Earnings Call Transcript - PNTG Q4 2020

Operator, Operator

Ladies and gentlemen, thank you for standing by and welcome to the Pennant Group Fourth Quarter 2020 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host, Derek Bunker. Please go ahead.

Derek Bunker, Host

Thank you, Sarah. Welcome, everyone, and thank you for joining us today. Here with me today, I have Danny Walker, our CEO; Brent Guerisoli, our President; Jen Freeman, our CFO; and John Gochnour, our COO. Before we begin, I have a few housekeeping matters. We filed our earnings press release and 10-K yesterday. The 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 p.m. Mountain on Friday, March 26, 2021. We want to remind anyone that may be listening to a replay of this call that all statements made are as of today, February 25, 2021, and these statements have not been nor will be updated subsequent to 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, Pennant and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of 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 wholly owned independent subsidiaries, collectively referred to as the Service Center, provide accounting, payroll, human resources, information technology, legal, risk management and other 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. All of our operating subsidiaries in the Service Center are operated by separate, wholly owned, 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 and our and similar terms used today are not meant to imply nor should it be construed as meaning 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 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 in our 10-K. Now with that, I'll turn the call over to Daniel Walker, our CEO. Danny?

Danny Walker, CEO

Thank you, Derek, and good morning, everyone. Thank you for joining us today to discuss Pennant's full year and fourth quarter 2020 results. Our first year as a public company was eventful, challenging, and ultimately rewarding. We navigated the complexities and dynamics of a new reimbursement methodology in PDGM. We completed the successful transition of key enterprise financial, human capital and IT systems related to our spin-off from The Ensign Group. And we dealt with and continue to deal with the impact of an unprecedented pandemic. I am proud of our collective efforts on each of these fronts, and I want to say thank you to each one of our leaders, resources, and team members for the courage and grit that you've consistently displayed. Despite the challenges faced, we were able to achieve strong results, both clinically and financially, and we are well positioned to continue growing in 2021. Our overall 2020 results were headlined by an incredible year for our home health and hospice segment, which achieved approximately 51% adjusted EBITDA growth in 2020 over the prior year and nearly 60% adjusted EBITDA growth in the fourth quarter over the prior year quarter. These impressive growth rates were underpinned by strong performances in nearly all facets of the business and were comprised of growth in both new and existing operations. Excluding home health agencies acquired in the previous 12 months, our 2020 total Medicare home health admissions grew nearly 7%. And inclusive of the benefits of the sequestration holiday, our average Medicare revenue per 60-day episode grew 10% as the reimbursement levels were rebased under PDGM to more appropriately account for the higher-acuity nursing acuity of our patient population. Similarly, in hospice, excluding agencies acquired in the previous 12 months, our total hospice admissions grew 32%; our hospice average daily census grew 8.4%; and inclusive of the benefits of the sequestration holiday, our average Medicare revenue per day increased 4.1%, each over the prior year quarter. This growth occurred as a result of strong clinical performance, as evidenced by our average home health star rating improving to 4.3 stars across Pennant, above the national average of three stars. And the percentage of agencies achieving a 5-star rating grew from 3% to 30% sequentially in the fourth quarter. Our home health discharge community rate, home health acute care hospitalization rate and hospice quality composite measures continue to outpace national averages, as reported by CMS. The foundation for these clinical results was laid years ago, and we continue to see the benefits of those investments year after year. And these outcomes are all the more impressive in light of the significant challenges faced during the pandemic. In our senior living segment, we continue to confront a difficult operating environment. But we feel confident in the long-term potential notwithstanding these near-term challenges. When we shared an update last quarter, we had seen our occupancy decline moderate and even slightly increased from September to October of 2020. Since then, however, we felt the acute impact of the second COVID-19 surge as the markets in which we operate experienced accelerating positive cases. Our segment results in the fourth quarter were negatively impacted even as we moved to offset pressures on occupancy and staffing. And we expect this trend to continue to some degree or another in the first half of 2021. We are also hopeful the ongoing vaccine rollout will bolster public confidence and unlock pent-up demand for senior living services, particularly as restrictions on in-person visitation and touring abate. We are pleased that all of our communities had or have scheduled their first vaccination clinics with 76% of our current residents having received the vaccine. While the current operating environment is a significant short-term headwind, we are confident in our ability to overcome these challenges as our leaders apply our proven principles and look forward to taking advantage of opportunistic acquisitions resulting from industry disruption in the wake of the pandemic. In short, these near-term pressures equate to long-term opportunity in the senior living segment. And as an organization, we are built to work through the challenges that come with turning around difficult operating situations. As Jen will discuss, we announced yesterday that we increased the capacity of our revolver from $75 million to $150 million. As our long-term stakeholders are aware, we opportunistically allocate capital where we have healthy operating markets and a strong leadership pipeline. In our senior living segment, we have not allocated and do not anticipate allocating capital for strategic acquisitions in the near term as our leaders focus their efforts on navigating the challenges of the pandemic and driving improved results in our existing buildings. On the other hand, we have deployed a significant amount of capital opportunistically in the home health and hospice segment. And our capacity to deploy even more continues to increase because we have multiple healthy operating markets and a strong leadership pipeline. We are grateful to our lending partners for entrusting us with increased borrowing capacity to execute our disciplined growth strategy. And we continue to work diligently to improve the health of our operating markets and strengthen our leadership pipeline so we can strategically invest across many markets in both segments simultaneously. As we announced yesterday in our press release, we are affirming our 2021 annual revenue and annual adjusted earnings per share guidance. This strong momentum in our home health and hospice business lays the foundation for our continued year-over-year growth. We are cognizant of the ongoing challenges facing our senior living business, and there are multiple reasons to be optimistic that we will return to growth in late 2021. Last year, we maintained annual guidance when the uncertainties regarding COVID-19 were at their peak based on the confidence we had and the ability of our local leaders to drive results despite the unexpected impact of the pandemic. With more visibility into how the pandemic is affecting top and bottom line performance in both segments, including the strength exhibited in the home health and hospice and the very real headwinds in senior living, we are affirming our 2021 guidance because we have similar confidence we can navigate the complexities of the current operating environment and perform consistent with the high expectations we've set for ourselves. We commend our local leaders for continuing to execute on the face of the adversity we have encountered this past year and for positioning us to continue our growth trajectory in 2021 in spite of the ongoing uncertainties. Now with that, I'll hand it off to Derek to discuss our recent investment activities. Derek?

Derek Bunker, Host

Thanks, Danny. During 2020 and since, we added 19 operations to the Pennant family. Our investment in these operations reflects the many ways in which we can grow through our disciplined deployment of capital and leadership talent. We expanded strategically within existing geographies and into adjacent markets. We expanded the continuum by adding home health services where we have a hospice agency and vice versa. We acquired large regional providers with a strong local reputation that we expect to further develop in our operating model. We acquired small, budding agencies that have significant long-term organic growth potential. And we executed multiple start-ups, consistent with our history of successful start-up ventures. We also began a joint venture relationship with a key hospital system partner. The common theme across these transactions was that we maintained discipline with the allocation of our dollars and our most important asset are leaders. Our strategy of entrusting talented entrepreneurial leaders with high-upside operations acquired at favorable entry points has laid the foundation for impressive year-over-year growth. Among these deals, many were off-market opportunities. And of these, some were the second or third transaction we closed with the same seller, evidencing our reputation as a strategic buyer of choice. Other deals were marketed processes that we were able to win not just because we were the highest bidder but more often that sellers saw value in our decentralized model and our commitment to carrying on their legacy by empowering local leaders, closing swiftly and welcoming employees into our unique culture. We are able to close a high volume of transactions each year, often multiple simultaneously, because of the collective expertise of our field and Service Center resources built over dozens and dozens of transactions and who continue to improve our due diligence, acquisition and onboarding processes. While we refrain from providing hard targets for the number or aggregate purchase price of acquisitions we anticipate in any given year, our historical track record of acquisitions is a good indicator of our likely future growth rate. Our capacity to execute a higher number and larger, more complex transactions increases as our operating markets mature and our leadership pipeline grows. The strength of our leaders and clusters, the ability of our resources to support acquisitions, our access to capital and a favorable M&A landscape combine to represent an exciting period of growth for Pennant, particularly in the home health, hospice and home care spaces. We are working feverishly to recapture strength in our senior living operating markets and leadership pipeline so that we are poised to pursue opportunities that may present themselves in the future. And with that, I'll hand it back over to Jen to provide some detail on the Company's financial performance. Jen?

Jen Freeman, CFO

Thank you, Derek, and good morning, everyone. Detailed financial results for the full year and three months ended December 31, 2020, are contained in our 10-K and press release filed yesterday. For the full year ended December 31, 2020, we reported total GAAP revenue of $391 million, an increase of $52.4 million or 15.5% over the prior year, GAAP diluted earnings per share of $0.52 and non-GAAP adjusted earnings per diluted share of $0.77, which represent a 26.2% increase over 2019 adjusted earnings per share of $0.61 and 71% over our 2019 spin-adjusted earnings per diluted share of $0.45. We had strong revenue and earnings per share results due to the consistent operational execution of our field leaders during a very difficult operating environment. We also benefited from a disciplined management of general and administrative costs even as we completed multiple key enterprise system transitions, much of which impacted fourth quarter G&A. We reported EBITDA of $107.2 million for the full year, exclusive of $28 million of Medicare advance payments received, $9.5 million of cash drawn on our revolving line of credit at year-end, 1.02 times net debt-to-adjusted EBITDA if Medicare advance payments have been paid back as of the year-end. As a reminder to our listeners, our strong annual results do not include any funds from the Provider Relief Fund established by the CARES Act. We continue to receive Medicare payments and approximately $8.4 million from the CARES Act. We expect automatic recoupment of the advance payments to begin in April 2021. Finally, please note that our full year non-GAAP adjusted earnings per share results exclude revenue from the Medicare sequestration holiday and certain limited COVID-19 expenses. As a reminder, our adjustments for COVID-19 expenses are those that we are able to easily capture directly related to the pandemic but do not include more intangible impacts such as lost revenue, lost efficiencies or other very real impacts on our revenue and expenses that resulted from the pandemic and are not easily quantifiable. As Danny mentioned, we expect our near-term results to include some lumpiness as we confront this phase of the pandemic. Nevertheless, our growth potential remains compelling, and we are confident we can meet the annual guidance we've provided and make it a defining year as we execute on our long-term growth strategy and realize a significant upside in both our business segments. We were pleased to announce yesterday that we amended our credit facility to increase our revolving line of credit from $75 million to an aggregate principal borrowing amount of $150 million. The amendment also refreshes the facility's five-year tenor, extends the termination of the facility out to 2026 and reduces the interest rate on drawn and undrawn capital, among other updates. We are grateful for the partnership of our banking group and the confidence in our models that this upsize represents. As of February 23, 2021, $131.7 million remains undrawn on the revolver, providing us substantial dry powder to continue our disciplined growth strategy. And with that, I'll turn the call back over to Danny. Danny?

Danny Walker, CEO

Thank you, Jen. I want to wrap up with a few final thoughts. We understood that by opting not to take the CARES Act provider relief funds, we would face some challenges and wouldn't emerge from the pandemic unscathed. Nonetheless, we believe that the path we've chosen is the right one for our organization, ensuring our ability to advance in both segments. We are excited about the untapped potential we have in these areas. Normally, we would highlight specific operations that performed exceptionally well both clinically and financially. However, today we want to acknowledge and express gratitude for the incredible bravery and commitment of our caregivers, clinicians, and frontline staff, who, alongside our local leaders and resources, provided vital support throughout the turbulent year of 2020. We cared for nearly 13,000 patients and residents in our home health, hospice, and senior living operations every day that year. Each of these interactions involved considerable personal risk and significant challenges for our team members, who did not have the option to stay sheltered while the crisis unfolded. Instead, they faced the danger head-on and successfully addressed needs in a highly complex environment. We are incredibly thankful for their efforts. A notable example occurred in Idaho, where the Twin Falls Manor was opened in partnership with the state during the pandemic's early days to become the only COVID-dedicated assisted living facility in the state. This required tremendous coordination and effort to staff and establish. Although it will be closing now that its purpose has been fulfilled, the care provided there was marked by the same bravery to confront danger despite the risks to themselves and their families. We deeply appreciate our frontline team's contributions. We have taken steps to honor both the collective group and individuals for their efforts. We look forward to building on this defining year in our organization's history as we journey toward a promising future in both segments. Now, we will move to the Q&A portion of our call. As Derek mentioned earlier, we have Brent Guerisoli, our President, and John Gochnour, our COO, available to answer questions. Sarah, could you please explain the Q&A process?

Operator, Operator

Our first question comes from David MacDonald with Truist.

David MacDonald, Analyst

A couple of quick questions. Danny, one thing I was wondering if you could talk about a little bit more, you mentioned in the release just the completion of the effort to decouple your IT systems and move everything onto your own platform. So I was wondering if you could just spend a minute and talk about what that does for you guys in terms of efficiency, spending and just agility of the organization. And then I got a couple of quick follow-ups.

Danny Walker, CEO

Thank you for the question, David. The primary effect will be the manhours our resources and leaders can now allocate to other areas of business growth. Each of these financial, accounting, HRIS, and IT systems required extensive planning and execution, consuming significant manhours and posing risks to our daily operations and reporting. We took great care in our approach to ensure a smooth transition. The main advantages of using our own platforms include the ability to gather better field data for each specific operation. We faced considerable disruption during the transition on the senior living side of our business, particularly with the implementation and customization of a new electronic medical record system. Some tasks were more difficult under a combined system. We see potential for improvement in our internal data practices. Once we move past these large projects, we expect to be able to focus more on our core strengths, pursuing good acquisitions, and strengthening our existing operations and markets, allowing us to continue making strategic capital investments as we have over the past decade.

David MacDonald, Analyst

And then just a couple of other quick questions. One, within your markets. Just given the relative strength of the Company, can you talk about what you're seeing in terms of local leadership talent and just the pipeline there?

John Gochnour, COO

Yes, David, it's a great question, and we appreciate it because it's right at the heart of everything we've been talking about today of momentum that's building in both segments. Our leadership pipeline right now is more robust than it's ever been. And one of the exciting things about that, we've got 18 different administrators in training in our program right now. And of that group, about 1/3 of them are folks who have been elevated internally. And I think what that speaks to is our leadership ethos that is built around this idea that if you elevate those around you, it allows you to expand your influence not just in the community that you're serving but also within the organization. And so we're excited about this new group of leaders that so many are being elevated internally and it positions us to be able to do from a capital allocation standpoint in the future.

David MacDonald, Analyst

Okay. And then just last question, Danny, just on the quality metrics, the 4.25 stars. Can you give us a sense of where that number was last year? And then during your prepared remarks, you quoted a 3% to 30% number sequentially. I just wanted to figure out what that was. I missed that.

Danny Walker, CEO

Yes. We will provide the figures from the previous year. We monitor the percentage of our agencies that receive a 5-star rating. Last year, 3% of our agencies achieved this rating, and now that number has increased to 30%. So that’s the metric. So John?

John Gochnour, COO

Last year, we averaged four stars in the fourth quarter, and this year we've increased that to 4.25 based on publicly reported CMS data. We are excited that we continue to utilize data partners like SHP to monitor and track this in real time, and we are making progress in this area. This is the result of the collective effort of hundreds of people dedicating thousands of hours to ensure we deliver the highest quality clinical product, documenting and coding accurately to capture it. That is the important takeaway.

Danny Walker, CEO

Yes. The situation, David, is that when we acquire agencies, they sometimes have a solid structure in place, where their clinical systems are designed to perform effectively within those limits. It takes time for us to implement systems for both compliance and operational aspects, and we are continuously assessing how our current actions will impact us in the future. We are pleased with the progress made. That summarizes the situation.

David MacDonald, Analyst

And I have one last question. A jump from 3% to 30% is quite substantial. As you mentioned, the nature of stars makes it even more challenging. Is there anything specific you would highlight? I'm sure COVID and perhaps a slower acquisition pace contributed somewhat. But is there anything else you would point out regarding such a significant increase in percentage?

Danny Walker, CEO

Yes. The process of acquiring, onboarding, and integrating new teams improves as they spend more time using our system. This increased exposure leads to greater clarity around the data, which in turn influences behavior and enhances execution. It's crucial to maintain this improvement over time through solid reporting structures. This foundation is what allows us to sustain consistent growth year after year. I want to commend our teams for their dedication, our initiatives to uplift our clinical leaders, and our support for them in delivering care tailored to local market needs. Regarding our acquisition pace, it hasn't diminished on average, and we've made significant progress. As we integrate new deals into our system, their quality improves over time, although it does take time for these clinical systems to become thoroughly established and consistent. We are satisfied with our progress.

Operator, Operator

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

Scott Fidel, Analyst

Thanks. I had a few questions I wanted to ask really more focused just on modeling for 2021 just based on some of the most recent developments in the market that you've highlighted. I guess first just on senior living. And certainly appreciate some of the framework that you provided around the pressures in the one half likely persisting for a bit and then hoping to return to growth. I think it might be helpful to the extent you can if you can give us any insight maybe into what your building maybe to the midpoint of guidance or into the base case, around how you're thinking about occupancy progressing in senior living from that 75.5% figure in the fourth quarter. If you can maybe help us in terms of first quarter to second quarter, and then maybe what sort do you get to in the back half of the year.

Danny Walker, CEO

Yes, I'll have Jen provide what she can. The projections on this are a little more difficult, as you know. The main thing I would say is we're seeing really good signs. The same trends from December have continued into January, and they'll likely persist into February and possibly March. We're seeing signs of things moving in the right direction. So, increasingly, we feel confident that as we progress further into the year, exceeding the prior year will definitely be something we can achieve. We're not used to experiencing declining performance, so this is a first for us in a quarter, and we won't tolerate it for long. I think you know us well enough to understand that. We're mobilizing and taking the necessary actions. As for the modeling, Jen, can you provide whatever detail you can?

Jen Freeman, CFO

Sure. It's Jen. So on the projections concerning senior living revenue, I would say on the occupancy side we're looking at kind of flat quarter-over-quarter. We have seen some pressure in this first quarter. We probably will continue at more of a flat pace through, as far as what we're projecting through the beginning, middle of the second quarter with slight uptick towards the end of the year to try to get probably to around what we did for the year in 2020, so that 77.7%, and looking at what we're doing and how we're moving in the right direction, achieving that towards a year-end goal.

Danny Walker, CEO

And there are still opportunities for us, Scott. I'll just mention that I, we're, the adjustment process in the fourth quarter to the combined heavy, heavy response on the COVID front, combined with declining census and an increasing survey and enforcement environment all to keep our residents safe, the ability to capture efficiencies was limited during that window. And we're seeing those conditions change, and so we'll be able to make further adjustments to the cost structure so that we can function well from an earnings perspective even at lower occupancy. It's one of the virtues of our portfolio, frankly, having assembled it at a low-cost basis, opportunistic entry points. We can still be successful even with these challenges. So it's something that we're, it's got all our attention. We're highly focused on it. And we knew that, well, like I mentioned in the script, that by choosing not to have provider relief funds that we could fill gaps with, that we were going to face a little bit of this. And we're excited about the opportunities that it presents in terms of getting better, and we're fully committed to building from where we're at and overcoming the difficulty.

Scott Fidel, Analyst

I'm excited. And I think, Dan, you were sort of just qualitatively talking about what my follow-up question was going to be on just this topic, just around sort of translating that into how you're thinking about sort of holding the line on EBITDAR margins in the segment. Obviously, there was a bit more pressure in the fourth quarter where you did have your first sort of modest decline in revenues. It sounds like from Jen's comments that you're expecting now to sort of stabilize on the revenue front and then ultimately start to grow again. And would definitely be interested in your thoughts on how that would translate into EBITDAR margin sort of progression in SL in 2021 off of that 4Q sort of exit rate and how many levers you have at this pull to, on the expense side to sort of manage around that.

Danny Walker, CEO

Yes. Jen can provide a little bit that's gone into our thinking there. The combination of having to provide a robust clinical response and some of the efficiencies that get lost when you were in total lockdown is you can't, that doesn't just hamper your marketing and business development efforts, but you're feeding residents in their own rooms, you can't do some of the communal kinds of things that actually cause your labor to be leveraged better, let alone the whole PPE, the whole world of protective equipment is something that we've kind of built into the system. So I think on a margin basis, you'll see us returning to the levels in Q2 and Q3 of this year fairly quickly. Probably Q2, Q3 of this year, I think those will be pretty achievable. And Q4, assuming there isn't some recurrence of what we experienced here, I think we can get back to where we had been in the past. So that's the general feeling as we've dug in. Obviously, the execution on it is well within our control. The control of the pandemic and some of what might occur there is less in our control. However, we're very encouraged by the way the vaccine is affecting rates. In our operations, in other skilled nursing settings, in hospital discharge structures, I think there are some really positive signs there that point towards a return to a manageable operating environment that would be very favorable for us.

Scott Fidel, Analyst

Got it. And just two more quick ones for you. First, just thinking about the first quarter and a couple of, I guess, exogenous sort of dynamics that affect everyone. But just interested if you wanted to just call out your thoughts there. One, obviously just weather. Obviously, extreme dynamics playing out, particularly in the South. And we're used to it here up North where I am, but I'm just interested in the impacts on the business there. And then from business days, I think there's a couple fewer business days year-over-year and sort of how you think about that impacting comps in the first quarter.

Danny Walker, CEO

Yes, great question. The weather situation hit pretty hard in Texas. We were not immune to that. We have, it affected several of our operations quite significantly. We had a few of them that we had to temporarily evacuate. And so that'll work its way into our systems. Obviously, there's insurance coverage and things like that, that we'll work on. But yes, it was a little disruptive. So there'll be a little bit of that in the first quarter that we expect will kind of be another headwind. But we're, we feel good about the way our leaders are responding. We feel great about how the residents that are in our care are being treated and protected. And I think everything related to being intact and enthused about recovery is just kind of exciting for the group. And it's a battle kind of environment, and we're glad to be in the battle, so.

Scott Fidel, Analyst

Great. I have one last question for you. I'm interested in an update on hospice Average Daily Census as it pertains to length of stay. Some of your peers have mentioned facing pressures related to COVID in November and December during their earnings calls. From your disclosures and your release, I found it difficult to see those pressures reflected. In fact, your ADC appeared strong compared to my projections. However, I understand there was M&A activity involved, so I would appreciate any insights you can provide regarding length of stay in hospice as it relates to ADC.

Danny Walker, CEO

Yes, it's something we're watching really closely. We've seen normal seasonality. The holidays are always a little interesting from the hospice ADC perspective. But John has a little more detail he can provide to you.

John Gochnour, COO

Scott, what you're seeing reflects our typical seasonality for the first quarter, which has been slightly affected by an above-average length of stay impact in the fourth quarter. We did notice some effects as length of stay declined significantly. However, it's noteworthy that our operators adapted well by finding new referral sources. Consequently, the overall effect on our actual average daily census hasn't been as severe and aligns with our usual first quarter patterns. We're satisfied with how we've managed this decline, which we attribute to the second wave of COVID in the latter half of the year.

Operator, Operator

Our next question comes from the line of Frank Morgan with RBC Capital.

Frank Morgan, Analyst

Most of my questions have been answered. But I guess going back to just sort of the external growth outlook, obviously, with the near-term pressures on the senior housing side. Does that really change your priority of M&A activity going forward? Does this make you be more inclined to look at the home health care and hospice side? Or any way that this changes your interest in growing the senior housing side?

Danny Walker, CEO

Yes, great question, Frank. Thanks for that. Our capital allocation strategy remains quite similar to how it's been in the past. But given the opportunity that's inherent in our existing buildings just by recovering from the pandemic and moving occupancies back up to where we would expect them to be and beyond, we just would remind listeners that we were at an all-time high in March, right, before the pandemic came, and so see a lot of upside in just building in our own portfolio. It's not that we won't do any acquisitions, but there's not, if we follow our acquisition strategy and our disciplined approach to allocation of capital, it's hard to see how our senior living business will qualify for that right now. So we grow from a position of strength. And when we have headwinds like we face, we confront those headwinds head on and we overcome them. So that will be the order of the day for until we see significant, consistent signs of strength in the senior living business and recovery there. So the equation on the home health and hospice side is very much intact. Strong markets, strong leadership pipeline, great momentum. We'll put a lot of capital to work in that space. So that's consistently how we've made decisions. And had our momentum not been interrupted or disrupted during the pandemic, we probably would have put some capital to work in the senior living space during the second half of last year. But we don't want to lose sight of our core thoughts on capital allocation to grow where we have strength. So I hope that helps.

Operator, Operator

There are no further questions at this time. I would now like to turn the call back to Daniel Walker for closing remarks.

Danny Walker, CEO

Thank you, Sarah. And we'd just like to thank everyone for joining us today. We look forward to the bright future in 2021 together. Thank you.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.