Pennant Group, Inc. Q2 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the Pennant Group Second Quarter 2025 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kirk Cheney, Executive Vice President. Please go ahead.

Thank you, Didi. 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 August 6, 2026. We want to remind anyone who may be listening to a replay of this call that all statements are made as of today, August 7, 2025, 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 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 publicly update or revise any forward-looking statements where changes arise from new information, future events, 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. The words Pennant, company, we, are 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 the use of the terms we, us, our and similar terms do not imply that the Pennant Group, Inc. has direct operating assets, employees, or revenues or that any of the subsidiaries are operated by the Pennant Group. Also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our 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-Q. And with that, I'll turn the call over to Brent Guerisoli, our CEO. Brent?

Thanks, Kirk, and welcome, everyone, to our second quarter 2025 earnings call. Building on a robust first quarter, we are pleased to report continued strong results and momentum across each of our service lines. Our positive performance reflects the consistent effort we have applied to every aspect of our business through our five key focus areas: leadership development, clinical excellence, employee engagement, margin, and growth. We have been talking about these initiatives on our earnings calls for many quarters, and these focus areas continue to be the catalyst for relentless improvement. In Q2, we generated revenue of $219.5 million, an increase of $50.8 million or 30.1%, and adjusted EBITDA of $16.4 million, an increase of $3.2 million or 24.5%, each over the prior year quarter. We are operators. We have succeeded and continue to perform in all kinds of environments through inflation, reimbursement cuts, a global pandemic, regulatory changes, multiple presidential administrations, market disruptions, emerging payer trends, and more. Through it all, we have grown and thrived and created more and more opportunities for local teams to build amazing operations that benefit their communities, residents, and patients. At this moment, CMS' misguided and counterproductive 2026 proposed home health rule has generated negative investor sentiment about home health. We agree that the proposed rule is seriously flawed, and we are engaged in an urgent effort to improve the final rule. But we would also urge you to dig beneath that narrative and examine the strength of our home health operations and the diversity of our business. Despite years of flat or modestly negative rate updates, our home health business has continued to grow organically and by acquisition. Our hospice service line continues to achieve record-breaking success. Our senior living operations are now in a much stronger position and have positive momentum. Pennant continues its steady upward trajectory. Our announced purchase of divested assets from Amedisys and UnitedHealth Group demonstrates the abiding potential we continue to see in home health. Home health services are a vital component of America's health care strategy. Their importance will only increase as more seniors age into these services and governmental leaders look for solutions to reduce the nation's overall health care spending. Patients want to receive care in the home. Lawmakers want to reduce deficits and improve health outcomes. Home health is a solution for both issues. Regarding our acquisition connected to the Amedisys UnitedHealth divestiture, we understand that just moments ago, an order was filed on the court's docket in the District of Maryland, outlining United's settlement with the Department of Justice in the antitrust matter. As you will see in the order, we are purchasing a large portfolio of agencies from United and Amedisys, primarily in Tennessee with additional locations in Alabama and Georgia. We view it as a very compelling transaction that will take us into attractive markets and create a center of strength in the Southeast. We are well prepared to execute on this expansion as we have continued to deepen our leadership bench through our CEO training and clinical leadership training programs, build momentum across our business lines, and have a healthy balance sheet with ample capacity. John will provide more specific details on the acquisition in a moment. As announced in yesterday's press release, we are raising annual guidance based on the momentum in the business, the operations we have added or expanded, and the significant upside in our existing operations. We anticipate full year revenue in the range of $852.8 million to $887.6 million and adjusted earnings per share in the range of $1.09 to $1.15. The midpoint of $1.12 represents a $0.05 increase over our original 2025 guidance and a 19.1% increase over our 2024 adjusted earnings per share. With today's announcement of the UnitedHealth Amedisys settlement, we anticipate updating guidance once again as we gain additional clarity regarding closing conditions and timing. With solid performance across the portfolio, exciting growth opportunities, and a healthy balance sheet, we are excited for the remainder of 2025 and beyond. With that, I'll turn the call over to John to provide more detail on our second quarter operational results.

Thank you, Brent, and good morning, everyone. Pennant's local leaders continue to drive inspiring clinical and operational results across the organization. Our results reflect strong organic growth even as we onboarded a record number of new operations. In our Home Health and Hospice segment, our excellent clinical and cultural performance continues to translate to record financial results. Top line segment revenue in the second quarter was $166 million, an increase of $40.7 million or 32.5%, and adjusted EBITDA was $25.5 million, an increase of $5.9 million or 29.9%, each over the prior year quarter. While we are pleased with these strong results, we continue to see opportunities to drive improvement in each of our five focus areas that will help us realize the extraordinary potential inherent in each of our operations. On the hospice side, we continue to see strong progress and growth. Hospice revenue was $73.8 million, an increase of $14.4 million or 24.3% over the prior year quarter. Hospice admits increased 14.7%. Average daily census increased 21.4%, and revenue per day increased 3.3%, each over the prior year quarter. Our mature operations continued to expand and deepen their impact in their communities as same-store admissions grew 4.5% and Average Daily Census increased 6.6%, each over the prior year quarter. These results demonstrate the alignment inherent in our unique operating model as operators drive significant growth in our mature portfolio even as they help support acquisitions and transition new operations. While our hospice results are strong, as described in our last call, our results continue to be impacted by hospice cap expense at a limited number of operations in California. As we continue to make progress in resolving these exposures, the underlying strength of our hospice performance will be more evident. While overall cap expense remains elevated, we are pulling the appropriate levers and have made solid progress tapering our 2025 cap exposure in the state. Despite the difficult reimbursement environment and sustained expense pressure, our home health business has continued to perform well. We are knitting ever more patients, managing episodes and optimizing referral flow at the local level to ensure we deliver care as efficiently and effectively as possible. As a result, our home health revenue grew to $79.2 million, an increase of $17.6 million or 28.5% over the prior year quarter. Total home health admissions increased 26.1%, Medicare admissions increased 21.6%, and revenue per episode increased 5.9%, each over the prior year quarter. Our mature home health operations continued their steady growth story as same-store admits increased 6%. Medicare admissions increased 2.9%, and revenue per episode increased 5.5%, each over the prior year quarter. We are a clinical business, and our clinical quality continues to be essential to unlocking new opportunities for us, including our joint ventures and the United Amedisys transaction. Our quality scores remain excellent with an average CMS star rating of 4.1 compared to the national average of 3.0 and a reported potentially preventable hospitalization rate of 8.6%, which compares favorably to the national average of 9.9% and peer group average of 10.3%. We also continue to succeed in CMS' home health value-based purchasing program, where we have experienced positive revenue impacts at our mature operations. Turning to regulatory updates. On the hospice side, CMS recently issued its final hospice rule with a 2.6% rate increase. As applied to Pennant, our modeling of the rules impact anticipates an increase in our revenue per day of approximately 2.5%. This increase applies effective October 1, 2025, and will provide a tailwind for our hospice results in Q4 and into 2026. As those listening to this call are likely aware, in late June, CMS issued the proposed 2026 home health rule, which proposes to reduce aggregate payments to home health agencies by a net 6.4% in 2026. This net reduction includes a payment update of positive 2.4%, offset by a 3.7% negative permanent behavioral adjustment, an estimated 4.6% negative proposed temporary adjustment, and a 0.5% decrease based on a proposed update to the FDL ratio. CMS' proposal is seriously misguided, is based on flawed methodology and data and works against the administration's stated goals of reducing deficits and preserving access to care. If enacted, the proposed rule will have several negative effects. First, these extreme cuts will significantly reduce home health access for vulnerable patients, particularly in rural areas where agencies already struggle for financial viability. Second, these cuts, when contrasted with reimbursement increases for other provider types over the same period, will reduce the competitiveness of home health agencies in recruiting and retaining talented clinical staff. Third, the cuts will cause an overall increase in health care spending as patients are unable to receive high-quality home health services timely, resulting in greater spending in higher cost settings. Along with the National Alliance for Care at Home and industry partners, we have mobilized a vigorous and urgent advocacy response at all levels of government. Through these efforts, we believe there is good reason to hope that the reimbursement established in the final rule will better reflect the vital role of home health in our nation's care continuum. We are also mindful that each of CMS' last three proposed rules initially reflected deeper cuts than those ultimately included in the final rules. As devastating as these cuts would be for the home health industry, traditional Medicare home health revenue represents only approximately 18% of our total revenue in the second quarter of 2025. Whatever the result of the 2026 final rule may be, our strong growth, diversified revenue streams and transparent operating model have helped us consistently thrive through disruption. Our local teams have already begun preparing operation-by-operation plans for adjusting their businesses to the impacts of the proposed rule. At every level of the organization, we are laser-focused on adjusting our operations and controlling the things that we can control. As we have shared repeatedly, our portfolio has been built during a period of dynamic changes to the regulatory and reimbursement environment in our industries. As demonstrated time and again, our operating model is uniquely suited to adapt to challenges and find competitive advantage in difficulty. Our Senior Living segment continued its excellent progress as revenue improved to $53.5 million, an increase of $10 million or 23.1% over the prior year quarter. Segment adjusted EBITDA improved to $5.1 million, a $1.1 million or 25.7% increase over the prior year quarter. These improvements have more than offset the phaseout of pandemic era support programs, which contributed over $1 million of incremental funds in the second quarter of 2024. We are pleased to note that same-store occupancy grew 90 basis points sequentially and now exceeds 80%, even as we have shored up pricing and strengthened our revenue quality over the past two years. In Q2, average monthly revenue per occupied room rose to $5,188, an increase of $398 or 8.3% over the prior year quarter. Our resurgent senior living business reflects the strength of our operating model to drive improvement across multiple care settings. The strength of our local leaders and teams is the foundation of these financial improvements. We are pleased to see an increased depth in our bench of C-level leaders driving results across the segment. Turning to acquisitions and growth. Signature Healthcare at Home, the large multisite acquisition we completed on January 1, continued to progress in its successful transition to Pennant. The transition highlights the ability of our seasoned Pennant operational leaders to support new leaders while continuing to perform at strong levels in their existing operations. Many of the Signature operations are led by pre-acquisition leaders who have now completed our leadership training program and embraced our unique operating model. Our core principles of local ownership, peer accountability, transparent data sharing, and strong resource support have had an immediate impact on the clinical, operational and community results in these businesses, leading to an accretive transition that has strengthened our platform in the Pacific Northwest. We see parallels between the Signature experience and the opportunities that lay ahead of us in the new markets through the United Amedisys divestiture. Pursuant to the court order, we are purchasing divested Amedisys and United LHC assets in Tennessee, Georgia, and Alabama. The package will include between 38 and 50 locations, primarily in the state of Tennessee. We anticipate that our final asset package will be closer to 50 locations. Approximately 2/3 of the revenue is connected to home health and 1/3 to hospice. The purchase price is between $113 million and $147 million, which is based on an EBITDA multiple that is comfortably within our target range of 4 to 8x. We have ample capacity on our revolver to execute the transaction well within our leverage covenants. We anticipate closing the transaction in the fourth quarter. We have a transition services agreement in place to facilitate a smooth transition and have been preparing for this moment for several months as we've waited for the antitrust process to play out. We are excited to bring these agencies into our portfolio and bring the Pennant operating model to the Southeast United States. As discussed in our previous earnings call, on April 1, 2025, we acquired Red Mountain Senior Living in Mesa, Arizona. This acquisition included 128 units, along with the underlying real estate. We continue to transition this attractive but previously underperforming community in a key market of strength for Pennant, and we look forward to further unlocking its significant potential. Immediately after quarter end, on July 1, 2025, we acquired GrandCare Home Health, which provides home health care in Los Angeles, Orange and Riverside counties. GrandCare enjoys a well-deserved reputation for providing excellent patient care in its markets and enjoys strong relationships with key acute care systems across its service area. The acquisition expands Pennant's service area in a region where we have a number of senior living communities creating a unique opportunity to build a Pennant care continuum. We look forward to continuing to grow GrandCare's impact on the community as it benefits from Pennant's operating model, peer support, and world-class resources. With that, I'll hand it over to Lynette for a review of the financials.

Thank you, John, and good morning, everyone. Detailed financial results for the three months ended June 30, 2025, are contained in our 10-Q and press release filed yesterday. For the quarter ended June 30, 2025, we reported total GAAP revenue of $219.5 million, an increase of $50.8 million or 30.1% over the prior year quarter. GAAP diluted earnings per share of $0.20 and adjusted diluted earnings per share of $0.27. Our year-to-date results put us on pace to exceed the top end of our full year guidance. Accordingly, we are revising and raising our full year 2025 guidance as follows: Full year total revenue is anticipated to be between $852.8 million and $887.6 million. Full year adjusted earnings per diluted share 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. This updated guidance incorporates current operations and organic growth, diluted weighted average shares outstanding of approximately 35.7 million, and a 26% effective tax rate. This guidance includes additional expenses in anticipation of the transaction with UnitedHealth Group and Amedisys, but no additional earnings because of the uncertainty surrounding the timing of our closing on that transaction. The guidance assumes, among other things, reimbursement rate adjustments and no unannounced acquisitions. It excludes the tax-affected cost startup of startup operations, share-based compensation, acquisition-related costs, and gain loss on disposition of assets and impairments. As Brent mentioned earlier, we will issue additional 2025 guidance updates that will reflect the impact of the UnitedHealth Group Amedisys transaction in the coming weeks. Key metrics for the three months ended June 30, 2025, include $41.2 million drawn on our revolving line of credit and $14.4 million cash on hand at quarter end, 0.38x net debt to adjusted EBITDA and cash flows provided from operations of $13.4 million year-to-date, including $34.6 million in Q2. 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 culture and develop high-performing teams of C-level leaders in their operations. At the Shores of Sheboygan in Wisconsin, newly awarded CEO, Susan TeStroete; and CCO, Tanya Grunow, are creating a community that stands out among its peers. Susan, Tanya, and team have invested in culture and community. The shores live our core value of customer second, with a greater than 90% favorable rating among employees and a turnover rate among the lowest in the company. This positive culture has promoted a strong reputation in the community, leading to 96% occupancy. Financial results have followed as revenues at the shores increased 22%, and EBITDA increased 187% each over the prior year quarter. At Riverside Home Health & Hospice in Grants Pass, Oregon, CEO Will Johns, clinical leaders Heather Hodges and Jenny Phillips; and CMO Sabrina Zehe have created a center of strength in Southern Oregon. Over the last two years, Riverside has invested significantly in clinical leadership. These investments have strengthened their ability to recruit and retain the best clinical staff, improved clinical outcomes, and allowed them to add geriatric primary and palliative care to our continuum of care. Riverside's strong culture and clinical outcomes have led to a 25.5% increase in home health census and a 115% increase in hospice average daily census. Great clinical outcomes, strong culture, and growth have led to improved financial performance as revenue increased 45% and EBITDA has increased 292% each over the prior year quarter. Safe Harbor Home Care in San Diego, California demonstrates the important role that nonmedical home care plays in our communities and in the patient journey. Under the leadership of CEO Jesse Madera; and Director of Operations Luke Madera, Safe Harbor has become a provider and employer of choice in San Diego County. Safe Harbor's deep commitment to its employees is illustrated by its employee satisfaction rating of almost 90% in a period where headcount grew dramatically and in an industry with historically high turnover. Clinically, Safe Harbor has differentiated itself with a unique focus on the social determinants of health and exceptional customer service. Through partnerships with home health, hospice, assisted living, skilled nursing, and acute care systems, Safe Harbor has become an essential part of its local health care continuum. As a result, Q2 revenue increased 84%, and EBITDA increased almost 183%, each over the prior year quarter. Safe Harbor is making a real impact in the lives of vulnerable populations in Southern California, including many veterans, and is showing that it is possible in nonmedical home care. With that, I'll turn the call back over to Brent for concluding comments.

Thanks, Lynette. Before we transition to questions, I want to thank our employees whose daily efforts create the results we share on these calls. You are vitally important; your work truly changes lives and makes the world better. With that, we'll open it up for questions. Didi, can you please instruct the audience on the Q&A procedure?

And our first question comes from Ben Hendrix of RBC Capital Markets.

I appreciate the comments on the United Amedisys deal. Given the information you just shared about the concentration of assets entering Tennessee, could you provide some background on your perspective regarding the Tennessee market and the payer landscape there? Additionally, how much did the existing relationship with Ensign Pennant Care Continuum in the West influence your decision, and what potential benefits do you foresee from that?

Thank you for the question, Ben. You really captured the essence of why we are so focused on the Tennessee segment of this divestiture. We see the Tennessee market as unique, filled with a significant amount of talent in our industries. We're also eager about the assets in Alabama and Georgia and our presence in those areas. However, our enthusiasm really lies in the scale we will achieve in Tennessee and the opportunities it presents to influence the care continuum, engage with payers, and serve the communities there. An attractive aspect is that Ensign has recently entered this market, and since we share similar values and operational models, we believe we can replicate their success in Tennessee, which is a state that clearly needs quality providers. Building an Ensign Pennant care continuum in Tennessee offers a great opportunity. Overall, we are very pleased with the deal and the strong foundation it provides for our growth in the Southeast. We truly believe these are high-quality assets that are making a positive difference in the community and, importantly, are supported by excellent teams delivering high-quality care to their patients.

Great. And just a follow-up on your comments around the proposed clawback in home health. I appreciate the commentary that it really directly impacts 18% of the business. But I was just wondering what's the potential for a clawback of that magnitude to trickle through some of your capitated relationships with managed care payers.

Yes. Any adjustments from Medicare rates affect both traditional fee-for-service Medicare and our managed Medicare or commercial contracts that are based on a percentage of the Medicare rate. There is a possibility that this could also impact some of our commercial revenue. However, we still have various strategies to mitigate these cuts. We have pointed out some of these during the call. Our business is diversified, with our hospice segment continuing to grow and our senior living business showing remarkable progress in recent quarters. We maintain our belief in home health as it is essential to the continuum of care, and while reimbursement can be cyclical, we expect it to ultimately support the delivery of these services to patients. We recognize that the impact of this rule spans our traditional fee-for-service business and some of our capitated contracts, but we see opportunities both to influence the implementation of the final rule through advocacy and to enhance the efficiency and effectiveness of care delivery across our diverse operations.

And our next question comes from David MacDonald of Truist.

A couple of questions. First, I just want to start actually in the senior living business. Can you talk a little bit just about the ongoing strength in revenue per occupied bed? I mean you guys have been driving that metric for a number of years now. And looking at occupancy, obviously, demand is pretty meaningful. But can you just talk about the sustainability of that? And longer term, should we think about that being more kind of a mid-single digit? Or just any commentary there?

Yes, David, it's a great question. We have spent a significant amount of time really focusing on revenue quality. And we've talked about it a little bit in past calls that part of the reason there was kind of flat occupancy growth is because of sort of the challenge or the efforts to make sure that the revenue quality that's coming in is offset by sort of transitioning or getting to a better point of strength from a RevPOR standpoint. So overall, those efforts have paid off. And the other thing is we are also really focused on providing a better experience in each of those communities. And so it's just been a really positive experience overall, I think, and that's a reflection of that increase over time. We have seen double-digit growth. It's tapered down to high single digits. The number that you reflected in the mid-single digits, that's kind of what we anticipate on an ongoing basis. But we also are encouraged by the short-term growth that we saw sequentially from our same-store occupancy growth, and we anticipate that our occupancy will continue to grow as well.

Okay. And then just two on the home health side. One, just with regards to the AME United deal. Can you talk about some areas where you guys are doing some spending in front of that closing and areas where you can kind of get in front of some things, and so this kind of hits the ground running and maybe able to pull some of the synergy capture forward, etc., once the deal is actually done and you guys take control of the assets?

It's a great question, David. And I think you saw us call out some of that spend when that was discussing guidance. And that's because we are preparing for the deal even now, investing in the right resources at the service center as well as we've invested significantly in our operational training program. We've hired more CITs this year than we've ever hired before because we knew this potential growth would come in. And so I'd say our primary investments have been to date from a resource perspective and from a leadership perspective with field leaders. We anticipate additional investments across the service center and additional investments from a shared services standpoint, ensuring that we're able to continue supporting these agencies in the same way that they've been supported by United and Amedisys. But of course, we'll be implementing our locally driven operating model. And so those investments will vary and be a little bit different than maybe what they were under Amedisys and United. And so our focus really to date has been leadership and then certain key resource areas, things like collections and finance. As we get closer, we've got significant investments planned across the service center and the field.

And then I guess just last question, a little bit more of a philosophical one. If the final rule doesn't get candidly a lot more reasonable, can you guys talk a little bit about just how you think about the balance of potential M&A versus just sitting back and gaining market share as your competitors struggle with this dramatically more than you do? Just any high-level comments in terms of how you balance that.

Yes. I mean we talked a little bit about the diversity of our business. And we believe in home health. I mean, anytime something like this happens, there's multiple different effects. Obviously, the direct effect is on reimbursement. But on the flip side of that, it's going to create probably a disruption in agencies and their ability to function. And so there's an opportunity from an organic standpoint to really grow in markets if there's a drop-off in number of agencies, but also from a valuation standpoint, there would be a reasonable expectation that there would be opportunities there. But again, we always focus our growth on three factors. One, do we have leaders in place ready to step in? Two, do we have strength in operations to be able to support new opportunities? And then third, does the deal make sense? And so as long as we meet those three criteria, whether it's home health, hospice, or senior living, we will continue to grow. And frankly, I think it will probably create more momentum or opportunity. We will have to look and see, though, right? Every deal that we do, we value, and we're pretty meticulous in the process and making sure that we can get the return that we're looking for. But I do think that it will create additional opportunity for us in the future. But again, it will be a little tempered early on as we kind of understand what the actual outcome of the final rule is.

And our next question comes from Raj Kumar of Stephens.

Just kind of focusing on senior living, just kind of looking at the overall year-to-date progression from a same-store perspective, kind of being up 10 bps occupancy-wise and then being up high single digits from a RevPOR perspective. Maybe if you could help us kind of bridge what's embedded into this new guidance for senior living from an occupancy and RevPOR perspective? And then maybe also from a margin seasonality perspective as well.

Thanks, Raj. When we discuss margins, we notice an improvement in senior living as we enhance our occupancy. Increasing occupancy contributes positively to our bottom line, which explains some of the gains in our EBITDA. Regarding rates, our model anticipates an increase of about 6%, consistent with our earlier reports. In terms of occupancy, we began the year with a target increase of about 30 to 50 basis points, and we still believe we can boost occupancy in both our senior living same-store portfolio and our newer operations.

Got it. As a follow-up, with the Amedisys asset coming online, does that temporarily halt the typical turnaround operations that are essential to the M&A strategy? Essentially, the question is whether that is on hold until Amedisys is integrated or if those operations remain active.

I believe that our approach to integrating previously acquired assets remains unchanged. We continue to focus on how we integrate, support, and enhance performance at locations like Signature, GrandCare, and our management agreement in Hartford. Our commitment to achieving excellent results in these areas is unwavering and is central to our operational strategy. Regarding new acquisitions, we see many opportunities on the horizon, and our pipeline is strong. We believe that the recent acquisition aligns with our goals in terms of geography, scale, density, and asset quality. Our attention will be centered on ensuring that these new assets transition smoothly and strengthen the overall Pennant platform. Therefore, while you may not see the typical monthly volume of one to three acquisitions we've seen in recent years, our plans for managing previously integrated assets remain intact. We are dedicated to supporting them, driving improvement, and ensuring they yield exceptional clinical, financial, cultural, and community outcomes.

And Raj, I would just add to remind you of our model. We have multiple portfolio companies spread out across the country with leaders focused on finding additional leaders for local operations as well as implementing growth strategies. In the case of Signature and now with the Amedisys United operations, some of those portfolio companies will support those acquisitions and transitions, while other portfolio leaders and companies will focus on their own growth. That's just been our model over time. Most of our focus will be on transitioning because it's a large number of agencies. But at the same time, as John said, the flywheel continues, and it's why we're structured the way we are, allowing us to operate independently in each of those respective portfolio companies.

And our next question comes from Stephen Baxter of Wells Fargo.

Just wanted to ask a couple, I guess, about the guidance since that hasn't really been touched on yet. I guess in terms of the revenue raise, it would be great if maybe we could help understand how much of the revenue raise comes from organic versus acquired revenue. And then I do believe you went into the year expecting same-store growth in both your segments to be approximately 7%. Obviously, you outperformed that in the first half of the year. I was wondering if you could update us on the same-store growth expectations that are now factored in for both home health and hospice and for senior living. And then I have a follow-up.

Thanks for the question, Stephen. When discussing revenue, it's important to note the difference between our initial guidance at the start of the year and our current situation. We've seen additional revenue from our GrandCare operation, which was acquired in July and is not included in our same-store comparisons since the beginning of the year. This acquisition is expected to contribute around $6 million in revenue. In terms of revenue growth, we anticipate a growth rate of about 7% to 8% for home health and hospice services. For senior living, we expect occupancy growth of around 30 to 50 basis points, along with a revenue per occupied room growth of approximately 6% to 7%.

Okay. Got it. If we were to maybe look, I guess, at the EBITDA or maybe more specifically the EBITDA margin, in the first half of the year, looks like those were relatively flat year-over-year, maybe up 10 basis points. And then I think in the back half of the year, they are up a bit more. I think we were doing math suggesting more like 70 basis points year-over-year in the second half. And I think you also have to overcome some of these additional costs on the acquisitions that you're speaking about here. Could you help us just understand what, if anything, should we think about as the key drivers of the year-over-year margin improvement in the back half? I think also maybe the discussion around hospice cap you're lapping some of the bigger exposure you might have had in the back half of this year? Just trying to better understand the progression of margins throughout the year.

Yes. That's a great question. We anticipate implementing several strategies in the second half of the year. First, we will focus on our operations, which we believe can yield additional opportunities to enhance our margins. We have already covered some points related to our preparation for possible changes in home health reimbursement. Overall, we are undertaking numerous efforts across all our business segments to improve results. Additionally, we expect a decrease in the overall cap amount in the latter half of the year, which should positively influence our performance compared to the first half. We've also accounted for the new hospice final rule, which includes approximately a 2.5% increase in our Medicare revenue. Furthermore, Signature continues to optimize its operations, and our recent acquisition of Grand Care is expected to significantly contribute in the second half of the year. We are also experiencing positive momentum in our Senior Living segment, which will contribute to margin improvements as well.

Thank you. I am showing no further questions at this time. I'd like to turn it back to Brent Guerisoli for closing remarks.

Okay. Well, thank you, Didi, and thank you, everyone, for joining us today.

This concludes today's conference call. Thank you for participating, and you may now disconnect.