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Pennant Group, Inc. (PNTG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong top-line and earnings growth: revenue $188.9M (+29.4% YoY), GAAP diluted EPS $0.16, and adjusted diluted EPS $0.24, with momentum across Home Health, Hospice, and Senior Living .
  • Consolidated adjusted EBITDA was $13.8M; management flagged an atypical hospice cap expense of $1.7M, noting that excluding this item, Q4 adjusted EBITDA margin would have risen from 15.0% to 16.2% (a notable positive surprise) .
  • 2025 guidance introduced: revenue $800–$865M, adjusted EPS $1.03–$1.11, adjusted EBITDA $63.1–$68.2M; guidance assumes ~36M diluted shares and a 25.5% effective tax rate .
  • Catalysts for the stock narrative: accelerating same-store growth, acquisitions (Signature Healthcare at Home Oregon close Jan-1-2025), technology/operational efficiency, and favorable VBP tailwinds; management anticipates an earnings ramp across 2025 .

What Went Well and What Went Wrong

What Went Well

  • Home Health and Hospice delivered volume-led growth: Q4 home health admissions +40.9% YoY; Medicare home health admissions +30.1%; hospice admissions +21.7%; hospice ADC +23.2% .
  • Senior Living revenue rose +20.0% YoY in Q4 with improved rate quality (average monthly revenue per occupied unit +8.6%) and strategic Wisconsin expansion (125 units under long-term triple net leases) .
  • Management quotes underscore confidence: “We are pleased to conclude a remarkable year... transformative expansion... anticipate continued positive momentum in 2025 and beyond” — CEO Brent Guerisoli ; “record-setting cash flows from operations... well-poised for future growth” — CFO Lynette Walbom .

What Went Wrong

  • Hospice cap expense created margin drag: management cited a $1.7M atypical cap hit in Q4; excluding it, adjusted EBITDA margin would have improved more meaningfully; management expects reduced impact in 2025 (~one‑third of 2024) as referral mix is adjusted .
  • Slight hospice Medicare revenue per day decline (-1.6% YoY in Q4) and modest Senior Living occupancy pressure (-40bps YoY) despite improved revenue quality .
  • Continued regulatory headwinds in home health reimbursement (net neutral under 2025 final rule) and ongoing audit environment; margin preservation requires operational efficiency and payer/managed care rate actions .

Financial Results

Consolidated key metrics (Q2 → Q3 → Q4 FY2024)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$168.745 $180.688 $188.892
YoY Revenue Change (%)+27.6% +28.9% +29.4%
GAAP Diluted EPS ($)$0.18 $0.20 $0.16
Adjusted Diluted EPS ($)$0.24 $0.26 $0.24
Adjusted EBITDA ($USD Millions)$13.150 $15.149 $13.763

Segment revenue breakout (Q3 → Q4)

SegmentQ3 2024 ($USD Millions)Q4 2024 ($USD Millions)
Home Health$60.988 $66.766
Hospice$62.757 $63.391
Home Care & Other$11.927 $11.864
Total HHH Services$135.672 $142.021
Senior Living Services$45.016 $46.871
Total Revenue$180.688 $188.892

KPIs (Q3 → Q4)

KPIQ3 2024Q4 2024
Total Home Health Admissions14,993 15,959
Medicare Home Health Admissions6,071 6,443
Avg Medicare Revenue per 60-Day Episode ($)$3,760 $3,824
Total Hospice Admissions2,987 3,090
Hospice Average Daily Census3,444 3,445
Hospice Medicare Revenue per Day ($)$183 $186
Senior Living Occupancy (%)79.1% 78.6%
Avg Monthly Rev per Occupied Unit ($)$4,836 $4,961

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025N/A$800.0–$865.0 New
Adjusted EPS ($)FY 2025N/A$1.03–$1.11 New
Adjusted EBITDA ($USD Millions)FY 2025N/A$63.1–$68.2 New
Diluted Wtd Avg Shares (MM)FY 2025N/A~36 New
Effective Tax Rate (%)FY 2025N/A25.5% New
Home Health Adjusted EBITDA Margin (%)FY 2025N/AHigh‑15% to Low‑16% (management view) New (qualitative)
Senior Living Adjusted EBITDA Margin (%)FY 2025N/AMoving toward ~10.5% (management view) New (qualitative)
Operating Cash Flow ($USD Millions)FY 2025N/AMid‑ to high‑$40s New
CapExFY 2025N/ASimilar to 2024 (absolute $) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Technology/InteroperabilityUpsized revolver supports systems investments; management agreement with Hartford introduces tech/process support Kno2 QHIN partnership to drive automation, efficiency, and connectivity across agencies and communities Strengthening digital infrastructure to enhance clinical/operational performance
Regulatory/Rate EnvironmentHospice +2.9% FY2025 rate update; Home Health proposed net -1.7% (later finalized near-neutral for PNTG) Net neutral impact expected in HH under final rule; managing hospice cap exposure and referral mix Navigating reimbursement headwinds; mitigation via mix, quality, managed care
Regional ExpansionSignature WA/ID closed Aug-1-2024; Wisconsin acquisitions post-Q3 Signature Oregon closes Jan-1-2025; 125-unit WI portfolio added Nov-1-2024 Sustained acquisitive growth in Pacific NW and WI
Senior Living Rev Quality/OccupancyFocus on rate quality; occupancy trending up; margin expansion to 9.8% in Q3 Q4 occupancy -40bps YoY but rate +8.6%; more SL M&A and cluster strength in WI Optimizing mix/rates while targeting occupancy gains
Value-Based Purchasing (VBP)>80% of owned HH operations project positive 2025 adjustments Positioned to benefit from expanded HH VBP due to above-average outcomes Tailwind expected from quality metrics

Management Commentary

  • Strategy and momentum: “2024 was also a year of transformative expansion… we anticipate continued positive momentum in 2025 and beyond.” — CEO Brent Guerisoli .
  • Balance sheet and cash: “record-setting cash flows from operations… well‑poised for future growth with ample dry powder to deploy.” — CFO Lynette Walbom .
  • Hospice cap mitigation: “I would expect some continued drag in 2025… potentially about 1/3 of what we experienced this year… focused on adjusting referral patterns.” — President/COO John Gochnour .
  • Margin outlook: “Home health margin… high 15%, low 16% EBITDA margin; senior living… increasing throughout the year… moving closer to 10.5%.” — CFO Lynette Walbom .
  • 2025 ramp cadence: “similar ramp… maybe a little lighter at the beginning and more aggressive toward the end” due to integration of larger acquisitions. — CEO Brent Guerisoli .

Q&A Highlights

  • Same-store growth assumptions: Guidance embeds ~7% same-store revenue growth (ex‑Signature), with upside potential in HHH given recent trends .
  • Medicaid exposure: ~15% of revenue exposed (primarily Senior Living + Home Care), with optimism that lower-cost settings save system dollars amid policy scrutiny .
  • Earnings/cash ramp and CapEx: 2025 operating cash flow mid- to high-$40M; CapEx similar to 2024; more pronounced free cash flow ramp expected .
  • Hospice cap remediation timeline: Significant Q4 cap expense; expect reduced drag in 2025 via referral mix shifts and focus on acute partners (California most impacted) .
  • Senior Living mix and M&A: Ongoing revenue quality focus; early innings of occupancy ramp; continued SL pipeline with attractive triple net leases and targeted real estate buys .

Estimates Context

  • We attempted to retrieve Wall Street consensus estimates via S&P Global for Q4 2024 (EPS, revenue) and recent quarters, but the request was unavailable due to SPGI rate limits. As a result, estimate comparisons for Q4 cannot be provided and beat/miss assessments versus consensus are not included. Values retrieved from S&P Global were unavailable at this time.

Key Takeaways for Investors

  • Volume-driven growth across HHH and improved SL rate quality continue to underpin revenue and earnings; watch for hospice cap normalization to unlock additional margin upside in 2025 .
  • 2025 guidance implies double-digit EPS growth with a back-half weighted ramp as acquisitions are integrated; operational cadence supports tactical positioning around quarterly prints .
  • Consolidated adjusted EBITDA trajectory remains solid; excluding atypical hospice cap items, Q4 margins would have shown stronger expansion — monitor referral mix shifts and cap accruals .
  • Strategic M&A (Signature Oregon close Jan-1-2025) and SL expansion (WI triple net leases) enhance footprint, clustering, and continuum synergies; accretion expected as Pennant’s operating model scales .
  • Technology and interoperability investments (Kno2 QHIN; Hartford management agreement) should improve efficiency, care coordination, and payer dialogue — potential tailwinds to rate negotiations and outcomes .
  • Regulatory environment remains mixed (HH net neutral in 2025; hospice rate up); Pennant’s above-average quality metrics and VBP positioning are differentiators to sustain growth and margin .
  • Near-term trading: focus on quarterly ramp expectations, hospice cap updates, and integration milestones; medium-term thesis: leadership-driven execution, acquisitive growth, and improved margin structure across segments .