies operating across 13 states, and our senior living business operated 57 senior living communities throughout seven states.
Previous wording
Acquisitions. During 2023, we expanded our operations with the addition of three home health agencies, eight hospice agencies, two home care agencies, and two senior living communities. A subsidiary of the Company entered into a separate operations transfer agreement with the prior operator of each acquired operation as part of each transaction.
Current wording
Acquisitions. During 2024, we expanded our operations with the addition of eight home health agencies, three hospice agencies, and six senior living communities. A subsidiary of the Company entered into a separate purchase agreements with the prior operator of each acquired operation as part of each transaction.
Previous wording
We have experienced modest senior living occupancy improvement through the year ended December 31, 2023, as a result of renewed consideration of senior living communities as a home-based care setting as the negative impacts of the global pandemic have subsided. Though we have seen steady improvements in occupancy throughout 2022 and 2023, the highly competitive environment for senior living residents and inflationary factors will continue to impact the rate at which we return our occupancy levels in our senior living communities to pre-pandemic levels.
Current wording
We have experienced stable senior living occupancy through the year ended December 31, 2024. Although we saw steady improvements in occupancy throughout 2023 as a result of renewed consideration of senior living communities as the negative impacts of the global pandemic subsided, and stable occupancy during 2024, the highly competitive environment for senior living residents and inflationary factors will continue to impact our occupancy levels in our senior living communities.
Previous wording
We have two reportable segments: (1) home health and hospice services, which includes our home health, home care and hospice businesses; and (2) senior living services, which includes the operation of assisted living, independent living and memory care communities. Our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), reviews financial information at the operating segment level using segment adjusted EBITDAR from operations. We also report an “all other” category that includes general and administrative expense from our Service Center.
Current wording
We have two reportable segments: (1) home health and hospice services, which includes our home health, hospice, home care, and geriatric primary and palliative care businesses; and (2) senior living services, which includes our assisted living, independent living and memory care services. Our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), reviews financial information at the operating segment level using segment adjusted EBITDAR from operations. We also report an “all other” category that includes general and administrative expense from our Service Center.
Previous wording
•Self-insurance reserves - The valuation methods and assumptions used in estimating costs up to retention amounts to settle open claims of insureds and an estimate of the cost of insured claims up to retention amounts that have been incurred but not reported;
Current wording
•Self-insurance reserves - The Company is self-insured for general and professional liability, workers’ compensation, automobile, and its employee health plans while maintaining stop-loss coverage with third-party insurers to limit its total liability exposure. The valuation methods and assumptions used in estimating costs up to retention amounts to settle open claims of insureds and an estimate of the cost of insured claims up to retention amounts that have been incurred but not reported;
Previous wording
The following table presents certain financial information regarding our reportable segments. General and administrative expenses are not allocated to the reportable segments and are included in “All Other”:
Current wording
The following table presents certain financial information regarding our reportable segments. General and administrative expenses are not allocated to the reportable segments:
Previous wording
Our consolidated revenue increased $71.7 million, or 15.1%, driven by the net organic growth of existing operations across all segments of $58.4 million or 12.3% as well as increased revenue from acquired operations of $13.3 million, or 2.8%, during the year ended December 31, 2023.
Current wording
Our consolidated revenue increased $150.3 million, or 27.6%, driven by the net organic growth of existing operations across all segments of $59.2 million or 10.9% as well as increased revenue from acquired operations of $91.1 million, or 16.7%, during the year ended December 31, 2024.
Previous wording
Home health and hospice revenue increased $52.2 million, or 15.3%. Revenue grew due to an increase in all key performance indicators including an increase in total home health admissions of 7.6%, an increase in Medicare home health admissions of 4.0%, an increase in average Medicare revenue per 60-day completed episode of 0.1%, an increase of 6.3% in total hospice admissions, an increase of 3.9% in hospice Medicare revenue per day, and an increase of 13.5% in hospice average daily census. The improvement in these metrics resulted in net organic revenue growth of $40.8 million for the year ended December 31, 2023. Growth was also driven by the acquisition of 11 home health, home care, and hospice operations, between December 31, 2022 and December 31, 2023, resulting in an increase in revenue of $11.4 million, or 3.3% overall.
Current wording
Home health and hospice revenue increased $125.0 million, or 31.7%. Revenue grew due to an increase in almost all key performance indicators including an increase in total home health admissions of 37.3%, an increase in Medicare home health admissions of 26.9%, an increase in average Medicare revenue per 60-day completed episode of 6.0%, an increase of 25.3% in total hospice admissions, and an increase of 25.4% in hospice average daily census, while Hospice Medicare revenue per day decreased by 1.1%. The improvement in these metrics resulted in net organic revenue growth of $46.4 million for the year ended December 31, 2024. Growth was also driven by the acquisition of eleven home health and hospice operations during the year ended December 31, 2024, and the acquisition of thirteen home health, home care, and hospice operations during the year ended December 31, 2023, resulting in an increase in revenue of $78.6 million, or 19.9% overall.
Previous wording
Senior living revenue increased $19.4 million, or 14.8%, for the year ended December 31, 2023 when compared to the same period in the prior year primarily due to a 12.9% increase in average monthly revenue per occupied unit and a 2.8% increase in occupancy rate between December 31, 2022 and December 31, 2023. Growth in revenue was also driven by the acquisition of two senior living communities, between December 31, 2022 and December 31, 2023, resulting in an increase of $1.9 million, or 1.4% overall.
Current wording
Senior living revenue increased $25.3 million, or 16.8%, for the year ended December 31, 2024 when compared to the same period in the prior year primarily due to a 8.3% increase in average monthly revenue per occupied unit and a 0.3% increase in occupancy rate. Growth in revenue was also driven by the acquisition of six senior living communities during the year ended December 31, 2024, and the acquisition of two senior living communities during the year ended December 31, 2023, resulting in an increase of $12.5 million, or 8.3% overall.
Previous wording
Consolidated cost of services increased $61.5 million, or 16.3%, for the year ended December 31, 2023 when compared to the year ended December 31, 2022. The increase in the amount of cost of services was driven primarily by volume of services provided. Cost of services as a percentage of revenue increased by 80 basis points from 79.6% to 80.4% over the same time period. The increase was driven primarily by increased wages and benefits.
Current wording
Consolidated cost of services increased $120.4 million, or 27.5%, for the year ended December 31, 2024 when compared to the year ended December 31, 2023. The increase in the amount of cost of services was driven primarily by volume of services provided and increased wages and benefits. Cost of services as a percentage of revenue decreased by 10 basis points from 80.4% to 80.3% over the same time period.
Previous wording
Cost of services related to our Home Health and Hospice services segment increased $48.9 million, or 17.3%, primarily due to increased volume of services from the growth in admissions and average daily census. Cost of services as a percentage of revenue for the year ended December 31, 2023 increased by 140 basis points compared to the year ended December 31, 2022 primarily due to increased wages and benefits.
Current wording
Cost of services related to our Home Health and Hospice services segment increased $101.6 million, or 30.6%, primarily due to increased volume of services from the growth in admissions and average daily census as well as increased wages and benefits. Cost of services as a percentage of revenue for the year ended December 31, 2024 decreased by 70 basis points compared to the year ended December 31, 2023 primarily due to increased efficiency in our operations.
Previous wording
Cost of services related to our Senior Living services segment increased $12.6 million, or 13.5%, during the year ended December 31, 2023 in response to higher occupancy and wage rate increases. As a percentage of revenue, costs of service decreased by 90 basis points during the year ended December 31, 2023 when compared to the year ended December 31, 2022 due to cost optimization, as occupancy increases toward approximately 80.0%.
Current wording
Cost of services related to our Senior Living services segment increased $18.7 million, or 17.6%, during the year ended December 31, 2024 in response to higher occupancy, acquisitions and wage rate increases. As a percentage of revenue, costs of service increased by 50 basis points during the year ended December 31, 2024 when compared to the year ended December 31, 2023 primarily due to increased wages and benefits.
Previous wording
Rent—Cost of Services. Rent increased 4.6% from $38.0 million to $39.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily as a result of the newly acquired senior living communities. As a percentage of revenue, rent—cost of services decreased 70 basis points when compared to the year ended December 31, 2022 due to improved senior living performance.
Current wording
Rent—Cost of Services. Rent increased 8.2% from $39.8 million to $43.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily as a result of the newly acquired senior living communities. As a percentage of revenue, rent—cost of services decreased 110 basis points when compared to the year ended December 31, 2023 due to improved overall sales leverage and performance.
Previous wording
General and Administrative Expense. General and administrative expense increased $2.7 million, or 7.9%, from $34.0 million to $36.7 million for the year ended December 31, 2023 when compared to the year ended December 31, 2022. The increase in general and administrative expense was due to an increase of $1.5 million in share-based compensation for the year ended December 31, 2023 when compared to the year ended December 31, 2022.
Current wording
General and Administrative Expense. General and administrative expense increased $13.5 million, or 36.9%, from $36.7 million to $50.2 million for the year ended December 31, 2024 when compared to the year ended December 31, 2023. The increase in general and administrative expense was primarily due to an increase of $12.5 million in wages and benefits for the year ended December 31, 2024 when compared to the year ended December 31, 2023.
Previous wording
Depreciation and Amortization. Depreciation and amortization expense decreased slightly as a percentage of total revenue.
Current wording
Depreciation and Amortization. Depreciation and amortization expense stayed flat as a percentage of total revenue.
Previous wording
Loss on Asset Dispositions and Impairment, Net. Loss on asset dispositions and impairment, net decreased $6.9 million for the year ended December 31, 2023 when compared to the year ended December 31, 2022 due to the transfer of senior living communities to Ensign in 2022.
Current wording
(Gain) loss on Asset Dispositions and Impairment, Net.(Gain) loss on asset dispositions and impairment, net is a gain of $0.7 million for the year ended December 31, 2024 compared to a loss of $0.1 million for the year ended December 31, 2023 primarily due to insurance proceeds related to one of our senior living communities.
Previous wording
Provision for Income Taxes. Our effective tax rate for the year ended December 31, 2023 was 29.0% of earnings before income taxes compared with an effective tax rate of 18.5% for the year ended December 31, 2022. The increase in the effective tax rate is primarily due to a change in nondeductible equity compensation expenses. See Note 14, Income Taxes, to the Consolidated Financial Statements included elsewhere in this report filed on Form 10-K for further discussion.
Current wording
Provision for Income Taxes. Our effective tax rate for the year ended December 31, 2024 was 22.4% of earnings before income taxes compared with an effective tax rate of 29.0% for the year ended December 31, 2023. The decrease in the effective tax rate is primarily due to a change in deductible equity compensation expenses. See Note 14, Income Taxes, to the Consolidated Financial Statements included elsewhere in this report filed on Form 10-K for further discussion.
Previous wording
On June 12, 2023, Pennant entered into the Second Amendment to its existing credit agreement (as amended, the “Credit Agreement”), to replace the LIBOR-based rates in the Credit Agreement with Standard Overnight Financing Rate (“SOFR”) based rates, due to the phase-out of LIBOR as a preferred global reference rate. The Credit Agreement provides for a revolving credit facility with a syndicate of banks with a borrowing capacity of $150.0 million (the “Revolving Credit Facility”). The Revolving Credit Facility is not subject to interim amortization and the Company will not be required to repay any loans under the Revolving Credit Facility prior to maturity in 2026, except that the loans may become due immediately if the Company triggers an event of default under the terms of the Credit Agreement. The Company is permitted to prepay all or any portion of the loans under the Revolving Credit Facility prior to maturity without premium or penalty, subject to reimbursement of any LIBOR breakage costs of the lenders.
Current wording
On July 31, 2024, Pennant amended and restated its existing credit agreement (as amended, the “Amended Credit Agreement”), which provides for an increased revolving credit facility with a syndicate of banks with a borrowing capacity of $250.0 million (the “Amended Revolving Credit Facility”). The Amended Revolving Credit Facility is not subject to interim amortization and the Company will not be required to repay any loans under the Amended Revolving Credit Facility prior to maturity in 2029. The Company is permitted to prepay all or any portion of the loans under the Amended Revolving Credit Facility prior to maturity without premium or penalty, subject to reimbursement of any SOFR breakage costs of the lenders.
Previous wording
The Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its independent operating subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend certain material agreements and pay certain dividends and other restricted payments. Financial covenants require compliance with certain levels of leverage ratios that impact the amount of interest. As of December 31, 2023, we were in compliance with all covenants.
Current wording
The Amended Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its independent operating subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend certain material agreements and pay certain dividends and other restricted payments. Financial covenants require compliance with certain levels of leverage ratios that impact the amount of interest. As of December 31, 2024, the Company was compliant with all such financial covenants.
Previous wording
As of December 31, 2023 we had $6.1 million of cash and $80.8 million of available borrowing capacity on our Revolving Credit Facility.
Current wording
As of December 31, 2024 we had $24.2 million of cash and $245.8 million of available borrowing capacity on our Amended Revolving Credit Facility.
Previous wording
We believe that our existing cash, cash generated through operations, and access to available borrowing capacity under our Credit Agreement, will be sufficient to provide adequate liquidity for the next twelve months for both our operating activities and opportunities for acquisition growth.
Current wording
We believe that our existing cash, cash generated through operations, and access to available borrowing capacity under our Amended Credit Agreement, will be sufficient to provide adequate liquidity for the next twelve months for both our operating activities and opportunities for acquisition growth.
Previous wording
Our net cash flow from operating activities for the year ended December 31, 2023 increased by $24.0 million when compared to the year ended December 31, 2022. The primary drivers of this difference was a $6.7 million increase in net income, a $12.9 million net increase in cash flows from the change in operating assets and liabilities, and an increase of $4.4 million in non-cash expenses.
Current wording
Our net cash flow from operating activities for the year ended December 31, 2024 increased by $6.2 million when compared to the year ended December 31, 2023. The primary drivers of this difference was a $10.4 million increase in net income, offset by a $2.5 million net decrease in cash flows from the change in operating assets and liabilities and a net decrease of $1.7 million in non-cash expenses.
Previous wording
Our net cash used in investing activities for the year ended December 31, 2023 increased by $6.0 million compared to the year ended December 31, 2022, primarily driven by a $11.9 million increase in business acquisitions and other assets, offset by a $6.1 million decrease in purchases of property and equipment during the year ended December 31, 2023 compared to the year ended December 31, 2022.
Current wording
Our net cash used in investing activities for the year ended December 31, 2024 increased by $40.5 million compared to the year ended December 31, 2023, primarily driven by a $40.4 million increase in business acquisitions, asset acquisitions, and escrow deposits during the year ended December 31, 2024 compared to the year ended December 31, 2023.