The Pennant Group, Inc. (PNTG) Q2 2021 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to The Pennant Group Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today Derek Bunker. Please go ahead.

Thank you, Adrian. Welcome everyone and thank you for joining us today. Here with me today I have Danny Walker, our CEO; Brent Guerisoli, our President; and Jen Freeman, our CFO. Before we begin, I have a few housekeeping matters. 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 5:00 PM Mountain Time on Friday September 9, 2021. We want to remind anyone that may be listening to a replay of this call, that all statements are made as of today, August 10, 2021, and these statements have not been, nor will they be updated subsequent to 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. 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. Except as required by federal securities laws, Pennant and its affiliates do not undertake to publicly update or revise any forward-looking statements or changes arise as a result of new information, future events, changing circumstances or for any other reason. In addition, the Pennant 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 through contractual relationships with such subsidiaries. The words Pennant, company, we, our 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. References herein to the consolidated company and its assets and activities as well as the use of the terms we, us and 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, employees or revenue 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 reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and in our 10-Q. With that, I'll turn the call over to Danny Walker, our CEO. Danny?

Thank you, Derek, and welcome everyone to our second quarter 2021 earnings call. Yesterday, we reported our financial results for the second quarter. We are pleased with the progress made financially, clinically and culturally, while acting urgently to accelerate that progress in the second half of the year and position us well for 2022 and beyond. Before I get into more detailed remarks, I want to express gratitude to the many members of our team, employees, our shareholders, stakeholders, partners in the community as we continue to navigate the challenges that are presented by this global pandemic. We're making good progress and there's a lot more improvement to come. Our Home Health and Hospice segment continues to produce record results, driven by strong adherence to our operating principles. We're pleased to report strong top and bottom line financial growth, with segment adjusted revenue increasing 27.4% and segment adjusted EBITDAR from operations increasing 32.8%, each over the prior year quarter. Excluding agencies acquired in the previous 12 months, our Home Health Medicare admissions grew 41.2%, while our total Home Health admissions grew 39.6%, both over the prior year quarter. Our hospice admissions and average daily census were up 4.8% and 16% respectively over the prior year quarter. Our clinical quality measures continue to improve. As a reminder, while CMS has stated that they are not updating their home health or hospice compare tools in 2021, third-party real-time analytics reveal positive trends in our home health star ratings, with the number of agencies with four stars or higher, improving to 93% on a real-time basis and hospice quality composite trends, improving to 97% on a real-time basis or 8% over the industry average. We are confident that as we continue to produce quality care outcomes, we will better address the needs of our complex patient population and expand our growth opportunities at the local level. These clinical and financial achievements in our Home Health and Hospice segment are particularly impressive as they came in the midst of a challenging labor environment and a record number of acquisitions in various stages of transition. Over the past 18 months, notwithstanding the spinoff-related distractions, system integrations and global pandemic, our local operators have acquired or started 23 operations across the segment. While this record number of transactions contributed to some choppiness to our quarterly results, they also provide compelling long-term growth opportunities across virtually every market in which we operate. As we methodically continue to integrate these new Pennant-affiliated agencies and build the cultural clinical and financial foundation for sustained success, we are well positioned to produce strong results in the second half of the year and into 2022. In our Senior Living segment, we achieved a step forward in many areas of the business, resulting in increased segment revenue of $0.7 million and segment adjusted EBITDAR of $1 million, each over the first quarter of 2021, which represented the pandemic-driven low point in our results. Our quarterly occupancy of 72.7% was 60 basis points higher than our first quarter occupancy. We are making progress on our ongoing efforts to deepen the leadership in our senior living communities, strengthen our cluster-centered operating model across the segment and build out marketing resident care and labor management systems and tools, that will accelerate our -- the ability of our local teams to drive further census growth and margin expansion. The process of becoming the senior living of choice in each local market will take time to fully actualize, yet we are confident it will build a solid foundation for which we can generate substantial value for our long-term stakeholders. While we knew the second quarter would have some lingering challenges from the sharp second wave of COVID-19 that impacted our first quarter results, both segments have tremendous inherent value that we know we can unlock. As we guided last quarter, while some of these pressures will persist in the second half of 2021, we expect the momentum we started to see in the second quarter to build and lay the foundation for an improved second half and even stronger 2022. As a reminder, we are not quite two years removed from our spin-off from the Ensign Group, during which time we have built teams and infrastructure to support our public company functions, transitions nearly every major IT, accounting, HR and payroll system onto our own platform, successfully navigated the dynamics of PDGM, improved our home health and hospice clinical quality scores and added roughly two dozen agencies, all in the face of an unprecedented global pandemic. While we have been able to accomplish this through the adherence to the -- we have been able to accomplish all of this through the adherence to our core values and best practices that underpin our historical success and the success that we've watched our mentor and business partner Ensign achieve over many years. We are far ahead of where we were two years ago. Today, we have stronger leaders and clusters, a deeper leadership pipeline, better quality measures, more robust IT solutions, a stronger balance sheet, greater dry power -- powder and more favorable debt terms. And importantly, as we continue to integrate these recent acquisitions and acquire more operations, we're compounding the dozens of compelling upside opportunities inherent throughout The Pennant Group. All that said -- with all that said, we're not satisfied with where we're at currently and we are acting with urgency to continue to recover from the pandemic effects in our Senior Living business and deliver on a stronger second half of the year and position ourselves to achieve even stronger results in 2022 and beyond, without many of the distractions that have weighed on and occupied our time over the past two years. With that, I'll ask Derek to provide an update on our recent investment activity. Derek?

Thanks Danny. During the second quarter and since we've welcomed into The Pennant family, two home health and two home care agencies in Southwest Colorado, one home health agency in Fort Worth, Texas and a hospice agency in Sacramento, California. These acquisitions have strong reputations in their local communities and represent key growth opportunities for these markets. We are thrilled to continue and amplify the legacies of the caregivers, clinicians and staff that have provided quality care to these communities. As Danny mentioned, we've acquired and onboarded nearly two dozen operations since the beginning of 2020, representing approximately a quarter of our current home health and hospice agency count. The short-term noise in our results that sometimes occurs when we have periods of robust strategic growth is a consequence of our unique acquisition model. We don't have a typical corporate development team that runs a deal process from source to close to hand off. Instead our acquisition and transition processes are ultimately led by the field leaders within an impacted market with support of partners and resources from sister operations and our service center There are significant advantages to this locally-led investment model, including a broader deal pipeline as our leaders cultivate their own network of off-market opportunities to more thorough due diligence and a smoother onboarding and transition process, because of an embedded familiarity with the local health care community dynamics. The process also functions to develop more capable business leaders across the organization. While this process can be a drag on results, as field leaders temporarily direct some resources from existing to newly acquired operations, it's important to emphasize that each agency we acquire multiplies our short and long-term growth opportunities. Our culture and operating model attract talented leaders that seek the entrepreneurial experience to build and lead teams that impact the lives of their staff, patients, residents, families and community members. Throughout our history as local teams drive each operation forward to the resources and support unique operating model they've been able to create significant organic growth year after year after year. We are excited about these and all of our acquisitions not just for what they contribute to our results in the first year or two post closing, but to the inherent value that we believe will be realized over the next 10 or 20 years just, as we continue to experience double-digit growth in most of our existing operations even our most mature ones. Overall, the pipeline for home health and hospice acquisitions remains strong and we are confident as we work through the process of welcoming these recently acquired operations into our organization and empower their local teams we will have the capacity for even more growth opportunities in the future. With that, I'll hand it over to Jennifer for a review of the financials. Jen?

Thank you Derek, and good morning everyone. Detailed financial results for the three months ended June 30, 2021 are contained in our 10-Q and press release filed yesterday. For the three months ended June 30, 2021, we reported total GAAP revenue of $110.3 million, an increase of $17.6 million, or 19% over the prior year quarter. GAAP diluted earnings per share of $0.09 and non-GAAP adjusted earnings per diluted share of $0.17, a 54% improvement sequentially over the first quarter of 2021. Please note that our non-GAAP adjusted earnings per share results for the three months ended June 30, 2021 include the effect of all COVID-related expenses and lost revenue, as well as the benefit of the Medicare sequestration holiday. Other key metrics include $43.8 million drawn on our revolving line of credit and $2.9 million cash on hand at quarter end. 1.1 times net debt to adjusted EBITDA and 1.98 times if Medicare Advance payments have been paid back as of the quarter end. Automatic recoupment of the advanced payments began in April 2021 on which we have repaid $9.4 million through August 9, 2021 and we expect to repay the remaining $18.6 million over time within the payback period. Cash flows provided from operations of $2.6 million, excluding the impact of the automatic recoupment of advanced payments and the impact of the final phase-out of the request for anticipated payment. Yesterday in our press release, we reiterated our full year 2021 revenue guidance of $430 million to $440 million and adjusted earnings per share guidance is $0.89 to $0.99 per diluted share. We are pleased with the momentum building in both segments that we believe will lead to a stronger second half of the year. We know the ramp to achieve our full year guidance is steeper than our performance in the first half. And despite the challenges we're facing on the labor front and in integrating our recent acquisitions inherent opportunities within our portfolio to realize significant value is as compelling as ever. We are proud of our local leaders and partners across the organization, for providing extraordinary care to our patients and residents, achieving quality clinical outcomes and finding ways to grow, during a challenging operating environment. And with that, I'll hand it over to Brent, to highlight a couple of our local leaders.

Thanks Jen. It's my pleasure, to recognize a few leaders in our organization that are providing excellent care to their local communities, while driving strong financial and cultural outcomes. At Alpha Home Health and Hospice, in Everett, Washington, administrator Chris Boettcher, Director of Clinical Services, Landy Allman and Director of Business Development, George Gitungo are achieving exceptional results by building a culture focused on our core values, including customer second, ownership and intelligent risk-taking. This team first invested in the right individuals that would accelerate the agency's growth trajectory and then, methodically focused on, producing quality care outcomes and strategically investing and expanding the services offering available to the community. Late last year, the team was awarded a certificate of need to provide hospice care to broaden the continuum of care they provide, which has accelerated the results in both lines of business. Meanwhile, they continued to score well clinically as their home health star rating improved from four stars in the second quarter of 2020, to a projected five-star rating according to real-time data analytics. The investments in the right people, culture and providing quality clinical care have helped them achieve revenue growth of 141% and EBIT growth of 219%, both in the second quarter over the prior year quarter. The results of Alpha Home Health and Hospice are typical of what talented local leaders can achieve, through the application of best practices in our operating model. At Desert View Senior Living in Las Vegas Nevada, Executive Director, Mike Trail, Wellness Director, Joe Rank and Marketing Director, Charlie Wolf has successfully navigated the ups and downs of the pandemic, providing excellent care to the residents and families, in the face of a challenging operating environment. Mike and his team have established a culture within Desert View, focused on becoming the Senior Living Community of choice within their market. And their focus is evidenced in growth in occupancy, revenue and EBIT in the second quarter of 2021, over the prior year quarter, despite the potential impact of COVID-19. In addition, the team's influence extends beyond Desert View as they provide resources and support to their sister operations in the market and across our Senior Living Segment. We're grateful for the leadership of Mike, Joe and Charlie and many others like them throughout our organization that embody our core values and provide life-changing service to our residents and patients. With that, I'll turn it back to Danny.

Thank you, Brent and thank you Jen and Derek, for your input. With that, Adrian, can you please instruct the audience on the Q&A procedure?

[Operator Instructions] The first question comes from the line of Scott Fidel with Stephens.

Hi. Thanks. Good afternoon everyone. First question just interested, if you could maybe give us a little bit of a real-time update in terms of, what you're seeing with the Delta Variant and with the recent uptick in the COVID activity and how that's impacting. I guess, the two businesses that have just more broadly been impacted by COVID have been, Senior Living and Hospice, when we think at the industry level. So particularly interested in terms of what you're seeing more recently around on Delta in those two businesses. And how that influences you are thinking around the ramp to achieve the full year EPS guidance that you reiterated today.

Yeah. Thanks Scott great question. So we're watching it very closely. It's – it continues to affect mostly the unvaccinated population. We're really fortunate to have a high percentage of vaccination, within our senior living communities in particular. And we've seen widespread reception to that amongst our employees as well. Those efforts continue and we're pretty optimistic that, we'll be able to navigate through that, even as it kind of affects the pockets of unvaccinated folks. The – on the hospice side the – we actually – sequentially, our census between Q1 and Q2 our ADC was down slightly. But our length of stay has increased ever so slightly. So we're in a good spot there. We've actually recovered on the hospice side through a variety of efforts by our local teams finding other avenues to support members of the community that need appropriate hospice care. So where we stand right now is, we're ahead of our all-time high back in January before pre-pandemic levels. So we're pleased with where we're at on the hospice front. There has been some disruption there, but it's – our teams have been able to navigate through it quite well. As it relates to the overall sort of progress of the Delta variant, as it moves into the West and in other places where we're a little bit more directly affected. We feel like we're just better prepared to go through something like that. The systems, the processes, the PPE all of those kind of things are there and we're ready to navigate it. And then what we find is that, our teams that – our culture and our adherence to our core values has really helped on issues, like caregiver burnout, and things like that. So we're feeling quite good about our ability to move forward even with the Delta variant, kind of doing what it's doing and achieve strong results in the second half. More importantly, we feel really good about our positioning as we look to 2022 and how things are stacking up as we look to continue to execute on our long-term growth strategy that's been a part of, how we've driven our results for many years. So. anything to add on that?

Yeah, I'd just say, we're kind of seeing a similar census uptick on the senior living side. We've sort of hit that – we bottomed out in the early part of the year, and we've gradually picked up. The return to our levels pre-pandemic, it's been a little slower than we'd hoped, but I think that's a function of we're continuing to deal with COVID, and we've got – we're seeing progress, right? And so at this point, as we follow our normal processes and the systems that we put into place over a year ago, we feel like we're in a good spot, but we're closely monitoring it. And every single operation is handling it at the local level.

Got it. And for the next question, I just wanted to follow-up on and get an update on the – some of the labor dynamics and you did call out a challenging labor environment, which basically everyone in health care is also experiencing. At the same time, it was encouraging to hear about the hospice ADC having recovered, so nicely already. So just interested, if maybe you can sort of drill into the labor dynamics a little bit more by the segment to sort of call out, where you're seeing the most pressure that's still on the SL side, and where you're – I guess seeing some of the green shoots in terms of what you're seeing around some labor initiatives as well.

Yeah. Brent, why don't you tackle this?

Yeah, Scott, it's a good question. I think what you're seeing reported and some of the information that's coming out is consistent with what we are experiencing. Our senior living communities have probably been the most affected in the group. The caregiver group is the one that's been the hardest to replace. And so that's on the senior living side. And then on the Home Health on Hospice side, these newer acquisitions right where we've oftentimes injected new leadership and we're trying to build out the culture. What we pride ourselves is becoming the provider of choice and the employer of choice in each of our markets. And in those instances, when we're still developing our reputation in the community, it's become a little bit harder to recruit and retain talent. We're making progress. But those are really the two areas we've seen the most significant impact. That being said, we have -- our stronger senior living providers have tended to weather the storm a little bit better than those that are really working through leadership changes et cetera. So we anticipate that these headwinds will last for quite some time. We're optimistic as we inject our culture right as we build the right leadership teams and we create the best opportunities for employment in our markets that we can combat some of those challenges. But it's certainly a real struggle for us right now in the moment but we are making progress.

Got it. And just one more for me and then I'll get back in the queue. Just on the home health trends that's where you're still seeing particularly really strong growth really across both Medicare and non-Medicare of the different segments. Just wondered, just on the non-Medicare side in particular, you had again really significant sequential revenue growth there. I think it's up around 15% sequentially. So maybe just remind us of what the key drivers of the non-Medicare revenue growth in home health has been. And then how much further run rate you see on these growth rates which have remained -- held up better I would say than really anything else sort of sequentially across the business? Thanks.

Yes. Thanks for that Scott. Yeah. So the home health non-Medicare growth really is a byproduct of how we are engaging in the whole post-acute continuum. Our approach from the beginning has been to lock arms with our skilled nursing partners, particularly at the Ensign Group through our Ensign Pennant care continuum and others in the community to develop really effective transition of care programs. And then make sure that there's alignment in that post-acute continuum on the payer side of things. So the natural growth of non-Medicare payers in the skilled nursing arena and elsewhere, but particularly in skilled nursing drives us to want to go help take care of those same patients so that there's continuity from the moment they leave the acute care setting all the way until they're fully rehabbed. And so that's really kind of just reflective of the growth in our relationships, how we handle getting the right patient into the right care setting at the right time. And we expect that that growth is very sustainable. We're just scratching the surface on these opportunities in some of the large markets where we have a lot of overlap like San Diego, Phoenix and the whole Phoenix and Tucson both the Dallas-Fort Worth market is another key area. So you've noticed that a lot of our growth on the Home Health and Hospice acquisition side actually dovetails with those markets as well. And it's mostly just us responding to the demand for high-quality clinical delivery systems that can interact with on a dynamic basis with other care settings in a very effective way, so that patients can flow easily from the acute setting into a skilled nursing setting for an optimal length of time at an optimal cost for everybody involved and then move into the home setting for -- to complete their recovery process. So we feel like -- when you talk about our growth opportunities, Derek mentioned this in his part that we continue to see acquisitions that we brought into the family four, five, six, seven years ago continue to deliver that kind of return and organic growth rate because of this process of building at the local level highlighting the kind of things that Brent talked about in his piece. So really it's just a function of our -- the relationships that we are nurturing and have been for many, many years. And we expect that the volume that goes through those relationships will continue to increase as we're hyper responsive to the acute care partners that we have. And we're building these transitional care systems so that they really work for non-Medicare payers in the managed care world as well so...

All right. Okay. Thank you.

Thanks Scott.

[Operator Instructions] The next question comes from the line of Frank Morgan with RBC Capital.

Good morning. I'd like to go back to the Hospice segment in the sequential results. Obviously the admits were down, but ADC down not nearly as much. So maybe if you could give us a little quarter -- a little more color around what happened during the quarter with length of stay, maybe actually with both with the admission trends over the months of the quarter and then really how did you exit the quarter in Hospice from both a length of stay and an admission standpoint and then maybe also median length of stay?

Yeah. So on the length of stay, we're actually up about 4.3% sequentially from quarter one. So from quarter one to quarter two on the length of stay, we're up about 4.3%. Then on the admissions side, we're actually up about. If you look at it over the organic -- looking at it organically, our admissions are up about 23% Q2 of 2020 to Q2 of 2021. We did see admissions rise from Q1 to Q2 as well. And then in the ADC, the ADC was just down like 0.5% Q-over-Q. What we saw with ADC during the quarter was it was pretty steady. So is at 23.08 when we left the quarter one at quarter two, we ended the quarter at 22.96 for the quarter. During the quarter it was pretty steady, so just a slight decline but it didn't dip beyond that. So it was pretty steady. And then now what we're seeing is that we're -- our ADC is significantly higher than it was in the first quarter. So we've recovered at Hospice and we're well over where we were in January for Q1. So I think we're really pleased with the census growth and what our operators have been able to do with our Hospice growth.

Got you. So if you're higher than Q1 that means you're higher in Q2. So your momentum coming out of the quarter looks really good.

Yes.

Any change in the growth in that improvement in the sense, is it more admissions, or is it continued length of stay growth? And are you seeing any differences in referral patterns?

I think it's mostly admissions with that Hospice growth. And then with average length of stay, look, I think we're pretty much steady where we were as of Q2.

Yeah. And as far as referral patterns Frank, the dynamic has been interesting right as hospitals have had to think about okay, can we do these elective surgeries, can we not? And where do we need to be positioned from a bed standpoint. And so -- there's been a little bit of ebb and flow over the last six to 12 months for sure on that, but -- generally speaking. And then that flows into residents that are in senior living and in skilled nursing and how those residents get to that place where there's a hospice conversation that's appropriate. And I would say that there's not been a dramatic change in the referral patterns in our experience as much as just there's been a change in where patients get to that place where they're having the hospice conversation. And there's been a little bit of a lull in the senior housing when things went a little haywire last year. And a lot of that normalcy is starting to come back. And then you're seeing a little bit on the hospital side as patients get to that crossroads where they're sending them and when they're sending them there. We've just been prepared and our teams have been really responsive to that. Obviously senses across the senior living industry has declined. There's been a little bit of a lull in those referrals just simply on a headcount basis. So it's just a dynamic environment. I don't see any permanent changes in how those conversations are coming to ahead. Sometimes if the health care provider is experiencing a little bit of an emergency whether it's new COVID cases or a surge whatever it might be some of those conversations can get put off a little bit. But our approach has been to just be very responsive to all of those needs and make sure that we're here. And I think our census and success is attributable to that approach.

Got you. My other question on the you called out the start-ups of these assets you bought over the last 18 months you brought on board. Could you give us any more color about sort of revenue contribution or where they are from a margin standpoint relative to where you think they should be? And just curious is there -- are you seeing anything different in this group of assets and your more stabilized assets from just a structural standpoint?

Good question. Thank you for asking. Yes. So, generally speaking -- I don't know if Derek can provide a little more color than I might. But generally speaking each of these operations falls right within our target acquisition opportunities. They are healthy businesses that are smaller that need more resources maybe need additional leadership, bandwidth, and other kinds of capital to support their expansion. They present really good opportunities for us. We -- generally from a margin standpoint the year in which we acquire a business they often operate in single-digit, even sort of low single-digits. And then within the first year to two years as they get integrated into our systems our Data Analytics processes, they get support from other like situated hospice or home health programs that can help them share the burden maybe even share some staff in some instances. We see margin expansion that moves fairly quickly into the mid-teens. And then from there inches upward as they capture more volume from the marketplace and they leverage some of their fixed overhead costs. So, Derek what would you add there?

I would just add a couple of things. I think to the revenue question Frank, I think like I mentioned the number of operations is about a quarter of our overall count. I think the revenue contribution is probably proportionately a little bit less than that just given the dynamics there of some of them being start-ups. Our typical acquisition being sometimes a smaller agency that just has a great clinical or a reputation within the community and a team in place and we're able to take the legacy that they've built and apply the resources and really elevate those local leadership teams and free them up to run. The other kind of point I would just emphasize and I kind of said this in our prepared remarks is just because of the -- some of the dynamics of the type of acquisitions that we typically do namely the size so much of our growth occurs not just in the first year two or three years. We do like to see it right out of the gate. Of course, we see typically a pretty dramatic improvement in the first two years. But even in years three and beyond, even with some of our acquisitions that we had previous to 2014, are still growing at double-digit rates partly because of the types of acquisitions that we've targeted but more importantly because of our operating model because of the opportunity for local leaders to drive the business forward to find ways to grow to expand their services to recruit new talent, to be creative in creating those opportunities for others. And so that's what's so exciting about is our recent acquisition is not just what they've been contributing so far. But as you look at it and you kind of compare it to our track record of all of our acquisitions over the past 10 or so years modeling these 23 out it's pretty exciting stuff.

But yes, I mean the margin compression is very real when you have this volume there. And it's -- we view it as pure investment and it's been our playbook that created the whole story and we've done this many years in a row. And we just are really excited about the incremental upside that our natural processes with this many operations will yield for our long-term investors.

Got you. And I know you called out on labor. The hardest place to find labor right now is in the senior housing area, the caregiver level there. But, I think you also called out that you're getting the right people in some of these recent Home Health care, and Hospice acquisitions. So what is that process like? I mean what is it that you're looking for that you don't have when you buy these? And just any color there and I'll hop. Thanks.

Great question, Frank. And we absolutely -- that's -- where we have an established team that's living our culture, that embraces our core values, that understands the cluster, model and a field-driven decision-making approach to the local health care market, that becomes a very attractive place for talented people, marketing professionals, clinical leaders, business operators plus people that are expert in billing and collections that are experts in intake and transitional care. All of those physical therapists, speech therapists, occupational therapists, RNs and all the supporting cast. Those folks typically are scattered throughout the market when we enter it. And then, as they get a sense that there's this unique place where they can work have access to the resources of a large corporate entity, but then they have the flexibility that they would have in a mom-and-pop that might not have all of the systems and the processes and the capital to go drive year-over-year-over-year success. It's really all of those types of positions. So each of these new acquisitions when we counter them they have some mix of those. There's obviously something that's driven their success. And usually, we're adding one or two or three or four of those parts that I just mentioned. But then, it's an ongoing process, so that once you start with the right team and you bolt on additional key professionals from the marketplace and the volume comes over and then we can support more leaders coming from other places in the marketplace. And with them it continues to grow. And that dynamic in the current labor environment has just been a little bit delayed. I wouldn't say, it's -- that we're hamstrung really at all from that but there have been -- there has been a little bit of in the marketplace people pausing and kind of waiting to see what's going to shake out with some of the unknowns. But, we feel like we're through most of that with our new acquisitions. And we really -- the short answer to this is that our bread and butter is exactly what we're doing, and we're really excited about these and how they're shaping up for us. Brent, do you have anything to add on that?

Yes. I think the other part of that is the influence of market partners, cluster partners and outside leadership teams that can come in and provide support. And it's just, because of the nature of our current environment, there's been a little bit more of a slog to get -- to be able to have access to our new acquisitions. And so that's created some additional challenge. The nice thing though is we feel like we're through much of that as well, right? And so to be able to have culture celebrations and to be able to have one-on-one interactions with partners that have done this before and helps to build and grow strong teams, those are the types of interactions with these newer acquisitions that were -- have just slowed a little bit over the last year. And so as we return back to a little bit more of normalcy, we're seeing some better response in the new acquisitions as well.

Yes. And our typical practice is we take a new acquisition in Sacramento, for example. And the team is really strong clinically. They've got a great reputation, but they've had some natural constraints based on the balance sheet, the team that -- the previous operator and the preferences and focus is there. We normally are able to bring adjacent operations, who have been through an acquisition with us or joined us and they understand our culture and we can sit down with them and immediately connect them to the stories and help them adjust. Out of an abundance of caution some of that was done remotely. Some of it wasn't able to be done in the same way and that's the disruption, we're referring to. But we're through it, and really looking forward to setting these teams free and watching what they achieve over the coming years.

Thank you.

[Operator Instructions] I would now turn the call back over to the speakers for closing remarks.

Thank you, Adrian. And we just wanted to thank everybody again for joining us today. Thank you to Scott and Frank for your thoughtful questions. And again thank you to all of our stakeholders. We understand that we're operating through a dynamic environment and we appreciate the trust that you've placed in us. And we look forward to honoring that trust as we continue to improve the second quarter, and we set the organization up for a very healthy 2022. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.