Earnings Call Transcript - PNTG Q1 2026

Operator, Operator

Ladies and gentlemen, thank you for standing by. Welcome to The Pennant Group First Quarter 2026 Earnings Call. The conference is being recorded. I would like now to turn the conference over to Kirk Cheney. Please go ahead.

Kirk Cheney, Investor Relations

Thank you, Michelle. Welcome, everyone, and thanks for being with us today. Joining me are Brent Guerisoli, our CEO; John Gochnour, our President and COO; Lynette Walbom, our CFO; and Andy Rider, President of our Senior Living segment. Before we get started, I have a few housekeeping items. Yesterday, we filed our earnings press release and Form 10-Q. The release is posted in the Investor Relations section of our website at www.pennantgroup.com. A replay of today's call will also be available on our website until 5:00 p.m. Mountain Time on May 6, 2027. We also want to remind anyone listening by replay that all statements are made as of today, May 7, 2026, and we do not intend to update these statements after this call. In addition, any forward-looking statements we make today reflect management's current expectations, assumptions and beliefs regarding our business and the operating environment. These statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Listeners should not place undue reliance on forward-looking statements and should review our SEC filings for a fuller discussion of factors that could affect our results. Except as required by federal securities laws, Pennant and its affiliates undertake no obligation to publicly update or revise any forward-looking statements due to new information, future events, changing circumstances or otherwise. Further, The Pennant Group, Inc. is a holding company and does not have direct operating assets, employees or revenues. Certain independent subsidiaries, collectively referred to as the service center, provide administrative services to our other operating subsidiaries pursuant to contractual arrangements. For reference, the terms "company," "we," "us," and similar terms refer to The Pennant Group, Inc. and its consolidated subsidiaries. Each of our operating subsidiaries and the service center is operated as a separate, independent company with its own management team, employees and assets. Accordingly, references in this presentation to the consolidated company and its assets and activities, as well as the use of "we," "us," and similar terms, should not be understood to suggest that The Pennant Group, Inc. directly employs operating personnel or that any subsidiary is directly operated by The Pennant Group. We also supplement our GAAP results with certain non-GAAP measures. We believe these measures, when considered alongside our GAAP results, can help provide a more complete view of our performance. However, they should not be considered in isolation or as a substitute for GAAP reporting. A reconciliation of GAAP to non-GAAP measures is included in yesterday's press release and is also available in our 10-Q. With that, I'll turn the call over to our CEO, Brent Guerisoli.

Brent Guerisoli, CEO

Thanks, Kirk. Good morning, everyone, and welcome to our first quarter 2026 earnings call. To start, I want to acknowledge the dedication of Pennant's people through different cycles and environments. During rapid growth, changing macroeconomic conditions and more, our teams consistently rise to meet the moment. I am proud to work alongside you. We're pleased to report another excellent quarter with strong results across our businesses, including revenue of $285.4 million, up $75.5 million or 36%; adjusted EBITDA of $21.7 million, up $5.3 million or 32.6%; adjusted EBITDA prior to NCI of $23.5 million, up $6.4 million or 37.2%; and adjusted diluted earnings per share of $0.32, up $0.05 or 18.5% each over the prior year quarter. Across both segments, we continue to build momentum and drive relentless operational improvement. As we've discussed on prior calls, 2025 was a year of dramatic acquisitional growth. And in 2026, we are committed to improving our operational performance in both new and mature operations. One clear indication of progress is our same-store segment adjusted EBITDA margins, which are on a substantial upward trajectory as we deliver exceptional results for patients, attract the best leaders and create a culture of excellence in our agencies and communities. We will continue to unlock meaningful value in our operations. A key to our success, as we have repeatedly emphasized, is attracting and developing exceptional leaders. Without this focus, the type of growth we have experienced would not have been possible. The large acquisitions we completed in 2025 called upon us to stretch our leadership recruitment and development muscles like never before. We rose to the challenge. In 2025, we added 101 CEOs and admitted them to our development program, and we have followed with 47 more in 2026 year-to-date. Also in 2025, we elevated 11 local CEOs and 24 other local C-level leaders. Our leadership pipeline remains robust and positions us well for additional growth in the future. With the addition of leaders recognized thus far in 2026, we now have 55 CEOs and 92 other C-level leaders in operations, driving our results across the business. The transition of Tennessee, Alabama and Georgia operations from UnitedHealthcare continues to progress. We have transitioned 2 of 5 operational waves fully into our systems and we'll continue this process through October. As this occurs, we anticipate improved operational performance and incremental reduction in expenses, including those under the transition services agreement. The leaders of each agency continue to work closely in clusters with experienced tenant partners to unleash the full potential of our locally driven operating model. Despite the anticipated challenges of maintaining census during an EMR transition, lower seasonal admission trends over the holidays and severe weather events in January, we have successfully rebounded and increased total census above the levels at the time of acquisition. Even as we continue to implement our systems and operating model and anticipate some additional disruption, we are pleased that the transition is progressing consistent with our expectations. The future is bright for Pennant in the Southeast. In sum, the first quarter was a tremendous start to the year, and we are well situated to deliver positive results throughout 2026 and beyond. With only one quarter behind us and substantial additional transition work on the near horizon, we are not adjusting guidance at this time, but would point you to the upper end of our guidance range.

John Gochnour, President and COO

Thank you, Brent, and good morning to everyone on the call. I'm pleased to report strong first quarter performance across both operating segments, driven by our continued focus on operational excellence, margin improvement, organic growth, clinical excellence and leadership development. Our Home Health and Hospice segment extended its exceptional growth trajectory, delivering quarterly revenue of $229.1 million, an increase of $69.2 million or 43.3% over the prior year quarter. Segment adjusted EBITDA of $33.6 million, up $8.5 million or 33.7%. And segment adjusted EBITDA prior to NCI of $35.4 million, up $9.5 million or 36.6%, each over the prior year quarter. This performance reflects consistent growth in existing operations and effective transitions in our newer operations. Total Home Health admissions reached 30,721, an increase of 62.7% while Medicare Home Health admissions rose to 13,303, an increase of 75.1%, each over the prior year quarter. These strong total growth metrics include same-store admission growth of 5.8% and same-store Medicare admission growth of 9.2%, each over the prior year quarter. Our Hospice business also continued its robust growth. Average daily census reached 5,199, an increase of 37%. And same-store hospice average daily census grew to 3,952, an increase of 10.2%, each compared to the prior year quarter. This momentum is driven by strong clinical outcomes, including positive reimbursement adjustments based on our Home Health value-based purchasing performance, deepening relationships with payers and our local leaders' ability to serve as trusted community resources for patients, employees and partners, even amidst significant transition activity and despite a 1.3% reduction in our Medicare Home Health base rate and continued wage pressure on the labor front. Our local leaders' focus on operational excellence drove same-store segment adjusted EBITDA margin prior to NCI to 17.2%, a 110 basis point improvement over the prior year quarter. Overall, segment adjusted EBITDA margin prior to NCI decreased to 15.5%, a 70 basis point decline, reflecting the expected impact of transitioning more than 50 new operations to our systems and the temporary higher cost of the ongoing transition services agreement. The new store margin performance was consistent with the expectations we set out in our guidance. And as Brent noted, as we fully integrate our new operations and talented local teams adopt our operating model, we expect these operations and our total segment margins to move toward our 18% target, though progress will not be immediate or perfectly linear. On the regulatory front, in April, we received the proposed 2026 hospice rule, which includes a 2.4% rate increase to the hospice daily rate. This aligns with our guidance assumptions and should provide an additional tailwind in the fourth quarter. Our Senior Living segment also delivered meaningful progress. Revenue of $56.3 million, increased $6.3 million or 12.6%. Adjusted EBITDA of $6.4 million, increased $1.5 million or 30.6%. And segment adjusted EBITDA margin improved to 11.8%, a 190 basis point increase, each over the prior year quarter. Since the pandemic, we have steadily expanded segment margin into the double digits with significant opportunity remaining. Same-store occupancy rose to 81%, up 180 basis points, while all-store occupancy reached 78.6%, up 10 basis points, each over the prior year quarter. Sequentially, we saw a 200 basis point decline in our all-store occupancy, which was driven almost entirely by our recent acquisitions of low-occupancy communities along with some typical holiday-related seasonality. We have seen a rapid rebound from the holiday seasonality and expect some continued volatility in our all-store occupancy as we add underperforming but high-potential Senior Living communities to our portfolio. Turning to growth: we completed the transition of 54 Home Health, Hospice and Home Care operations in Tennessee, Alabama and Georgia in the fourth quarter of 2025. Throughout quarter 1, our service center and segment leaders dedicated substantial time to integrating these operations into our systems and the unique tenant operating model. As Brent described, results have been consistent with our expectations, and we anticipate completing the transition by the end of the third quarter. We are very excited about the progress and the potential to unlock significant value in these operations as we grow in the Southeast. While integration remains our primary focus, we continue to evaluate a pipeline of Home Health and Hospice tuck-ins and potential joint ventures with integrated health care systems. As we find opportunities that meet our disciplined criteria and will not distract from our integration efforts, we expect to pursue them in the coming months. In Senior Living, we completed 4 acquisitions after quarter end. On April 1, 2026, we acquired the operations and real estate of Lavender Lane Senior Living, which includes 43 assisted living and memory care units and 25 independent living units. This addition strengthens our growing Phoenix area portfolio where we have deep leadership talent and a robust continuum of care across Home Health, Hospice, Home Care and Senior Living. Additionally, on May 1, 2026, three more senior living communities joined Pennant through triple net leases with trusted capital partners: a 100-unit community in Glendale, Arizona, now operating as Saguaro Senior Living, and two Wisconsin communities, 45 units and 50 units now operating as Cardinal Lane Senior Living and Harbor Haven Senior Living. These additions further expand our presence in two of our most strategic markets. We continue to review multiple Senior Living opportunities and, supported by strong operational performance and investments in leadership development, expect to remain active acquirers throughout the year. With that, I'll turn the call over to Lynette to walk through the financial results.

Lynette Walbom, CFO

Thank you, John, and good morning, everyone. Additional detail on our financial performance for the three months ended March 31, 2026, is included in the Form 10-Q and press release filed yesterday. Some additional highlights for the quarter compared to the prior year quarter include the following: GAAP revenue of $285.4 million, an increase of $75.5 million or 36%; GAAP net income of $8.5 million, an increase of $0.7 million or 9.6%; adjusted net income of $11.5 million, an increase of $1.9 million or 19.8%; GAAP diluted earnings per share of $0.24, an increase of $0.02 or 9.1%; and adjusted diluted earnings per share of $0.32, an increase of $0.05 or 18.5%. Additional selected metrics for the three months ended March 31, 2026, include $72 million outstanding on our revolving line of credit and $98.8 million outstanding on our term loan for a total of $170.8 million outstanding under our credit facility. We had $4.9 million in cash on hand at quarter end and a net debt to adjusted EBITDA ratio of 1.93x. Cash flows used in operations were $3.4 million, an improvement of $17.8 million versus the prior year quarter. I'd now like to highlight a few leaders across our organization who have delivered exceptional outcomes. Their examples illustrate the meaningful progress that can occur when local leaders build strong cultures and develop high-performing teams of C-level leaders within their operations. Riverside Home Health and Hospice in Grants Pass, Oregon is led by Chief Executive Officer Will Johns, Chief Marketing Officer Sabrina Zage, and clinical leaders Jennifer Doman and Heather Raj. Riverside is a provider of choice in Southern Oregon with a Home Health star rating of 4.5 stars, Hospice composite score of 100% and Hospice visits in the last day of life of 84% versus the national average of 48%. This clinical quality has resulted in exceptional financial performance. Since taking the helm in 2024, Will and the Riverside team have doubled revenue from $2.5 million in Q1 2024 to $5 million in Q1 2026, tripled EBITDA and improved agency-level operating margin by more than 1,100 basis points over the same period. With a broad rural service area, Riverside's story demonstrates once again that our unique operating model can support tremendous success outside of large population centers. Home Health and Hospice are critical components in the health care continuum and rural communities. At Capitol Hill Senior Living, newly appointed CEO Rodney Washburn, CCO Britanee Plascencia and CMO Roxy Romero provide a caring, attractive home for over 100 residents in downtown Salt Lake City. With low turnover and high employee satisfaction, it is clear that Capitol Hill's culture contributes to a positive resident experience. As a result, occupancy has increased over 2,300 basis points. Revenue has increased 46% and EBITDA has increased over 238% each over the prior year quarter. Capitol Hill was one of our first real estate acquisitions, which we purchased in 2024 as an underperforming asset in an attractive location for a compelling price. By improving the operations, the Capitol Hill team has now added value to the operation, to the real estate and most importantly to the residents and community. With strong demand for its services, Capitol Hill is now adding units to its upper floor, further expanding the business' financial opportunity going forward. With that, I'll hand the call back to Brent for closing remarks.

Brent Guerisoli, CEO

Thanks, Lynette. As we wrap up, I want to again thank our operators, clinicians and service center partners who, like the individuals highlighted, provide truly life-changing service to our patients and residents every day. We are grateful for all you do. With that, we'll open the line for questions. Michelle, would you please provide the audience with the Q&A instructions?

Operator, Operator

We will now begin the question-and-answer session. The first question is from Brian Tanquilut with Jefferies. Please go ahead.

Brian Tanquilut, Analyst, Jefferies

Congrats on a good quarter. I have a few questions. First, can you speak to the integration progress you're seeing with the Amedisys and United assets and how we should think about the cadence of their impact on margins for the remainder of the year? Also, can you share KPIs around labor and payer retention?

John Gochnour, President and COO

Brian, thanks for the question. As Brent stated in the call, we're excited about where we stand in the integration to date. We have moved through the first two waves of our integration process, moving those agencies onto our systems, and we've begun the third wave. The third and fourth waves are the largest of the five waves, so we're in the heart of getting those operations over. We have been moving through the leadership development aspect. In some cases, leaders who entered our program in Q4 and earlier have completed our CEO development program and have now been placed as executive directors. In other cases, we found talented people in the acquired locations who qualified for our clinical and leadership training program and have either begun training or have completed training in our operating model and stepped in as Executive Directors and future CEOs. From a KPI standpoint, as Brent mentioned, we have rebounded during the transition period as we guided. We expect modest blips in census during an EMR transition; we experienced those and have rebounded, particularly in agencies where integration is complete. We also navigated a challenging January where winter storms in Tennessee prevented admissions, and it's positive to see census now above acquisition levels. Regarding margins, we're on target. We have the added costs we've telegraphed associated with the transition services agreement and the system transitions, which take training time and pull people out of the field. We have a strong team providing that support. We see significant opportunity as transition services agreement costs roll off and as agencies move onto our systems, improve clinical outcomes and adopt our practices. That improvement is built into our guidance and we expect it to occur throughout the year.

Brian Tanquilut, Analyst, Jefferies

That's helpful. Follow-up on CapEx: given elevated spend this quarter to build out infrastructure in the South, how should we think about CapEx trend over the course of the year?

Brent Guerisoli, CEO

We discussed some of the Senior Living acquisitions that came on late in Q4. Some of those required significant CapEx in the first part of the year. We expect heavier spend earlier in the year and CapEx likely ending up in the $15 million to $18 million range for the year.

Brian Tanquilut, Analyst, Jefferies

One last question: given where hospitals stand today and the team model being rolled out for some of the joint ventures you've announced, how do you think about receptivity among hospitals in your markets to sign JVs on the Home Health side?

John Gochnour, President and COO

We've had six years of experience working in joint ventures with premier integrated health care systems. Through that, we've built a track record of helping them improve underperforming parts of their business that are critical to the continuum of care. Hospitals need to decant the hospital to take higher-acuity patients and need chronic condition patients to receive care in the home to keep them out of the hospital. We've partnered to build effective home health and hospice programs that reduce readmission and return-to-acute rates. As a result, there is receptivity. Hospitals facing labor pressures and acuity challenges have seen the value of partnering with an expert provider. We have a strong track record as that partner. Those conversations are ongoing; we are disciplined in our approach and pursue the right opportunities with partners committed to clinical excellence, financial performance and culture.

Operator, Operator

Our next question is from Raj Kumar with Stephens. Please go ahead.

Raj Kumar, Analyst, Stephens

On the same-store trends in Home Health: Medicare admission growth continues to be strong. Is this a function of enrollment shift dynamics, such as MA mix changes, or is it more idiosyncratic market-level wins from referrals? Have you seen any acceleration as you get more ingrained in markets?

John Gochnour, President and COO

Great question, Raj. We're still early in assessing how macro factors affect this, but what we're seeing is that we continue to be chosen. Our goal in every market is to be the provider of choice and the employer of choice. When we can attract talent and have staff, we can serve those communities. Our local teams have executed strongly. Our model is built so that we can be the solution of choice. With some competitors affiliating with single providers, there's less space for independent providers that deliver strong clinical outcomes to step in and execute. We are watching whether this is a longer-term trend related to Medicare mix or a short-term market-share execution, but we are optimistic and pleased with how communities are choosing us.

Raj Kumar, Analyst, Stephens

Regarding Hospice same-store growth: there's a wide gap between ADC and total admits. Are you comfortable with current length of stay profiles? Anything to call out on CAP? Also, any headwinds from fuel or macro pressures you've embedded in guidance?

John Gochnour, President and COO

On hospice ADC, as called out in the prepared remarks, we saw a 10.2% improvement in same-store ADC even as admission trends were softer. Length of stay decreased, but length of stay depends on the patients coming on service. We're improving relationships across the continuum, which helps drive the ADC increase. Execution and delivering exceptional care are driving the increase. There was data suggesting earlier hospice election saves the Medicare Trust Fund significantly, which underscores the value of educating and partnering with referral sources to get people on hospice sooner. On CAP, we saw a significant reduction quarter-over-quarter versus the prior year quarter, and we continue to monitor it. CAP pressures are local; some agencies, particularly in California, have higher reimbursement but CAP limits days of service. Our service center finance resources built models to help local executive directors understand CAP exposure and to develop business development plans to navigate the mix and avoid CAP issues. On fuel, it's a macro indicator we are watching. If gas prices stay elevated, we have historically provided stipends or adjusted mileage rates to support employees. Currently, we view it as short-term flux and are not building significant fuel expense or mileage increases into our guidance, pending how the situation evolves.

Operator, Operator

Our next question is from David MacDonald with Truist. Please go ahead.

David MacDonald, Analyst, Truist

Congratulation on the quarter. First, can you speak to payer conversations and any early reactions around expansion into the Southeast? Second, what does the increased market focus on waste, fraud and abuse mean for market-share opportunity over time?

Brent Guerisoli, CEO

On the payer front, as we've expanded in the Southeast and strengthened our presence in the Northeast, we've progressed conversations with major payers on a broader basis. We've also invested significantly in the team that supports payer relationships, and we've made strong progress. These are ongoing conversations, but they have been positive. Payer partners are looking for consistent, high-quality care. Our clinical product and quality solutions at the local and national levels create opportunities. In managed care conversations, we've seen positive results in getting better contracts and Medicare-like reimbursement. We expect this to continue as we expand and perform well clinically.

John Gochnour, President and COO

On fraud, waste and abuse: this administration is focused on rooting out fraud, waste and abuse, and we support that effort. Some tools considered are blunt instruments; we encourage nuance in policy. We believe we're differentiated because every provider number undergoes an annual compliance review, including claims audits and on-site audits, making our compliance program industry-leading. In markets where enforcement has been aggressive, that action can reopen opportunities for compliant providers with strong clinical quality and community relationships. We see that as potential upside. We'll continue to engage with policymakers and industry partners to ensure thoughtful approaches, because rooting out bad actors directs Medicare dollars to providers delivering high-quality care.

David MacDonald, Analyst, Truist

One quick follow-up on integration timing: you mentioned the third and fourth wave are the largest remaining. Is the bulk of the heavy lifting in Q2 with a ramp down later such that TS expenses drop meaningfully after?

John Gochnour, President and COO

Yes. The heart of the work is the third and fourth waves. The third wave has begun and the fourth is coming. Expect the bulk of the transition through Q2 and the very early part of Q3. September and October will be winding down the final wave. You should see transition services expenses drop significantly as agencies migrate onto our systems and local teams use those systems to improve clinical, financial and community results.

Operator, Operator

Our next question is from Benjamin Hendrix with RBC Capital Markets. Please go ahead.

Benjamin Hendrix, Analyst, RBC Capital Markets

On hospice CAP: you have strong systems for monitoring CAP, but are there particular markets where heightened competition for short-stay admissions could box you out of those admissions and be a headwind?

Lynette Walbom, CFO

That can be the case in markets with higher reimbursement; California is an example. CAP pressures will depend on local operations. Local teams use multiple tactics, including focusing on short length-of-stay opportunities where appropriate, but the core is ensuring patient appropriateness and proactive community outreach. We track CAP at every operation, ensure teams understand their local exposures, and deploy documented best practices to drive improvement.

Benjamin Hendrix, Analyst, RBC Capital Markets

On Senior Housing: can you talk about the status of the newer acquisitions, how much quality improvement you expect and where you can take the performance of those platforms?

Andy Rider, President, Senior Living

Thanks, Ben. We're excited about the latest acquisitions and those from late last year. Most are distressed assets with large upside but will show lumpiness in occupancy and margins during integration. Over the long term, they have tremendous upside; we're getting favorable pricing. We're improving at integrating these assets and getting better each year, so turns are happening faster. The Capitol Hill example that Lynette highlighted shows what we can do over an eight-quarter period to transform an operation. We're eager to roll up our sleeves and get to work on the new additions.

Operator, Operator

Our next question is from Stephen Baxter with Wells Fargo. Please go ahead.

Stephen Baxter, Analyst, Wells Fargo

Good to hear guidance leaning to the upper end. Did Q1 outperform internal expectations, and how much of the guidance nudge flows from Q1? Are you carrying any Q1 momentum forward into the rest of the year in same-store growth or margins?

Brent Guerisoli, CEO

Stephen, we feel good about where we stand, but given the ongoing transition work—especially as we move deeper into Wave 3 and into Wave 4—we want to be cautious. We're seven months into the transition but we don't want to declare victory yet. We are seeing progress and would like another quarter of results before making adjustments; Q2 will be very insightful for the remainder of the year. That's why we're not formally changing guidance now but point to the upper end of the range.

Lynette Walbom, CFO

Specifically on same-store performance, we expect the improvements seen this quarter to continue, driven by operators focusing on driving additional margin to the bottom line. We'll provide further guidance updates, likely in Q2.

Brent Guerisoli, CEO

To add, one reason same-store results in Q1 are encouraging is that they occurred amid a Home Health reimbursement reduction and while we were supporting the Southeast transition. Our existing operators continued to perform well while supporting integration, which is a positive sign for sustaining momentum. We want more experience through Q2 before making any guidance changes.

Operator, Operator

Our next question is from Jared Haase with William Blair. Please go ahead.

Jared Haase, Analyst, William Blair

On same-agency margins: same-store segment adjusted EBITDA prior to NCI was up 110 basis points year-over-year. Where are the biggest levers for operating leverage, given some duplicative work related to transition and ongoing labor pressure?

John Gochnour, President and COO

Thanks, Jared. Our model centers on people, local ownership and cluster partners who support each other. A few drivers of efficiency: we offset some revenue decline through strong Home Health value-based purchasing performance. Local teams were asked to create plans to offset base rate adjustments—working more effectively in the community, partnering with institutional partners and getting earlier referrals—which led to meaningful same-store revenue per episode improvements despite the base rate decrease. On efficiency, clinical teams worked to make our EMR more efficient, allowing nurses and clinicians to spend more time with patients and less time documenting while maintaining regulatory standards. That led to reduced visits per episode and improved productivity. We also view operations holistically: Home Health and Hospice together can offset pressures in one service line with growth in another. Strong ADC growth in hospice also helped same-store margin improvement.

Brent Guerisoli, CEO

I'll add that our technology stack and data tools give local teams better information to drive efficiencies and outcomes. Continued investment in technology to help local teams be efficient and effective is a priority, especially given the reimbursement environment.

Jared Haase, Analyst, William Blair

A quick follow-up on Senior Living: Medicaid mix ticked up a little, about 300 basis points year-over-year. What's driving that and how durable are the Medicaid waivers given potential state budget pressure?

John Gochnour, President and COO

On Senior Living, local operators are encouraged to connect with government agencies to understand available programs and serve populations that need assistance, regardless of payer source, while remaining financially responsible. We play primarily in Class B and C properties where Medicaid mix can be higher; that may continue. We adjust state by state depending on pressures. We have seen some effects from enforcement efforts, but we're confident in the Medicaid programs in our operating areas. These programs often save states money by preventing hospitalizations, and we position ourselves as a low-cost, high-quality provider. We're confident in continued growth where appropriate and will empower local operators to make the right financial decisions to drive margin and resident care.

Brent Guerisoli, CEO

To expound on waivers: sometimes waivers are perceived as lower reimbursement, but in many states the reimbursement is healthy and appropriate for services provided. That can drive our acquisition strategy—for example, in Wisconsin and Arizona where we recently added buildings, we have strong state and payer relationships. Those prenegotiated rates give clarity immediately on stepping into a building, creating an opportunity to expand occupancy and improve operations while serving vulnerable populations.

Operator, Operator

I am showing no further questions in the queue at this time. I will now turn it back over to Brent for closing remarks.

Brent Guerisoli, CEO

Thank you, Michelle, and thank you, everyone, for joining us on the call today. Have a great day.

Operator, Operator

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