Pennant Reports Fourth Quarter and Fiscal Year 2024 Results

Conference Call and Webcast scheduled for tomorrow, February 28, 2025 at 10:00 am MT EAGLE, Idaho, Feb. 27, 2025 (GLOBE NEWSWIRE) -- The Pennant Group, Inc. (NASDAQ: PNTG), the parent company of the Pennant group of affiliated home health, hospice and senior living companies, today announced its operating results for the fiscal year and fourth quarter of 2024, reporting GAAP diluted earnings per share of $0.70 and $0.16 for the year ended December 31, 2024 and the fourth quarter, respectively. Pennant also reported adjusted diluted earnings per share of $0.94 for the year and $0.24 for the quarter (1). Fourth Quarter Highlights Total revenue for the full year was $695.2 million, an increase of $150.3 million or 27.6% over the prior year, and for the fourth quarter was $188.9 million, an increase of $42.9 million or 29.4% over the prior year quarter;Net income for the full year was $22.6 million, an increase of $9.2 million or 68.6% over the prior year and for the fourth quarter was $5.8 million, an increase of $1.4 million or 32.4% over the prior year quarter;Adjusted net income for the full year was $30.0 million, an increase of $8.1 million or 36.9% over the prior year and for the fourth quarter was $8.5 million, an increase of $1.9 million or 28.0% over the prior year quarter;Segment Adjusted EBITDAR from Operations for the full year was $139.4 million, an increase of $28.5 million or 25.7% over the prior year and for the fourth quarter was $36.7 million, an increase of $6.5 million or 21.6% over the prior year quarter;Adjusted EBITDA for the full year was $53.3 million, an increase of $12.6 million or 30.9% over the prior year and for the fourth quarter was $13.8 million, an increase of $1.9 million or 16.1% over the prior year quarter; Home Health and Hospice Services segment revenue for the year was $519.5 million, an increase of $125.0 million or 31.7% over the prior year and for the fourth quarter was $142.0 million, an increase of $35.1 million or 32.9% over the prior year quarter; Home Health and Hospice Services segment adjusted EBITDAR from operations for the full year 2024 was $87.7 million, an increase of $22.1 million or 33.7% over the prior year and for the fourth quarter was $23.2 million, an increase of $5.0 million or 27.3% over the prior year quarter; and segment adjusted EBITDA from operations for the full year was $80.7 million, an increase of $20.5 million or 34.1% over the prior year and for the fourth quarter was $21.3 million, an increase of $4.7 million or 27.9% over the prior year quarter; Total home health admissions for the full year were 59,741, an increase of 16,233 or 37.3% over the prior year and fourth quarter were 15,959, an increase of 4,631 or 40.9% over the prior year quarter; total Medicare home health admissions for the full year were 24,598, an increase of 5,209 or 26.9% over the prior year and for the fourth quarter were 6,443, an increase of 1,491 or 30.1% over the prior year quarter; Hospice average daily census for the full year was 3,268, an increase of 661 or 25.4% over prior year and for the fourth quarter was 3,445, an increase of 649 or 23.2% compared to the prior year quarter; Senior Living segment revenue for the full year was $175.8 million, an increase of $25.3 million or 16.8% over the prior year and for the fourth quarter was $46.9 million, an increase of $7.8 million or 20.0% over the prior year quarter; average occupancy for the fourth quarter was 78.6%, a decrease of 40 basis points over the prior year quarter, and average monthly revenue per occupied room for the fourth quarter was $4,961 an increase of $393 or 8.6% over the prior year quarter;Senior Living segment adjusted EBITDAR from operations for the full year was $51.7 million, an increase of $6.4 million or 14.1% over the prior year and for the fourth quarter was $13.4 million, an increase of $1.5 million or 12.9% over the prior year quarter; and segment adjusted EBITDA from operations for the full year was $16.2 million, an increase of $3.9 million or 31.9% over the prior year and for the fourth quarter was $4.2 million, an increase of $0.8 million or 23.4% over the prior year quarter. (1) See "Reconciliation of GAAP to Non-GAAP Financial Information.” Operating Results “We are pleased to conclude a remarkable year, with strong performance in revenue, adjusted EBITDA, and adjusted earnings per share,” said Brent Guerisoli, the Company’s Chief Executive Officer. “2024 was also a year of transformative expansion, including numerous strategic acquisitions and robust organic growth. With our solid operational foundation, ongoing investments in leadership, and abundant latent potential in our new and existing operations, we anticipate continued positive momentum in 2025 and beyond.” “We ended the year with record-setting cash flows from operations, which further enhanced our already healthy balance sheet. Based on our strong financial performance, the positive impacts of our credit agreement upsize and our equity offering in the fourth quarter, we are well-poised for future growth with ample dry powder to deploy,” said Lynette Walbom, the Company’s Chief Financial Officer. A discussion of the Company's use of Non-GAAP financial measures is set forth below. A reconciliation of net income to EBITDA, adjusted EBITDAR and adjusted EBITDA, as well as a reconciliation of GAAP earnings per share, net income to adjusted net earnings per share and adjusted net income, appear in the financial data portion of this release. More complete information is contained in the Company’s Form 10-K for the year ended December 31, 2024, which has been filed with the SEC today and can be viewed on the Company’s website at www.pennantgroup.com. 2025 Guidance Management is providing 2025 annual guidance as follows: total revenue is anticipated to be between $800.0 million and $865.0 million; full year 2025 adjusted earnings per diluted share is anticipated to be between $1.03 and $1.11; and full year 2025 adjusted EBITDA is anticipated to be between $63.1 million and $68.2 million. Mr. Guerisoli remarked, “Our earnings guidance midpoint of $1.07 represents 13.8% growth on our 2024 adjusted earnings per share and 46.6% growth over 2023 results. This is based on the compelling momentum across both our segments, the capability of our local leaders to drive organic and inorganic growth, and the untapped potential within our existing operations.” The Company’s 2025 annual guidance is based on diluted weighted average shares outstanding of approximately 36 million and a 25.5% effective tax rate. The guidance assumes, among other things, reimbursement rate adjustments and no unannounced acquisitions. It excludes the tax-effected costs at start-up operations, share-based compensation, acquisition-related costs, and gain (loss) on disposition of assets and impairments. Ms. Walbom also stated, “We believe providing annual adjusted consolidated EBITDA guidance in addition to annual revenue and adjusted earnings per share guidance is helpful to understanding our expectations for our business and operational cash flow. This updated guidance reflects management’s expectations based on 2024 performance and current operating conditions.” Conference Call A live webcast will be held tomorrow, February 28, 2025 at 10:00 a.m. Mountain time (12:00 p.m. Eastern time) to discuss Pennant’s fourth quarter 2024 financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Pennant’s website at https://investor.pennantgroup.com. The webcast will be recorded and will be available for replay via the website. About Pennant The Pennant Group, Inc. is a holding company of independent operating subsidiaries that provide healthcare services through 123 home health and hospice agencies and 57 senior living communities located throughout Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming. Each of these businesses is operated by a separate, independent operating subsidiary that has its 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," "its" and similar verbiage, are not meant to imply that The Pennant Group, Inc. has direct operating assets, employees or revenue, or that any of the home health and hospice businesses, senior living communities or the Service Center are operated by the same entity. More information about Pennant is available at www.pennantgroup.com. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 This press release contains, and the related conference call and webcast will include, forward-looking statements that are based on management’s current expectations, assumptions and beliefs about its business, financial performance, operating results, the industry in which it operates and other future events. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding growth prospects, future operating and financial performance, and acquisition activities. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to materially and adversely differ from those expressed in any forward-looking statement. These risks and uncertainties relate to the company’s business, its industry and its common stock and include: reduced prices and reimbursement rates for its services; its ability to acquire, develop, manage or improve operations, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of operations; its ability to access capital on a cost-effective basis to continue to successfully implement its growth strategy; its operating margins and profitability could suffer if it is unable to grow and manage effectively its increasing number of operations; competition from other companies in the acquisition, development and operation of facilities; its ability to defend claims and lawsuits, including professional liability claims alleging that our services resulted in personal injury, and other regulatory-related claims; and the application of existing or proposed government regulations, or the adoption of new laws and regulations, that could limit its business operations, require it to incur significant expenditures or limit its ability to relocate its operations if necessary. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the company’s periodic filings with the Securities and Exchange Commission, including its Form 10-Q and/or 10-K, for a more complete discussion of the risks and other factors that could affect Pennant’s business, prospects and any forward-looking statements. Except as required by the federal securities laws, Pennant does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release. Contact Information Investor RelationsThe Pennant Group, Inc.(208) 506-6100ir@pennantgroup.com SOURCE: The Pennant Group, Inc. THE PENNANT GROUP, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(unaudited, in thousands, except for per-share amounts) Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023 Revenue$188,892 $145,954 $695,240 $544,891 Expense Cost of services 152,673 116,934 558,449 438,096 Rent—cost of services 11,215 10,320 43,029 39,759 General and administrative expense 13,872 9,754 50,209 36,667 Depreciation and amortization 1,827 1,313 6,119 5,130 Loss (gain) on disposition of property and equipment, net 69 66 (682) 70 Total expenses 179,656 138,387 657,124 519,722 Income from operations 9,236 7,567 38,116 25,169 Other expense income, net: Other income 15 311 207 339 Interest expense, net (650) (1,569) (6,956) (5,924)Other expense, net (635) (1,258) (6,749) (5,585)Income before provision for income taxes 8,601 6,309 31,367 19,584 Provision for income taxes 2,071 1,780 7,028 5,674 Net income 6,530 4,529 24,339 13,910 Less: Net income attributable to noncontrolling interest 772 180 1,780 531 Net income attributable to The Pennant Group, Inc.$5,758 $4,349 $22,559 $13,379 Earnings per share: Basic$0.17 $0.15 $0.72 $0.45 Diluted$0.16 $0.14 $0.70 $0.44 Weighted average common shares outstanding: Basic 34,269 29,978 31,191 29,863 Diluted 35,333 30,236 32,000 30,193 THE PENNANT GROUP, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except par value) December 31, 2024 December 31, 2023Assets Current assets: Cash$24,246 $6,059 Accounts receivable—less allowance for doubtful accounts of $232 and $259 at December 31, 2024 and 2023, respectively 81,302 61,116 Prepaid expenses and other current assets 17,308 12,902 Total current assets 122,856 80,077 Property and equipment, net 43,296 28,598 Right-of-use assets 270,586 262,923 Restricted and other assets 17,477 9,337 Goodwill 129,124 91,014 Other indefinite-lived intangibles 96,182 67,742 Total assets$679,521 $539,691 Liabilities and equity Current liabilities: Accounts payable$18,737 $10,841 Accrued wages and related liabilities 43,106 28,256 Lease liabilities—current 19,671 17,122 Other accrued liabilities 20,186 15,330 Total current liabilities 101,700 71,549 Long-term lease liabilities—less current portion 253,420 248,596 Deferred tax liabilities, net 1,861 1,855 Other long-term liabilities 10,575 8,262 Long-term debt, net — 63,914 Total liabilities 367,556 394,176 Commitments and contingencies Equity: Common stock, $0.001 par value; 100,000 shares authorized; 34,670 and 34,373 shares issued and outstanding at December 31, 2024, respectively; and 30,297 and 29,948 shares issued and outstanding at December 31, 2023, respectively 35 29 Additional paid-in capital 236,091 105,712 Retained earnings 57,222 34,663 Treasury stock, at cost, 3 shares at December 31, 2024 and December 31, 2023 (65) (65)Total The Pennant Group, Inc. stockholders’ equity 293,283 140,339 Noncontrolling interest 18,682 5,176 Total equity 311,965 145,515 Total liabilities and equity$679,521 $539,691 THE PENNANT GROUP, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented: Year Ended December 31, 2024 2023 Net cash provided by operating activities$39,298 $33,090 Net cash used in investing activities (70,684) (30,222)Net cash provided by financing activities 49,573 1,112 Net increase in cash 18,187 3,980 Cash beginning of period 6,059 2,079 Cash end of period$24,246 $6,059 THE PENNANT GROUP, INC.REVENUE BY SEGMENT(unaudited, dollars in thousands) The following table sets forth our total revenue by segment and as a percentage of total revenue for the periods indicated: Three Months Ended December 31, 2024 2023 Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage Home health and hospice services Home health$66,766 35.3% $45,932 31.5%Hospice 63,391 33.6 54,405 37.3 Home care and other(a) 11,864 6.3 6,554 4.5 Total home health and hospice services 142,021 75.2 106,891 73.3 Senior living services 46,871 24.8 39,063 26.7 Total revenue$188,892 100.0% $145,954 100.0% (a) Home care and other revenue is included with home health revenue in other disclosures in this press release. Year Ended December 31, 2024 2023 Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage Home health and hospice services Home health$239,539 34.5% $175,044 32.1%Hospice 240,102 34.5 194,627 35.7 Home care and other(a) 39,843 5.7 24,793 4.6 Total home health and hospice services 519,484 74.7 394,464 72.4 Senior living services 175,756 25.3 150,427 27.6 Total revenue$695,240 100.0% $544,891 100.0% (a) Home care and other revenue is included with home health revenue in other disclosures in this press release. THE PENNANT GROUP, INC.SELECT PERFORMANCE INDICATORS(unaudited, total revenue dollars in thousands) The following table summarizes our overall home health and hospice performance indicators for the each of the dates or periods indicated: Three Months Ended December 31, 2024 2023 Change % ChangeTotal agency results: Home health and hospice revenue$142,021 $106,891 35,130 32.9% Home health services: Total home health admissions 15,959 11,328 4,631 40.9%Total Medicare home health admissions 6,443 4,952 1,491 30.1%Average Medicare revenue per 60-day completed episode(a)$3,824 $3,481 $343 9.9%Hospice services: Total hospice admissions 3,090 2,540 550 21.7%Average daily census 3,445 2,796 649 23.2%Hospice Medicare revenue per day$186 $189 $(3) (1.6)% Three Months Ended December 31, 2024 2023 Change % ChangeSame agency(b) results: Home health and hospice revenue$107,731 $100,002 $7,729 7.7% Home health services: Total home health admissions 12,650 11,057 1,593 14.4%Total Medicare home health admissions 5,119 4,826 293 6.1%Average Medicare revenue per 60-day completed episode(a)$3,615 $3,495 $120 3.4%Hospice services: Total hospice admissions 2,621 2,375 246 10.4%Average daily census 2,912 2,657 255 9.6%Hospice Medicare revenue per day$185 $187 $(2) (1.1)% Year Ended December 31, 2024 2023 Change % ChangeTotal agency results: Home health and hospice revenue$519,484 $394,464 $125,020 31.7% Home health services: Total home health admissions 59,741 43,508 16,233 37.3%Total Medicare home health admissions 24,598 19,389 5,209 26.9%Average Medicare revenue per 60-day completed episode(a)$3,677 $3,468 $209 6.0%Hospice services: Total hospice admissions 12,208 9,746 2,462 25.3%Average daily census 3,268 2,607 661 25.4%Hospice Medicare revenue per day$183 $185 $(2) (1.1)% Year Ended December 31, 2024 2023 Change % ChangeSame agency(b) results: Home health and hospice revenue$430,672 $384,230 $46,442 12.1% Home health services: Total home health admissions 49,273 42,767 6,506 15.2%Total Medicare home health admissions 20,560 19,047 1,513 7.9%Average Medicare revenue per 60-day completed episode(a)$3,546 $3,474 $72 2.1%Hospice services: Total hospice admissions 10,591 9,479 1,112 11.7%Average daily census 2,826 2,561 265 10.3%Hospice Medicare revenue per day$185 $186 $(1) (0.5) % (a) The year to date average for Medicare revenue per 60-day completed episode includes post period claim adjustments for prior periods.(b) Same agency results represent all agencies purchased or licensed prior to January 1, 2023. The following table summarizes our senior living performance indicators for the periods indicated: Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023Total senior living results: Senior living revenue$46,871 $39,063 $175,756 $150,427 Occupancy 78.6% 79.0% 78.8% 78.5%Average monthly revenue per occupied unit$4,961 $4,568 $4,811 $4,443 Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023Same store senior living(a) results: Senior living revenue$41,742 $38,323 $161,367 $148,548 Occupancy 79.6% 79.9% 79.7% 79.7%Average monthly revenue per occupied unit$4,905 $4,522 $4,763 $4,416 (a) Same store senior living results is defined as all senior living communities excluding affiliate memory care units in transition, and new senior living operations acquired in 2023 or 2024. THE PENNANT GROUP, INC.REVENUE BY PAYOR SOURCE(unaudited, dollars in thousands) The following table presents our total revenue by payor source as a percentage of total revenue for the periods indicated: Three Months Ended December 31, 2024 2023 Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage Revenue: Medicare $90,116 47.7% $70,915 48.6%Medicaid 25,318 13.4 20,882 14.3 Subtotal 115,434 61.1 91,797 62.9 Managed Care 26,613 14.1 20,210 13.8 Private and Other(a) 46,845 24.8 33,947 23.3 Total revenue $188,892 100.0% $145,954 100.0% (a) Private and other payors includes revenue from all payors generated in the Company’s home care operations and management services agreement. Year Ended December 31, 2024 2023 Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage Revenue: Medicare $335,862 48.3% $263,810 48.4%Medicaid 91,704 13.2 77,337 14.2 Subtotal 427,566 61.5 341,147 62.6 Managed Care 92,697 13.3 73,748 13.5 Private and Other(a) 174,977 25.2 129,996 23.9 Total revenue $695,240 100.0% $544,891 100.0% (a) Private and other payors includes revenue from all payors generated in the Company’s home care operations and management services agreement. THE PENNANT GROUP, INC.RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION(unaudited, in thousands, except per share data) The following table reconciles net income to Non-GAAP net income for the periods presented: Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023 Net income attributable to The Pennant Group, Inc.$5,758 $4,349 $22,559 $13,379 Non-GAAP adjustments Costs at start-up operations(a) 229 102 473 1,162 Share-based compensation expense(b) 2,425 1,401 8,242 5,565 Acquisition related costs and credit allowances(c) 282 301 1,278 476 Interest expense - write off deferred financing fees(e) — — 428 — Costs associated with transitioning operations(d) 68 102 (350) 861 Unusual, non-recurring or redundant charges(e) 458 942 1,004 2,575 Provision for income taxes on Non-GAAP adjustments(f) (726) (562) (3,668) (2,124)Non-GAAP net income$8,494 $6,635 $29,966 $21,894 Dilutive Earnings Per Share As Reported Net Income$0.16 $0.14 $0.70 $0.44 Average number of shares outstanding 35,333 30,236 32,000 30,193 Adjusted Diluted Earnings Per Share Net Income$0.24 $0.22 $0.94 $0.73 Average number of shares outstanding 35,333 30,236 32,000 30,193 (a) Represents results related to start-up operations. Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023 Revenue$(172) $(2,216) $(5,128) $(11,037) Cost of services 381 2,158 5,265 11,139 Rent 18 156 324 1,041 Depreciation & amortization 2 4 12 19 Total Non-GAAP adjustment$229 $102 $473 $1,162 (b) Represents share-based compensation expense incurred for the periods presented. Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023 Cost of services$1,039 $832 $3,853 $3,120 General and administrative 1,386 569 4,389 2,445 Total Non-GAAP adjustment$2,425 $1,401 $8,242 $5,565 (c) Represents costs incurred to acquire an operation that are not capitalizable. (d) During the year ended December 31, 2023, an affiliate of the Company placed its memory care units into transition and is converting the facility into an assisted living community. We received insurance proceeds related to the property in 2024 which were recorded as a gain on asset disposition on the consolidated statements of income. The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with an entity transitioned to Ensign. Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023 Revenue$— $— $(1) $(4) Cost of services 13 17 (569) 616 Rent 52 82 209 238 Depreciation 3 3 11 11 Total Non-GAAP adjustment$68 $102 $(350) $861 (e) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses. (f) Represents an adjustment to the provision for income tax to the year-to-date effective tax rate of 25.2% and 25.8% for the year ended December 31, 2024 and 2023, respectively. This rate excludes the tax benefit of share-based payment awards. The table below reconciles Consolidated net income to the Consolidated Non-GAAP financial measures, Consolidated Adjusted EBITDA, and to the Non-GAAP valuation measure, Consolidated Adjusted EBITDAR, for the periods presented: Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023 Consolidated net income$6,530 $4,529 $24,339 $13,910 Less: Net income attributable to noncontrolling interest 772 180 1,780 531 Add: Provision for income taxes 2,071 1,780 7,028 5,674 Net interest expense 650 1,569 6,956 5,924 Depreciation and amortization 1,827 1,313 6,119 5,130 Consolidated EBITDA 10,306 9,011 42,662 30,107 Adjustments to Consolidated EBITDA Add: Costs at start-up operations(a) 209 (58) 137 102 Share-based compensation expense(b) 2,425 1,401 8,242 5,565 Acquisition related costs and credit allowances(c) 282 301 1,278 476 Activities associated with transitioning operations(d) 13 17 (570) 612 Unusual, non-recurring or redundant charges(e) 458 942 1,004 2,575 Rent related to items (a) and (d) above 70 238 533 1,279 Consolidated Adjusted EBITDA 13,763 11,852 53,286 40,716 Rent—cost of services 11,215 10,320 43,029 39,759 Rent related to items (a) and (d) above (70) (238) (533) (1,279)Adjusted rent—cost of services 11,145 10,082 42,496 38,480 Consolidated Adjusted EBITDAR(f)$24,908 $95,782 (a) Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations.(b) Share-based compensation expense and related payroll taxes incurred. Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense.(c) Non-capitalizable costs associated with acquisitions, credit allowances, and write offs for amounts in dispute with the prior owners of certain acquired operations.(d) During the year ended December 31, 2023, an affiliate of the Company placed its memory care units into transition and is converting the facility into an assisted living community. We received insurance proceeds related to the property in 2024 which were recorded as a gain on asset disposition on the consolidated statements of income. The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with an entity transitioned to Ensign.(e) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses.(f) This measure is a valuation measure and is displayed thusly, it is not a performance measure as it excludes rent expense, which is a normal and recurring operating expense and, as such, does not reflect our cash requirements for leasing commitments. Our presentation of Consolidated Adjusted EBITDAR should not be construed as a financial performance measure. The following table present certain financial information regarding our reportable segments. General and administrative expenses are not allocated to the reportable segments: Home Health and Hospice Services Senior Living Services All Other TotalThree Months Ended December 31, 2024 Segment Revenue$141,849 $46,871 $172 $188,892Segment Cost of Services 118,628 33,437 Segment Adjusted EBITDAR from Operations$23,221 $13,434 $36,655Three Months Ended December 31, 2023 Segment Revenue$104,990 $38,748 $2,216 $145,954Segment Cost of Services 86,748 26,848 Segment Adjusted EBITDAR from Operations$18,242 $11,900 $30,142 Home Health and Hospice Services Senior Living Services All Other TotalYear Ended December 31, 2024 Segment Revenue$515,344 $174,767 $5,129 $695,240Segment Cost of Services 427,635 123,107 Segment Adjusted EBITDAR from Operations$87,709 $51,660 $139,369Year Ended December 31, 2023 Segment Revenue$385,652 $148,198 $11,041 $544,891Segment Cost of Services 320,046 102,904 Segment Adjusted EBITDAR from Operations$65,606 $45,294 $110,900 The table below provides a reconciliation of Segment Adjusted EBITDAR from Operations above to income from operations: Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023 Segment Adjusted EBITDAR from Operations(a)$36,655 $30,142 $139,369 $110,900Less: Unallocated corporate expenses 11,747 8,208 43,587 31,704Less: Depreciation and amortization 1,827 1,313 6,119 5,130Rent—cost of services 11,215 10,320 43,029 39,759Other income 15 311 207 339Adjustments to Segment EBITDAR from Operations: Less: Costs at start-up operations(b) 209 (58) 137 102Share-based compensation expense(c) 2,425 1,401 8,242 5,565Acquisition related costs and credit allowances(d) 282 301 1,278 476Activities associated with transitioning operations(e) 13 17 (570) 612Unusual, non-recurring or redundant charges(f) 458 942 1,004 2,575Add: Net income attributable to noncontrolling interest 772 180 1,780 531Income from operations$9,236 $7,567 $38,116 $25,169 (a) Segment Adjusted EBITDAR from Operations is net income (loss) attributable to the Company's reportable segments excluding interest expense, provision for income taxes, depreciation and amortization expense, rent, and, in order to view the operations performance on a comparable basis from period to period, certain adjustments including: (1) costs at start-up operations, (2) share-based compensation, (3) acquisition related costs and credit allowances, (4) the costs associated with transitioning operations, (5) unusual, non-recurring or redundant charges, and (6) net income attributable to noncontrolling interest. General and administrative expenses are not allocated to the reportable segments, and are included as “All Other,” accordingly the segment earnings measure reported is before allocation of corporate general and administrative expenses. The Company's segment measures may be different from the calculation methods used by other companies and, therefore, comparability may be limited.(b) Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations.(c) Share-based compensation expense and related payroll taxes incurred. Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense.(d) Non-capitalizable costs associated with acquisitions, credit allowances, and write offs for amounts in dispute with the prior owners of certain acquired operations.(e) During the year ended December 31, 2023, an affiliate of the Company placed its memory care units into transition and is converting the facility into an assisted living community. We received insurance proceeds related to the property in 2024 which were recorded as a gain on asset disposition on the consolidated statements of income. The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with an entity transitioned to Ensign.(f) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses. The tables below reconcile Segment Adjusted EBITDAR from Operations to Segment Adjusted EBITDA from Operations for each reportable segment for the periods presented: Three Months Ended December 31, Home Health and Hospice Senior Living 2024 2023 2024 2023 Segment Adjusted EBITDAR from Operations$23,221 $18,242 $13,434 $11,900 Less: Rent—cost of services 1,935 1,655 9,280 8,664 Rent related to start-up and transitioning operations (18) (65) (52) (173)Segment Adjusted EBITDA from Operations$21,304 $16,652 $4,206 $3,409 Year Ended December 31, Home Health and Hospice Senior Living 2024 2023 2024 2023 Segment Adjusted EBITDAR from Operations$87,709 $65,606 $51,660 $45,294 Less: Rent—cost of services 7,189 5,791 35,840 33,967 Rent related to start-up and transitioning operations (140) (313) (393) (966)Segment Adjusted EBITDA from Operations$80,660 $60,128 $16,213 $12,293 Discussion of Non-GAAP Financial Measures EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes, and (c) depreciation and amortization. Adjusted EBITDA consists of net income attributable to the Company before (a) interest expense, net (b) provisions for income taxes, (c) depreciation and amortization, (d) costs incurred for start-up operations, including rent and excluding depreciation, interest and income taxes, (e) share-based compensation expense, (f) non-capitalizable acquisition related costs and credit allowances, (g) net costs associated with transitioning operations, (h) unusual, non-recurring or redundant charges and (i) net income attributable to noncontrolling interest. Consolidated Adjusted EBITDAR is a valuation measure applicable to current periods only and consists of net income attributable to the Company before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) rent-cost of services, (e) costs incurred for start-up operations, excluding rent, depreciation, interest and income taxes, (f) share-based compensation expense, (g) acquisition related costs and credit allowances, (h) costs associated with transitioning operations, (i) unusual, non-recurring or redundant charges and (j) net income attributable to noncontrolling interest. The company believes that the presentation of EBITDA, adjusted EBITDA, consolidated adjusted EBITDAR, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the company’s operating performance. The company believes disclosure of adjusted net income, adjusted net income per share, EBITDA, adjusted EBITDA and consolidated adjusted EBITDAR has economic substance because the excluded revenues and expenses are infrequent in nature and are variable in nature, or do not represent current revenues or cash expenditures. A material limitation associated with the use of these measures as compared to the GAAP measures of net income and diluted earnings per share is that they may not be comparable with the calculation of net income and diluted earnings per share for other companies in the company's industry. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. For further information regarding why the company believes that this non-GAAP measure provides useful information to investors, the specific manner in which management uses this measure, and some of the limitations associated with the use of this measure, please refer to the company's periodic filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The company’s periodic filings are available on the SEC's website at www.sec.gov or under the "Financial Information" link of the Investor Relations section on Pennant’s website at http://www.pennantgroup.com.

Pennant Reports Fourth Quarter and Fiscal Year 2024 Results

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