The Pennant Group’s (Nasdaq: PNTG) total blended portfolio continued to perform strongly during the second quarter of 2021, despite lingering pressures stemming from multiple factors.
Pennant reported $110.3 million in total revenue in Q2 2021, a 19% improvement and $17.6 million over the previous year. Net income for the quarter was $2.7 million, adjusted EBITDA for the quarter was $8.6 million, and adjusted EBITDAR for the quarter was $18.6 million.
The Eagle, Idaho-based company’s senior living segment, consisting of 54 communities in seven states, reported $32.2 million in revenue in the quarter. That was a $1.2 million improvement over the previous quarter, but a 7.2% decrease from the previous year.
Occupancy for the segment, meanwhile, was 72.7% as of June 30. This marked an 8% decrease over Q2 2020, but a 60 basis point improvement on a sequential basis.
The improvement was tempered by continued uncertainty over Covid-19, the winter storm that hit Pennant’s Texas communities especially hard, and ongoing wage and hiring headwinds.
While Pennant is happy with the numbers and the company’s financial position, leadership is not satisfied and is taking steps to build on that performance in the second half of 2021, CEO Danny Walker said Tuesday during the company’s Q2 2021 earnings call.
“We’re acting with urgency to continue to recover from the pandemic effects in our senior living business, 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,” he said.
There are signs that Pennant’s senior living performance continues to improve. Occupancy for the segment stood at 74.1% as of Aug. 9. This is a 280 basis point improvement over the company’s mid-March low point. Communities boast high resident and staff vaccination rates, while efforts to vaccinate more are ongoing.
Moreover, staff at Pennant’s communities have nearly 18 months of experience mitigating Covid-19, and have sufficient stockpiles of personal protective equipment (PPE) and other safety equipment in the event new outbreaks occur.
“We feel like we’re in a good spot where we’re closely monitoring [Covid-19], and every single operation is handling it at the local level,” Walker said.
In addition to improving senior living performance, Pennant sees untapped potential in recent acquisitions still undergoing transitions to the company’s cluster-centered local management model.
“Management sees significant upside from transitioning more recent acquisitions and a rebound in the senior housing segment,” RBC Capital Markets Equity Analyst Frank Morgan wrote in a note to investors.
Pennant’s balance sheet remains solid. The company reported $2.9 million of cash on hand and $106.2 million of availability on its $150 million revolving line of credit, net debt-to-adjusted EBITDA ratio of 1.10x, and a lease-adjusted net debt-to-adjusted EBITDAR ratio of 4.96x as of June 30.
In April, automatic recoupment of Medicare advanced payments received by the company as part of the CARES Act began; the company repaid $9.4 million through Aug. 9 and expects to repay the balance — $18.6 million — through the remaining payment period, CFO Jenn Freeman said.
Home health and hospice, which accounts for 70.8% of Pennant’s total portfolio, generated $78.1 million, a nearly 35% increase — or $20.1 million — over the prior year.
Pennant reiterated its full year 2021 guidance of $430 million to $440 million and its annual adjusted earnings per share guidance to $0.89 to $0.99 per diluted share.
The company’s stock ended trading Tuesday down over 3% in trading, closing at $30.75 per share.
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