Good day, and thank you for standing by. Welcome to The Pennant Group's Third Quarter 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kirk Cheney. Please go ahead.

Thank you, Darian. Welcome, everyone, and thank you for joining us today. Here with me today, I have Brent Guerisoli, our CEO; John Gochnour, our President and COO; and Lynette Walbom, 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 p.m. Mountain Time on November 6, 2025. We want to remind anyone who may be listening to a replay of this call that all statements made are as of today, November 7, 2024, and these statements will not be updated after today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. 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, we do not undertake to publicly update or revise any forward looking statements where changes arise from 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 administrative 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. 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 use of the terms we, us, our and similar terms do not imply 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 we declare GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our 10-K. With that, I'll turn the call over to Brent Guerisoli, our CEO. Brent?

Thanks, Kirk, and welcome everyone to our third quarter 2024 earnings call. We are pleased to report another record breaking quarter with strong results across our business. We are so grateful for the more than 7,000 amazing team members throughout the organization. Through their dedicated efforts, our leaders and teams drove new highs in revenue, census and earnings and our businesses are healthy and growing. Collectively, our Q3 consolidated results reflect revenue of 180.7 million, an increase of 40.5 million or 28.9% over the prior year quarter. Adjusted EBITDA also grew significantly to 15.1 million, an increase of 4.3 million or 39.2% over the prior year quarter. Adjusted earnings per share for the quarter were $0.26, an increase of $0.06 or 30% over the prior year quarter. These results reflect our ongoing commitment to the five key focus areas we have highlighted throughout the year; leadership development, clinical excellence, employee experience, margin improvement and growth. With leadership [Technical Difficulty] developing local leaders remains at the heart of our operating model as the talent and experience in our operations and clusters deepens. With strong portfolio companies our efforts throughout our footprint, we are able to more quickly improve new acquisitions and grow seasoned operations. Thus, the significant investment we have made in our leadership and development programs is the catalyst for enduring momentum. This investment continues as year-to-date we have added over 60 CEOs in training and elevated nearly 40 internal clinical leaders in our newly expanded clinical leadership development program. Shortly after quarter end we added more fuel to our growth engine in the form of a follow on equity offering. The purpose of this offering, which follows the expansion of our revolving credit facility in August, is to prudently manage our balance sheet and give us additional capital to grow. It was our pleasure during the marketing process to introduce new investors to the Pennant story and help them catch the vision of the significant opportunity that exists in our platform and potential for future growth. Now with zero debt and abundant dry powder, we are well-positioned to execute on the second portion of the signature purchase and the robust acquisition opportunities in our pipeline. Based on this sustained momentum in our business, we are again raising annual guidance. We anticipate total adjusted revenue of 665.3 million to 706.5 million, a 28.5% increase over 2023 at the midpoint; adjusted EBITDA of 51.9 million to 55.2 million, a 31.5% increase over 2023 at the midpoint; and adjusted earnings per share of $0.90 to $0.96, a 27.4% increase over 2023 at the midpoint. With that, I'll turn the call over to John to provide more detail on our third quarter operational results.

Thank you, Brent, and good morning everyone. Our strong Q3 performance both in same-store operations and new transitions demonstrates the ability of our local leaders and teams to thrive through periods of intense growth. Of note, we do not utilize a centralized acquisition team and instead rely on our local leaders with the support of service center partners to transition new acquisitions. As our results show, they do it exceptionally well while continuing to accelerate performance in their local operations. Our Home Health and Hospice segment rolls on with increasing strength, generating quarterly revenues of 135.7 million of 34.2 million or 33.7% over the prior year quarter. This included same store revenue growth of 12 million or 12.2%. Segment adjusted EBITDA of 21.9 million increased by 6 million or 37.5% over the prior year quarter. Segment adjusted EBITDA margin increased to 16.1%, a 20 basis point improvement over the prior quarter. Our home health continued to accelerate. Home health revenue increased 33.7% as total home health admissions improved 38.5%. Medicare home health admissions increased 30.8% and revenue per episode increased 4.9% each over the prior year [Phonetic] quarter. We are also pleased to note that same store home health admissions grew by 15.5% and same store Medicare home health admissions increased by 8.6% each over the prior year quarter. The driving force behind this growth remains exemplary clinical outcomes. In Q3, our percentage of home health agencies with a star rating of 4 and above increased to 73.5% and our acute care hospitalization rate of 13.3% remained well below the national average of 14.1%. In addition, we continue to trend ahead of the curve in home health value-based purchasing where at present over 80% of the operations we owned during the 2024 [Phonetic] period project to receive positive adjustments to…

Thank you, John, and good morning, everyone. Detailed financial results for the three months ended September 30, 2024 are contained in our 10-Q and press release filed yesterday. For the quarter ended September 30, 2024, we reported total GAAP revenue of 180.7 million, an increase of 40.5 million or 28.9% over the prior year quarter, GAAP diluted earnings per share of $0.20 and adjusted diluted earnings per share of $0.26. Key metrics for the three months ended September 30, 2024 include 113 million drawn on our revolving line of credit and 4.5 million cash on hand at quarter end, 2.05 times net debt-to-adjusted EBITDA and cash flows provided from operations of 18.7 million year-to-date including 7.7 million in Q3. As Brent described above, after quarter end we issued approximately 4 million shares of common stock, which generated 1.5 [Phonetic] million in net proceeds for the company. We have used the proceeds to pay down our revolver which is fully available to be deployed. We now have abundant drivers for future growth including the $48 million acquisition of Signature’s Oregon operations set to close in January 2025. Our year-to-date results and the impact of the equity offering on our outstanding debt and related interest expense merit an increase in our full year guidance. Accordingly, we are revising and raising our full year guidance as follows; full year 2024 total revenue between 665.3 million and 706.5 million, adjusted earnings per diluted share between $0.90 and $0.96 and adjusted EBITDA between 51.9 million and 55.2 million. This updated guidance incorporates current operations and organic growth diluted weighted average shares outstanding of approximately 32.5 million and a 26% effective tax rate. It anticipates continued strong operating performance through the end of the year, Hospice reimbursement rate adjustments, decreased interest expense and contributions from our…

Thanks, Lynette. As we conclude, I'd like to once again thank all the operators and clinicians who, like those highlighted above, dedicate themselves daily to providing life change to our patients and residents. You are truly making a difference in the lives and communities we serve and it is an honor to work alongside of you. With that, we'll open it up for questions. Darian, can you please instruct the audience on the Q&A procedure?

Absolutely. At this time, we will conduct the question and answer session. [Operator Instructions] Our first question comes from the line of Ben Hendrix of RBC Capital Markets. Your line is now open.

Hey, great. Thanks guys and congratulations on the quarter. Just a quick question on your views of the upcoming administration -- presidential administration. Just want to get your thoughts on the backdrop, the regulatory backdrop for both segments under President Trump's first administration or first term, and how it contrasts under the current administration and what you're expecting going forward overall in terms of -- for an operating backdrop? Thank you.

Thanks for the question. And the first thing I'd say is that obviously we're agnostic about politics as far as the way that we operate the business. Our focus is on controlling the things that we can control. Happy to share a few, the things that we anticipate, the experience that we've had in operating over the last 12 years through multiple Democratic as well as the first Trump administration. The first thing that we noticed is there has been an increase -- a pretty significant increase on the regulatory enforcement side over the last that was relatively different than what we saw during the Trump administration previously. And so we're optimistic that as CMS continues to consider what's the best way to approach reducing fraud in the industry and all of the things that they're responsible for that they'll recognize that burdening good quality providers with significant post payment audits and things like that isn't necessary. The second thing, on the reimbursement front, we have three years now of flat to declining reimbursement on home health. That contrasts with under the Trump administration where we saw more solid reimbursement patterns, where we saw increases that actually corresponded with the inflation that we felt. So I think those are the two biggest things that we'd highlight. Again, our focus is truly on delivering the best possible care to our patients and controlling the things that we can control. So how we'll respond to the election, we want to make sure that all of our employees are in a good spot. We want to make sure that we are able to continue to grow at the pace that we've been growing, that we continue to have acquisition opportunities to take the quality of care that we have to new communities and that we continue to control the things we can control.

Great. Thanks guys.

Thank you. Our next question comes from the line of Scott Fidel. Your line is now open.

Hello, it's. Who was it? Is it for Scott Fidel?

Scott Fidel, yes, please.

Okay, great. Yeah, you were a little jumbled on the call there. Great. Hi everyone. First question, just wanted to just sort of follow up on some of the M&A commentary. And clearly M&A is sort of in full flight right now across the businesses. But certainly it feels like there's a bit of an inflection right now on the Senior Living side where you've done several transactions. Recently, I definitely noted, John's comments around seeing a healthy pipeline on that side. So it feels like perhaps that that side of the business, you're getting more comfortable again with M&A on the Senior Living side. So, was hoping maybe you could sort of frame sort of how you're thinking about your capital allocation towards M&A across Home Health and Hospice and then Senior Living. I know that you just sort of look opportunistically at where the opportunities are, but also as it would be helpful if you wanted to maybe give us some framework around how you're thinking about allocating growth capital towards each of the two major segments.

Yeah, great questions there, Scott. And I think you framed it well. And really, when we look at opportunities, there're three determinants that we're considering. The first is we're a first who then what organization do we have leaders ready to go to step into opportunities. And then the second is we grow where we have -- so if we have healthy clusters, healthy markets, we're going to invest in those leaders. In those leaders, they are looking for opportunities to grow. So they find great leaders through our CIT pipeline and then we look to grow in those areas. And then the third is really that we have good opportunities, right, the right way, and we see there's an opportunity to grow and develop and really create value. What you're seeing on the Senior Living front, and you pointed it out, this is really a reflection of the strength that we're experiencing in our Senior Living business. And so Wisconsin has been one of those markets in particular that we just announced this acquisition. We've done other acquisitions more recently in Wisconsin. We're growing in a healthy way. We've got strong teams in place and so we've got significant opportunity to grow there. We are going to grow in both segments and we're an opportunistic growth company and so we're going to grow where we have strength and where there're great opportunities. The great thing is our pipeline is robust. We talked about Signature. There're other opportunities in the pipeline as well that we anticipate bringing on board in 2025. And so from that standpoint, we're going to allocate capital where we think we can create the most value. The other thing just to bear in mind, on the Senior Living side, oftentimes it's not really a capital allocation question because it is upfront unless we choose to invest in real estate and we have done a couple of those. We did the two building earlier this year in Utah and those have been really, really strong for us. And we'll look for opportunities on the real estate side where it makes sense, but we're kind of slowly moving into that because for the most part we want to focus our allocating dollars to investing into opportunities where we can create value. So that's kind of the way that we're going to approach it. We're excited about both of our business lines and anticipate continuing to see strong growth across the board.

Okay, great. Got it. And then next question. Definitely was interested in the sequential jump in the home care revenues. I'm assuming that that was from probably the first tranche of Signature. So maybe there was a bit of a different business mix there, maybe. Can you sort of confirm that and then sort of talk about the profile of that business and then also whether, as you're looking at additional M&A opportunities in the HHH side, whether you are more interested in growing that home care business line as well?

Yes, Scott, really appreciate the question and I'll highlight a couple of things. First of all, we're really excited about how home care is trending. Some of this is based on pulling some the way that we're allocating the revenue between Medicaid and PCS so that we create more clarity about how much revenue is in that home care and other bucket to really highlight the progress that we're making on the non-skilled side. The PCS business has done really well. The other thing -- there's two other things that are captured there. One is our provider services business, which is our geriatric primary care and palliative care business where we're building out continuums in markets across the country and we're really excited with the progress that that's made and kind of the exponential growth that we've seen there. And then we're also capturing the Hartford management fee in that line. So that's sort of the things that have been pulled. There's a little bit of sort of reallocation from some of the Medicaid rates that were previously captured up in Home Health and Hospice and are now appropriately captured with Home Care so that we make sure that you can see how that business is trending and then the other two components that I just mentioned, but I'll just highlight the strength of our home care business. We highlighted what Jesse and his team have done in San Diego. That's true kind of across the board. We're really excited about the group of leaders we have there, their passion for using home care as a solution for some of the social determinant of health issues that abound in our society. And so we do see that as an opportunity and a growth area where our model can uniquely impact individuals who are struggling and need that non-skilled support. So I think you'll see us continue [Technical Difficulty] opportunities and look to grow in that side of the business as well.

Okay, that's helpful color. It's good to know that the Hartford is in there too because just in the third quarter alone it sort of moved towards like a 50 million annualized revenue business versus well below 20 in the first half, okay. And then just one last question for you, obviously you've been operating in this very tight rate environment in home health for several years and, hopefully, we can be optimistic that maybe there's sort of a different rate regime on the way with the new administration. But in the meantime, just at that sort of net neutral rate that you talked about, do you feel like you can maintain your home health margins with the other levers that you have, even grow them or do you think there will be a little bit of diminution for the Medicare home health fee for service business in 2025 on the margin side?

Yeah. Scott, we remain confident in the unique ability of our operating model that is focused on local leaders standing transparently seen the impact of everything from a revenue change to a change in the way that they're operating their business and the cost impact of that decision, just the capability that that model has to respond to these difficult changes in reimbursement. Anytime you have 5.4% labor -- an increase in our labor costs and you get a flat reimbursement update, it's difficult to maintain margin. And I think our home health operators have done an extraordinary job of seeking to operate more efficiently, continuing to encourage our clinical teams to operate at the top of their licensure, to be as productive as possible so that we can be the best community. We've done a better job this year of retaining that talent and improving our turnover, which is what's driven this growth. And so while it is a huge headwind to not receive an update in the inflation environment that we are operating in, I think what you've seen over the last three years continues to be our focus; control the things that we can control. Can we build better relationships with institutional referral sources? Can we do a better [Technical Difficulty] making sure that we're driving the best clinical outcomes so that our payers will recognize that and give us better rates on the managed Medicare side and the managed care side? There's different tools that we use to offset that Medicare rate. What we view as really a cut, I mean, it's essentially flat to just very, very modestly down. But I do think you'll continue to see progress on the margin side, what we're built for. And I think we've shown that over the last 12 years that even in periods of uncertainty and difficulty on the reimbursement side, our model will allow us to emerge successfully.

Okay, thanks. Helpful color. Thanks.

[Operator Instructions] And I'm showing no further questions, so this will conclude the question and answer session. I would now like to turn it back to Brent Guerisoli, Group CEO for closing remarks.

Okay, well, thank you, Darian, and thank you everyone for joining us today.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.