The Pennant Group Inc.’s (Nasdaq: PNTG) position is different from other, larger home health companies in the country, mainly in that a substantial portion of its overall revenue comes from senior living.
COVID-19 is once again threatening senior care industries, making providers like Pennant more at risk for negative disruption. After all, lower occupancy in senior living communities is not just harmful to the senior living segment of Pennant’s business, but its home health and hospice operations as well.
Yet for now, Pennant executives are optimistic about the company’s future and less worried about the Delta variant spreading across the country.
“We’re feeling quite good about our ability to move forward, even with the Delta variant, and achieve strong results in the second half,” Pennant CEO Danny Walker said on the company’s Q2 earnings call Tuesday. “More importantly, we feel really good about our positioning as we look toward 2022, with how things are stacking up as we look to continue to execute on our long-term growth strategy.”
The Eagle, Idaho-based Pennant is a holding company of affiliated home health, hospice and senior living companies. Included in its network are 86 home health and hospice agencies, and 54 senior living communities, located throughout 14 states.
“[Delta] continues to affect mostly the unvaccinated population, and we’re really fortunate to have a high percentage of vaccination within our senior living communities in particular, and we’ve seen widespread reception to that amongst our employees as well,” Walker said.
Walker believes the company is far more prepared to take on COVID-19 disruption at this point, whether that’s related to personal protective equipment (PPE) or other general operational processes.
“We’re ready to navigate it,” he said.
Overall, Pennant brought in $110.3 million in revenue in Q2 2021, a nearly 19% increase from the $92.7 million it posted in 2020 over the same period.
Home health revenue increased by nearly 70% year over year, from $20.8 million to $35.3 million. Hospice increased by nearly 13%.
In Q2, home health represented 32% of the company’s overall revenue, a 10% jump year over year. Hospice represented 33% of overall revenue, with senior living representing just over 29%, creating a relatively even split between the three segments.
Growing in a turbulent environment
Amid labor challenges and spiking COVID-19 cases, Pennant has continued to execute on its aggressive growth strategy. The company’s performance in Q2, its executives believe, is noteworthy considering all the external headwinds paired with its internal expansion efforts.
“These clinical and financial achievements in our home health and hospice segment are particularly impressive, as they came in the midst of a challenging labor environment and a record number of acquisitions in various stages of transition over the past 18 months,” Walker said.
Over the course of Q2, Pennant closed on two home health acquisitions in southwest Colorado, along with one in Texas. It also acquired a hospice agency in Sacramento, California.
“While this process can be a drag on results, as field leaders temporarily direct some resources from existing to newly acquired operations, it’s important to emphasize that each agency we acquire multiplies our short- and long-term growth opportunities,” Derek Bunker, Pennant’s chief investment officer, said on the call.
In April, after the acquisition of Pasco Southwest Home Health, Pennant executives reiterated that more M&A would be coming down the pike in 2021 and beyond.
The company has also touted its capacity to continue building out its home health and hospice segments across the country.
“Overall, the pipeline for home health and hospice acquisitions remain strong,” Bunker said. “As we work through the process of welcoming these recently acquired operations into our organization, [we are confident] that we will have the capacity for even more growth opportunities in the future.”
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