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Pennant Group, Inc. (PNTG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered accelerating top-line growth and a modest EPS beat: revenue was $219.5M (+30.1% YoY) versus Street at ~$210.6M; adjusted diluted EPS was $0.27, matching consensus, while GAAP diluted EPS was $0.20 . Street figures marked with * are from S&P Global.
  • Guidance was raised across revenue, adjusted EPS, and adjusted EBITDA; management signaled further potential updates tied to closing the UnitedHealth Group/Amedisys divestiture, with tax rate and share assumptions refined .
  • Segment momentum was broad-based: Home Health & Hospice revenue +32.5% YoY, hospice ADC +21.4% YoY; Senior Living revenue +23.1% YoY with RevPOR +8.3% YoY; segment adjusted EBITDA improved in both segments .
  • Call tone was confident despite regulatory headwinds; management emphasized resilient operating model, robust clinical quality, diversified revenue mix, and preparedness for the UHG/Amedisys asset purchase; regulatory advocacy is ongoing on CMS’s proposed home health cuts .
  • Near-term catalysts: raised guidance and Southeast portfolio acquisition clarity (court order, settlement) are potential stock drivers; risks include CMS’s 2026 proposed home health rule and hospice cap expense at select CA ops .

What Went Well and What Went Wrong

What Went Well

  • Broad-based growth: “We are pleased by the strength in our home health, hospice and senior living businesses, as each contributes meaningfully to our positive performance.”
  • Guidance raised on momentum: revenue to $852.8–$887.6M; adjusted EPS $1.09–$1.15; adjusted EBITDA $69.1–$72.7M; midpoint EPS growth +19.1% YoY on 2024 adj EPS .
  • Clinical and operating quality: CMS home health star rating 4.1 vs national 3.0; PPH 8.6% vs national 9.9% and peer 10.3%; VBPM tailwinds and hospice final rule (+~2.5% rev/day effect in Q4 onward) .

What Went Wrong

  • Regulatory headwinds: CMS 2026 proposed home health rule net –6.4% cut; potential knock-on to capitated contracts; management mobilizing advocacy; diversified mix mitigates impact (traditional Medicare HH ~18% of total revenue) .
  • Hospice cap expense: elevated at limited CA operations; management working to taper exposure, expects decline in 2H margin drag vs 1H .
  • Mix headwinds in payor sources: Medicare/Medicaid share decreased YoY (to 61.3% from 64.2%), with higher Private/Other; requires continued pricing and collections discipline .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD)$188.892M $209.842M $219.501M
Revenue Consensus Mean ($USD)*$185.829M$201.462M$210.619M
GAAP Diluted EPS ($)$0.16 $0.22*$0.20
Primary EPS Consensus Mean ($)*$0.24$0.238$0.27
EBITDA Margin %*5.89%6.93%5.79%
EBIT Margin %*4.93%6.03%4.77%
Net Income Margin %*3.05%3.71%3.23%

Values marked with * retrieved from S&P Global (GetEstimates/GetFinancials).

  • Revenue beat: Q2 actual $219.5M vs consensus ~$210.6M → +4.2%; EPS in line on adjusted ($0.27) and below on GAAP ($0.20) as expected given non-GAAP adjustments . Street figures marked with * are from S&P Global.
  • Non-GAAP bridge: Adjusted diluted EPS $0.27 vs GAAP $0.20; adjustments include share-based comp ($2.212M), acquisition-related costs/credit allowances ($2.166M), and transition activities; tax-effect applied at 26% .
  • Cash flow YTD: CFO highlighted $13.4M operating cash flow YTD; Q2 contributed ~$34.6M (implied quarterly swing), with net debt to adjusted EBITDA 0.38x and $14.4M cash at quarter-end .

Segment Breakdown

Segment MetricQ4 2024Q1 2025Q2 2025
Home Health & Hospice Revenue ($)$142.021M $159.9M $166.020M
Home Health & Hospice Adjusted EBITDA from Ops ($)$21.304M $25.1M $25.469M
Senior Living Revenue ($)$46.871M $50.0M $53.481M
Senior Living Adjusted EBITDA from Ops ($)$4.206M $4.9M $5.141M

KPIs

KPIQ4 2024Q1 2025Q2 2025
Total Home Health Admissions15,959 18,878 17,832
Medicare Home Health Admissions6,443 (Q1 not disclosed by number; see same-store metrics)6,980
Avg Medicare Revenue per 60-day Episode ($)$3,824 +9.3% YoY; same-store +5.9% YoY $3,882 (+5.9% YoY)
Total Hospice Admissions3,090 3,783 (+22.8% YoY) 3,500 (+14.7% YoY)
Hospice Average Daily Census3,445 3,794 (+28.1% YoY) 3,909 (+21.4% YoY)
Hospice Medicare Revenue per Day ($)$186 —$190 (+3.3% YoY)
Senior Living Occupancy (%)78.6% ~flat; pricing mix shift 78.8% (flat YoY; same-store 80.1%)
Senior Living Avg Monthly RevPOR ($)$4,961 +11.3% YoY $5,188 (+8.3% YoY; same-store +8.8%)

Guidance Changes

MetricPeriodPrevious Guidance (Feb 27, 2025)Current Guidance (Aug 6, 2025)Change
Total Revenue ($)FY 2025$800.0M–$865.0M $852.8M–$887.6M Raised
Adjusted Diluted EPS ($)FY 2025$1.03–$1.11 $1.09–$1.15 Raised
Adjusted EBITDA ($)FY 2025$63.1M–$68.2M $69.1M–$72.7M Raised
Effective Tax Rate (%)FY 2025 Assumption~25.5% 26.0% Raised
Diluted Wtd Avg Shares (M)FY 2025 Assumption~36.0 ~35.7 Maintained/Refined
UHG/Amedisys Transaction AssumptionsFY 2025No incremental earnings includedIncludes additional expenses; no earnings given timing uncertainty Clarified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Regulatory/Home Health RuleNo 2026 rule yet; 2024 results strong; guidance set CMS proposed 2026 net –6.4% cuts; diversified revenue and advocacy plan; traditional Medicare HH ~18% of total revenue Heightened risk; mitigation in place
Acquisition StrategySignature (platform) integration; pipeline robust; Red Mountain SL acquisition (4/1) UHG/Amedisys settlement and court order; purchasing 38–50 locations (mostly TN; also AL, GA), ~$113–$147M price, 4–8x EBITDA target; close expected Q4 Scaling up; Southeast center of strength
Senior Living Pricing/OccupancyRevPOR +11.3% YoY; occupancy flat; focus on revenue quality RevPOR +8.3% YoY; same-store occ +90bps sequential to >80%; margins improving Improving mix and occupancy
Clinical Quality (Home Health)CMS star 4.1; PPH 8.7%; quality-driven growth CMS star 4.1; PPH 8.6%; VBPM positive impacts; strong admissions and episode management Sustained strength
Labor/Hiring EnvironmentNet nurses +200 YoY in Q1; SL labor inflation ~<5%; HH/H ~3.2% Continued investment in leadership (CITs), service center resources to prep for UHG/Amedisys transition Preparedness improving
Hospice Cap ExposureNot explicit in Q4; strong hospice ADC growth Elevated cap expense at limited CA ops; taper expected 2H Improving outlook
Macro/PayorsFocus on RevPOR and payer mix; Medicaid ~30% revenue in SL markets Some potential trickle to capitated contracts; diversified mix helps Manageable headwind

Management Commentary

  • CEO on momentum: “The second quarter represents a continuation of our robust operating momentum… we have faced dynamic changes in our operating environment, and we have grown through them.”
  • COO on acquisitions: “We see significant untapped potential for organic improvement and exciting acquisition opportunities on the near horizon, including the announced transaction with UnitedHealth Group and Amedisys.”
  • CFO on guidance update: “Full year 2025 adjusted EPS is anticipated to be between $1.09 and $1.15 and full year adjusted EBITDA is anticipated to be between $69.1 million and $72.7 million.”
  • COO on regulatory stance: “CMS’s proposal is seriously misguided… Along with the National Alliance for Care at Home and industry partners, we have mobilized a vigorous and urgent advocacy response.”
  • COO on Southeast deal: “The package will include between thirty eight and fifty locations… Approximately two thirds of the revenue is connected to home health and one third to hospice… purchase price between $113,000,000 and 147,000,000 … target 4–8x EBITDA.”

Q&A Highlights

  • Tennessee/Southeast strategy: Management highlighted talent density in TN and benefits of building an Ensign–Pennant continuum; sees the assets as high-quality and a platform for growth .
  • Proposed home health cuts: Impact extends to capitated contracts, but diversified mix and operational levers (efficiency, advocacy) provide offsets; continued belief in home health’s essential role .
  • Senior Living RevPOR sustainability: Expect mid-single-digit RevPOR growth longer-term with continued occupancy improvement; near-term trends above that, aiding margin .
  • Pre-spend for UHG/Amedisys: Investments in leadership (CIT hires), service center resources (collections, finance), and shared services to ensure smooth transition; guidance includes expenses but not earnings ahead of closing .
  • Margin trajectory 2H: Drivers include operational levers, hospice cap decline, hospice final rule tailwind (~2.5%), and contribution from Signature and GrandCare; Senior Living momentum supports margins .

Estimates Context

  • Revenue: Q2 2025 actual $219.501M vs consensus $210.619M* → beat; Q1 2025 actual $209.842M vs $201.462M*; Q4 2024 actual $188.892M vs $185.829M*.
  • EPS: Q2 2025 adjusted EPS matched consensus at $0.27*; Q1 2025 actual $0.27* vs $0.238*; Q4 2024 actual $0.24* vs $0.24*.
  • Target Price: Consensus mean ~$33.67* (6 estimates), unchanged across periods.

Values marked with * retrieved from S&P Global (analyst estimates).

Key Takeaways for Investors

  • Broad-based growth with a meaningful revenue beat and inline adjusted EPS supports raised FY guidance; the narrative centers on operating momentum amid regulatory uncertainty .
  • The Southeast portfolio acquisition is a strategic scale-up at a disciplined multiple, with prepared leadership and resources to integrate; expect guidance updates post-clarity on timing .
  • Regulatory risk (CMS proposed home health cuts) is real but mitigated by diversified revenue, advocacy, and operational levers; management quantifies traditional Medicare HH at ~18% of total, limiting direct exposure .
  • Senior Living continues a multi-quarter revenue quality push with RevPOR growth and emerging occupancy gains; margin expansion likely as occupancy improves and pricing holds .
  • Hospice momentum remains strong; cap exposure in CA is being addressed, with expectations for reduced drag in 2H and a Q4 tailwind from the hospice final rule .
  • Near-term trading: stock likely sensitive to guidance revisions and UHG/Amedisys closing milestones; headline risk from CMS rule could create volatility but also M&A/market share opportunities per management .
  • Medium-term thesis: scalable local-operator model, clinical quality differentiation, and disciplined acquisition strategy underpin durable growth; watch labor inflation trends, cap resolution, and payer mix evolution .

Appendix: Selected Source Tables and Details

  • GAAP/Non-GAAP Reconciliation: Adjusted diluted EPS $0.27 vs GAAP $0.20; non-GAAP net income $9.412M; adjustments include share-based comp $2.212M, acquisition-related costs $2.166M, transitioning ops $(0.982)M, tax-effected at 26% .
  • Payor Mix (Q2 2025): Medicare 47.3%, Medicaid 14.0%, Managed Care 13.9%, Private & Other 24.8% .
  • Cash Flow (1H 2025): Net cash from operations $13.414M; net cash used in investing $(60.355)M; financing $37.080M; ending cash $14.385M .

Notes:

  • Street estimate values and certain ratio metrics are from S&P Global and marked with * (GetEstimates/GetFinancials).