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Sobered by Q3 Results, Pennant Group Refocuses to Gain Senior Living Strength

After a “sobering” third quarter, leaders with Pennant Group (Nasdaq: PNTG) are evaluating the moves they made over the last 18 months and are taking steps to improve performance going forward.

“We know that sustainable clinical and financial results are achieved when our investment activity is well calibrated with the health of our current operations and bandwidth of our leaders and resources,” Pennant CEO Danny Walker said Tuesday on the company’s Q3 2021 earnings call. “We haven’t struck this delicate balance well enough over the past 18 months.”

Eagle, Idaho-based Pennant’s portfolio includes 54 senior living communities and 87 home health and hospice agencies, across 14 states. The company spun out of Ensign Group (Nasdaq: ENSG) in 2019.

In advance of releasing its financial results, Pennant last week warned that its earnings would reflect a tough quarter.

Rising Covid-19 infection rates in key senior living markets, coupled with the labor pressures felt across the industry, slowed the positive momentum that Pennant had achieved in this segment earlier this year, Walker said. Four senior living communities experienced temporary admission holds in September.

Other senior living owners and operators also confronted multiple headwinds last quarter, with Welltower (NYSE: WELL) CEO Shankh Mitra describing a “perfect storm” of expenses related to labor, supplies, insurance and other costs.

Pennant’s leaders were self-reflective on Tuesday’s call, with Walker downplaying external factors and emphasizing that the company is reviewing and learning from its mistakes in a tough “sophomore season.”

“In general, the demands of completing the spin off successfully, the high volume of home health and hospice acquisitions, the leadership overhaul of our senior living segment and the investment of time and resources in early stage new business ventures, all when coupled with the unique pressures of the Covid-19 pandemic, have diluted our effectiveness at operating to our standards,” he said.

Senior living performance is already receiving a boost from the full implementation of Pennant’s IT systems. The tools and data are enhancing sales and marketing, wellness efforts and labor management, according to Walker.

Pennant — like Ensign — operates on a locally-focused model that empowers community-level leaders. Some of these local leaders did manage to post strong third-quarter results, highlighting the type of performance that Pennant’s leaders hope for across the portfolio.

One example is Brentwood Park Assisted Living in Franklin, Wisconsin. That community grew revenue 16% year-over-year and increased occupancy 8% year-over-year, Pennant President Brent Guerisoli said on Tuesday’s call.

“This strong top line growth occurred during a period when many other communities saw significant pressure on occupancy,” he observed.

Pennant’s executives expressed confidence that the company will retrench and improve across home health and senior living.

“Our senior living segment has the potential to be a source of strength for Pennant,” Walker said.

Pennant’s 2022 revenue guidance of $468 million to $478 million reflects “healthy” growth and an earnings recovery, Stifel analysts noted.

After falling sharply on the warning about Q3 earnings, Pennant’s share price has been recovering. That trend continued on Tuesday, with shares up 5.66% to close the regular trading day at $24.84.

The post Sobered by Q3 Results, Pennant Group Refocuses to Gain Senior Living Strength appeared first on Senior Housing News.

Source: For the full article please visit Senior Housing News

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