Good day, and thank you for standing by. Welcome to The Pennant Group's Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kirk Cheney. Please go ahead.

Thank you, Darian. Welcome, everyone, and thank you for joining us today. Here with me today, I have Brent Guerisoli, our CEO; John Gochnour, our President and COO; and Lynette Walbom, our CFO. Before we begin, I have a few housekeeping matters. We filed our earnings press release and 10-Q yesterday. This announcement is available on the Investor Relations section of our website at www.pennantgroup.com. A replay of this call will also be available on our website until 5:00 p.m. Mountain Time on November 6, 2025. We want to remind anyone who may be listening to a replay of this call that all statements made are as of today, November 7, 2024, and these statements will not be updated after today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions, and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by Federal securities laws, we do not undertake to publicly update or revise any forward-looking statements where changes arise from new information, future events, changing circumstances, or for any other reason. In addition, the Pennant Group, Inc. is a holding company with no direct operating assets, employees, or revenues. Certain of our independent subsidiaries, collectively referred to as the Service Center, provide administrative services to the other operating subsidiaries through contractual relationships with such subsidiaries. The words Pennant Company, we, our, and us refer to the Pennant Group, Inc. and its consolidated subsidiaries. Our operating subsidiaries and the Service Center are operated by separate independent companies that have their own management employees and assets. References herein to the consolidated company and its assets and activities as well as use of the terms we, us, our, and similar terms do not imply that the Pennant Group, Inc. has direct operating assets, employees, or revenue, or that any of the subsidiaries are operated by the Pennant Group. Also, we supplement our GAAP reporting with non-GAAP metrics. When we declare GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our 10-K. With that, I'll turn the call over to Brent Guerisoli, our CEO. Brent?

Thanks, Kirk, and welcome everyone to our third quarter 2024 earnings call. We are pleased to report another record-breaking quarter with strong results across our business. We are so grateful for the more than 7,000 amazing team members throughout the organization. Through their dedicated efforts, our leaders and teams drove new highs in revenue, census, and earnings, and our businesses are healthy and growing. Collectively, our Q3 consolidated results reflect revenue of 180.7 million, an increase of 40.5 million or 28.9% over the prior year quarter. Adjusted EBITDA also grew significantly to 15.1 million, an increase of 4.3 million or 39.2% over the prior year quarter. Adjusted earnings per share for the quarter were $0.26, an increase of $0.06 or 30% over the prior year quarter. These results reflect our ongoing commitment to the five key focus areas we have highlighted throughout the year: leadership development, clinical excellence, employee experience, margin improvement, and growth. With leadership development at the heart of our operating model, the talent and experience in our operations and clusters deepen. With strong portfolio companies, our efforts throughout our footprint allow us to quickly improve new acquisitions and grow seasoned operations. Therefore, the significant investment we have made in our leadership and development programs serves as the catalyst for enduring momentum. This investment continues, as year-to-date, we have added over 60 CEOs in training and elevated nearly 40 internal clinical leaders in our newly expanded clinical leadership development program. Shortly after quarter end, we added more fuel to our growth engine in the form of a follow-on equity offering. The purpose of this offering, which follows the expansion of our revolving credit facility in August, is to prudently manage our balance sheet and provide additional capital for growth. It was our pleasure during the marketing process to introduce new investors to the Pennant story and help them understand the significant opportunity that exists in our platform and the potential for future growth. Now, with zero debt and abundant dry powder, we are well-positioned to execute on the second portion of the signature purchase and the robust acquisition opportunities in our pipeline. Based on this sustained momentum in our business, we are again raising our annual guidance. We anticipate total adjusted revenue of 665.3 million to 706.5 million, a 28.5% increase over 2023 at the midpoint; adjusted EBITDA of 51.9 million to 55.2 million, a 31.5% increase over 2023 at the midpoint; and adjusted earnings per share of $0.90 to $0.96, a 27.4% increase over 2023 at the midpoint. With that, I'll turn the call over to John to provide more detail on our third-quarter operational results.

Thank you, Brent, and good morning everyone. Our strong Q3 performance, both in same-store operations and new transitions, demonstrates the ability of our local leaders and teams to thrive through periods of intense growth. Of note, we do not utilize a centralized acquisition team and instead rely on our local leaders with the support of service center partners to transition new acquisitions. As our results show, they do it exceptionally well while continuing to accelerate performance in their local operations. Our Home Health and Hospice segment rolls on with increasing strength, generating quarterly revenues of 135.7 million, up 34.2 million or 33.7% over the prior year quarter. This included same-store revenue growth of 12 million or 12.2%. Segment adjusted EBITDA of 21.9 million increased by 6 million or 37.5% over the prior year quarter. Segment adjusted EBITDA margin increased to 16.1%, a 20 basis point improvement over the prior quarter. Our home health continued to accelerate, increasing revenue by 33.7% as total home health admissions improved by 38.5%. Medicare home health admissions increased by 30.8%, and revenue per episode increased by 4.9%, each over the prior-year quarter. We are also pleased to note that same-store home health admissions grew by 15.5%, and same-store Medicare home health admissions increased by 8.6% each over the prior year quarter. The driving force behind this growth remains exemplary clinical outcomes. In Q3, our percentage of home health agencies with a star rating of 4 and above increased to 73.5%, and our acute care hospitalization rate of 13.3% remained well below the national average of 14.1%. In addition, we continue to trend ahead of the curve in home health value-based purchasing, where at present over 80% of the operations we owned during the 2024 period project to receive positive adjustments to our 2025 revenues. These strong clinical outcomes make us a provider of choice in our communities, attract additional talented clinicians to our teams, and ultimately lead to strong financial outcomes. We also continue to drive improvement in our hospice programs as our existing operations set themselves apart in the community and we successfully transition recent acquisitions. Hospice revenue increased by 24.6% as admissions increased by 22.8%, same-store admissions increased by 12.2%, average daily census increased by 27.7%, and same-store average daily census increased by 12.8%. During the period, length of stay remained steady. Each of these items is over the prior year quarter. We continue to see significant opportunities for hospice growth as we grow and develop talented business development teams in our local operations, improve length of stay through community education, and build out continuums of care in new communities. On the regulatory front, based on the 2025 Final Hospice Rule, which became effective on October 1, we model a 2.9% rate increase to our Pennant operations. This modest increase will provide an appropriate update to reimbursement to offset the persistent impact of inflation, and as many of these costs have already been realized, should provide an additional tailwind through the remainder of the year. Last week, CMS issued the 2025 Home Health Final Rule with a negative 1.8% permanent behavioral adjustment and a 0.4% decrease to reflect the updated fixed dollar loss impact on outlier payments. These negatives are offset by a market basket update of 2.7% to yield a proposed aggregate net increase of 0.5% in Medicare fee-for-services payments in 2025. As applied to Pennant, based on our geographic distribution and the finalized wage index updates, we anticipate a net neutral impact on reimbursement per episode under the 2025 Final Rule. The Final Rule's reimbursement reduction is half as large as the cut that CMS originally proposed. While we appreciate that CMS responded to feedback from us and other stakeholders regarding the unsupportable and ill-advised cuts originally proposed, we are hopeful that CMS will soon revisit its policy of scarcity relating to home health and recognize that properly reimbursing high-quality home health providers is necessary for patients and beneficial for the public. As we've stated previously, Pennant began in and has thrived through periods of difficulty, much like today. We know our local leaders will respond nimbly and appropriately to these changes as they have in the past. The cyclical nature of home health care reimbursement, coupled with our strong clinical outcomes, gives us confidence that the value we will be realizing moving forward. Our Senior Living business continues to perform well. Senior Living segment revenue of 45 million is up 16.3% over the prior year quarter, and adjusted EBITDA of 4.4 million has increased 43.8% over the prior year. Same-store occupancy continues to grow, reaching 80.2% in the quarter, a 100 basis point increase sequentially. This was paired with 7.8% year-over-year gains in revenue per occupied unit. As we have invested in leaders, increased occupancy, improved revenue quality, and enhanced operational performance, we have seen a consistent increase in margin from 4.6% in Q3 2022 to 8% in Q3 2023 to 9.8% in Q3 2024, a 20 basis point increase over the last two years. There remains upside in this segment, and we are excited to continue to invest in its future. As we announced on November 1, after quarter end, we closed on the acquisition of three communities in Northern Wisconsin through an attractive long-term triple net lease arrangement. This transaction added 125 units to our portfolio in the state where we have CEOs in training prepared to operate and strong clusters and leaders ready to assist with the transition. We continue to evaluate a robust pipeline of opportunities to purchase well-priced Senior Living real estate or step into favorable triple net leases, as landlords eagerly seek to attract and partner with high-quality providers. We will remain disciplined as we evaluate these opportunities and continue to improve the operational fundamentals of our Senior Living business. On the Home Health and Hospice side, in August, we acquired the Washington and Idaho assets of Signature Healthcare at Home. The integration and transition of these operations is proceeding well, and we are beginning to unlock additional value in these businesses as we implement our unique operating model, share best practices, and provide world-class support from our service center. As you may recall, Signature's Oregon assets represent the second and larger portion of the transaction, and we continue to prepare to close the acquisition on January 1, 2025. We are excited to welcome Signature's Oregon operations to the Pennant Team and look forward to the bright future that we will have as one of the largest independent providers in the Pacific Northwest. Even as we remain laser-focused on integrating the significant number of operations we have acquired over the past 18 months, along with the second tranche of Signature, we continue to see a robust stream of meaningful acquisition opportunities in both segments. Our growth does not result from arbitrary quotas for capital deployment. We ensure that we have the right operational and clinical leadership to make an impact on a new community or market and prioritize investments that make sense for the long-term health of our organization.

Thank you, John, and good morning everyone. Detailed financial results for the three months ended September 30, 2024, are contained in our 10-Q and press release filed yesterday. For the quarter ended September 30, 2024, we reported total GAAP revenue of 180.7 million, an increase of 40.5 million or 28.9% over the prior year quarter, GAAP diluted earnings per share of $0.20, and adjusted diluted earnings per share of $0.26. Key metrics for the three months ended September 30, 2024, include 113 million drawn on our revolving line of credit and 4.5 million cash on hand at quarter end, 2.05 times net debt-to-adjusted EBITDA, and cash flows provided from operations of 18.7 million year-to-date, including 7.7 million in Q3. As Brent described above, after quarter end we issued approximately 4 million shares of common stock, which generated 1.5 million in net proceeds for the company. We have used the proceeds to pay down our revolver, which is fully available to be deployed. We now have abundant drivers for future growth, including the $48 million acquisition of Signature’s Oregon operations set to close in January 2025. Our year-to-date results and the impact of the equity offering on our outstanding debt and related interest expense merit an increase in our full-year guidance. Accordingly, we are revising and raising our full-year guidance as follows: full year 2024 total revenue between 665.3 million and 706.5 million, adjusted earnings per diluted share between $0.90 and $0.96, and adjusted EBITDA between 51.9 million and 55.2 million. This updated guidance incorporates current operations and organic growth, diluted weighted average shares outstanding of approximately 32.5 million, and a 26% effective tax rate. It anticipates continued strong operating performance through the end of the year, Hospice reimbursement rate adjustments, decreased interest expense, and contributions from our joint ventures and management agreements. It excludes unannounced acquisitions, the announced purchase of Signature assets, startups, share-based compensation, acquisition-related costs, or one-time implementation and unusual items. I would now like to spotlight a few leaders in our organization who have achieved exceptional results. Their stories demonstrate the remarkable progress that can occur when local leaders build strong cultures and develop high-performing teams of C-level leaders in our operations. Bluebird Home Health and Hospice in Idaho joined the Pennant Group through acquisition in 2023. Led by future CEO, Justin Stenquist; future CCO, Paige Ziemer; future CMO Ali Luzetti; and Director of Operations, Sarah Hamilton, Bluebird has focused intensely on culture and being a solution for healthcare community partners. As a result, Bluebird has grown hospice census and home health census by 20% since acquisition, increasing top-line revenue and bottom-line earnings by 36% and 192% respectively, each over the prior year quarter. Bluebird's success, coupled with the strong continuing performance of Pennant's longstanding Western Idaho agency, Horizon Home Health and Hospice, reaffirms our ability to support agencies in the same communities. At Safe Harbor Home Care in San Diego, California, CEO Jesse Madera and operational leaders are focused on the compelling opportunity that exists in private duty home care and veteran support services. By emphasizing quality care and the social determinants of health, they have filled a vital need in the local care continuum and demonstrated that our operating model creates significant value in non-skilled care. Safe Harbor's revenue and EBITDA have grown by 83% and 285% respectively, each over the prior year quarter. We look forward to the continued success that Jesse and his team will create in Southern California. At Harvard View Assisted Living and Meadowview Assisted Living, CEO Tammy Wagner, CWO Aseli Gadzinski, and Wellness Director Stephanie Kopis continue to contribute to our healthy performance in Northern Wisconsin. This team has created an exceptional culture, which is evident with great engagement results and turnover rates that are roughly 50% better than the industry average. The healthy culture has driven occupancy up by 900 basis points over the prior year quarter to over 96%, and strong financial results have followed, including revenue growth of 11% and EBITDA growth of 135% each over the prior year quarter. With that, I'll turn the call back over to Brent for concluding comments.

Thanks, Lynette. As we conclude, I'd like to once again thank all the operators and clinicians who, like those highlighted above, dedicate themselves daily to providing life-changing care to our patients and residents. You are truly making a difference in the lives and communities we serve, and it is an honor to work alongside of you. With that, we'll open it up for questions. Darian, can you please instruct the audience on the Q&A procedure?

Absolutely. At this time, we will conduct the question and answer session. Our first question comes from the line of Ben Hendrix of RBC Capital Markets. Your line is now open.

Hey, great. Thanks, everyone, and congratulations on the quarter. I have a quick question regarding your views on the upcoming presidential administration. I'd like to hear your thoughts on the regulatory environment for both segments during President Trump's first term, how it compares to the current administration, and what you anticipate moving forward in terms of the operating backdrop. Thank you.

Thanks for the question. The first thing I'd say is that obviously we're agnostic about politics as far as the way that we operate the business. Our focus is on controlling the things that we can control. Happy to share a few insights from the experience that we've had operating over the last 12 years through multiple Democratic and Republican administrations. The first thing that we've noticed is there has been a significant increase in regulatory enforcement over the last several years, which contrasts with what we saw during the Trump administration. So we're optimistic that as CMS continues to consider the best approach to reducing fraud in the industry, they will recognize that burdening good quality providers with significant post-payment audits isn't necessary. The second aspect is on the reimbursement front, where we have three years of flat to declining reimbursement on home health, contrasting sharply with the solid reimbursement patterns we experienced under the Trump administration, where increases actually corresponded with the inflation we felt. I think those are the two biggest highlights. Again, our focus is truly on delivering the best possible care to our patients and controlling our operations.

Great. Thanks guys.

Thank you. Our next question comes from the line of Scott Fidel. Your line is now open.

Hello, it's... Who was it? Is it for Scott Fidel?

Scott Fidel, yes, please.

Okay, great. Yeah, you were a little jumbled on the call there. Great. Hi everyone. First question, just wanted to follow up on some of the M&A commentary. Clearly, M&A is in full flight right now across the businesses. But it feels like there's a bit of an inflection right now on the Senior Living side where you've done several transactions recently. I definitely noted John's comments around seeing a healthy pipeline on that side. So it feels like perhaps that side of the business, you're getting more comfortable again with M&A on the Senior Living side. I was hoping you could frame how you're thinking about your capital allocation towards M&A across Home Health and Hospice and then Senior Living. I know you look opportunistically at where the opportunities are, but also it would be helpful if you wanted to maybe give us some framework around how you're thinking about allocating growth capital towards each of the two major segments.

Yeah, great questions there, Scott. And I think you framed it well. When we look at opportunities, there are three determinants we consider. The first is whether we have leaders ready to step into opportunities — so who then what. The second is whether we have healthy clusters and markets ready for growth. We’ve observed that our leaders are looking for opportunities to grow based on our CIT pipeline. The third is identifying good opportunities where we see a chance to grow and create value. Regarding the Senior Living front, as you pointed out, this reflects the strength we’re experiencing in our Senior Living business, particularly in Wisconsin. We’ve announced this acquisition and have done others in Wisconsin recently. We’re growing in a healthy manner. Strong teams are in place, allowing us significant growth opportunities. We plan to grow in both segments; we are an opportunistic growth company and will invest where we see strength and opportunities. The good news is our pipeline remains robust. We previously talked about Signature, and there are additional opportunities we anticipate bringing on board in 2025. Essentially, we will allocate capital where we believe we can create the most value. On the Senior Living side, it's often not solely a capital allocation question since it relates to upfront investments, unless we choose to invest in real estate, a few of which we have done. So we'll be cautious but optimistic in looking for opportunities where it's sensible.

Okay, great. Got it. And then next question. I was definitely interested in the sequential jump in the home care revenues. I'm assuming that was from the first tranche of Signature. So maybe there was a different business mix there. Can you confirm that and talk about the profile of that business as well as whether, in addition to M&A opportunities in the HHH side, you're more interested in growing that home care business line as well?

Yes, Scott, really appreciate the question, and I'll highlight a couple of things. First, we're genuinely excited about how home care is trending. Some of this progress is due to our allocation of revenue between Medicaid and PCS to clarify how much revenue is in that home care and other categories. The PCS business has performed very well. Two additional components are our provider services business, which focuses on geriatric primary care and palliative care, where we're building out continuums across the country and are excited about that growth, and we're also capturing the Hartford management fee in that line. There’s been a slight reallocation of Medicaid rates that were captured under Home Health and Hospice, now correctly categorized under Home Care to show this growth clearly. The strength in the home care business reflects our leaders' commitment to using home care solutions to address social determinant issues nationwide. We see this as a growth area, and we plan to pursue opportunities in that line of business.

Okay, that's helpful color. It's good to know that the Hartford is in there too because just in the third quarter alone it sort of moved towards like a 50 million annualized revenue business versus well below 20 in the first half, okay. And then just one last question for you. Obviously, you've been operating in this very tight rate environment in home health for several years, and hopefully, we can be optimistic that there might be a different rate regime on the way with the new administration. But in the meantime, just at that sort of net neutral rate that you talked about, do you feel like you can maintain your home health margins with the other levers that you have, even grow them, or do you think there will be a little bit of diminishment for the Medicare home health fee-for-service business in 2025 on the margin side?

Scott, we remain confident in the unique ability of our operating model, which focuses on local leaders and transparently tracks the impact everything from revenue changes to operational changes and associated costs. Our model allows us to respond effectively to evolving reimbursement challenges. It's tough to maintain margins when there's a labor cost increase like 5.4% amid flat reimbursement updates, yet our home health operators are executing superbly, working efficiently, and encouraging our clinical teams to operate at the top of their license to maximize productivity. We’ve also improved our talent retention this year, enhancing our turnover rates, which is driving this growth. Although it's a substantial headwind to face in a high-inflation environment, I think you’ll see continued progress on margins because we’ve built a robust model. Our past performance over 12 years in adversity gives us confidence that we can navigate the future successfully.

Okay, thanks. Helpful color. Thanks.

And I’m showing no further questions, so this will conclude the question and answer session. I would now like to turn it back over to Brent Guerisoli, Group CEO, for closing remarks.

Okay, well, thank you, Darian, and thank you everyone for joining us today.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.