The fourth quarter of 2021 did not go the way leaders with The Pennant Group (Nasdaq: PNTG) had hoped.
A number of factors led to the company’s challenged performance in 4Q, including lingering pressures from the Covid-19 pandemic, staffing woes, recent leadership overhauls in the company’s senior living segment, infrastructure changes and the recent high volume of home health and hospice acquisitions.
The outlook was a little brighter for Pennant’s senior living segment, which has gained about 100 basis points of occupancy since being hit hard by the omicron coronavirus variant last December. Those gains have helped the company drive revenue per occupied room (RevPOR), which registered at $3,291 in the fourth quarter of 2021.
Pennant reported an average senior living occupancy of 72.4% for the fourth quarter of 2021.
The Eagle, Idaho-based company also expects to see positive momentum related to its agreement last month to transfer operations of five senior living communities to affiliates of The Ensign Group (Nasdaq: ENSG), the company it spun off from in 2019.
Although Pennant’s path to growth and track record remain intact, Stifel Analyst Tao Qiu is less sanguine on the company’s pace of margin recovery in 2022, particularly as it relates to some of the company’s other moving parts.
“Strong RevPOR growth and recently-announced senior living dispositions should strengthen senior living but [home health and hospice] needs to see meaningful margin improvement too, which we consider challenging,” Qiu wrote in a Feb. 28 note to investors.
The company also saw a challenging earnings period in the third quarter of 2021. CEO Danny Walker noted that the company has only seen a small number of periods as challenging as the current one in its 12-year history.
“It’s unusual for us to come up short of our expectations,” CEO Danny Walker said during a fourth-quarter 2021 earnings call with investors and analysts Tuesday. “We look forward to restoring and building confidence in the organization as we move forward into 2022 and beyond.”
The Pennant Group has 88 home health and hospice agencies and 54 senior living communities spread across 16 states, primarily on the West Coast.
The company’s share value dipped almost 7.6% to land at $15.02 by the time the markets closed Tuesday.
Investments for the future
Although Pennant has more work to do with regard to its recovery, the company made progress in 4Q21 as it related to building out its local leadership bench and honing its data analytics capabilities.
On the leadership front, the company spent time in the fourth quarter appointing market and cluster leaders and in elevating and recruiting sales and marketing employees. The company has also rapidly deployed data and resident assessment tools to aid its operations.
Pennant additionally took “significant steps” to retool its senior living footprint in a way that management says will set it up for growth long-term. With the transition of the five communities to Ensign in January, the company now has a smaller, more manageable portfolio on which to focus.
All of that will help accelerate the company’s ongoing turnaround in 2022, according to Pennant Group President Brent Guerisoli.
“With this leaner senior living portfolio, a deepening bench of leaders in the field and service center and better data and systems, we are confident we can recover lost ground and realize the significant potential in this segment,” Guerisoli said during the company’s 4Q21 call Tuesday.
Guerisoli didn’t mince words when he acknowledged the company’s progress in 4Q21 was not “anywhere close to where we expected to be in the near-term.” And, the company’s leaders expect their challenges to last into the first quarter of this year.
But Guerisoli also believes recent moves will bear fruit this year and down the road.
“We’re optimistic but realistic and in the timeframe that it’s going to take, but it was encouraging to see a step forward in Q4,” he said.