Good day, and thank you for standing by. Welcome to The Pennant Group First Quarter 2025 Earnings Call. At this time all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. After the speakers presentation there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Kirk Cheney, Executive Vice President.

Thank you, Josh. Welcome, everyone, and thank you for joining us today. Here with me today, I have Brent Guerisoli, our CEO; John Gochnour, our President and COO; and Lynette Walbom, our CFO. Before we begin, I have a few housekeeping matters. We filed our earnings press release and 10-Q yesterday. This announcement is available on the Investor Relations section of our website at www.pennantgroup.com. A replay of this call will also be available on our website until 5:00 p.m. Mountain Time on May 6, 2026. We want to remind anyone who may be listening to a replay of this call that all statements are made as of today, May 7, 2025, and these statements will not be updated after today’s call. Also, any forward-looking statements made today are based on management’s current expectations, 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 from 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 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 and the Service Center are operated by separate independent companies that have their own management, employees, and assets. References herein to the consolidated company and its assets and activities as well as the use of the terms we, us, our, and similar terms do not imply that The Pennant Group, Inc. has direct operating assets, employees, or 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. The GAAP to non-GAAP reconciliation is available in yesterday’s press release and is available in our 10-Q and 10-K. And with that, I will turn the call over to Brent Guerisoli, our CEO. Brent?

Thanks, Kirk. Good morning, everyone, and welcome to our first quarter 2025 earnings call. To begin, I want to recognize all the contributions and efforts of our incredible partners across the Pennant footprint. Always, especially in periods of dramatic growth, the work our teams do can be demanding and so inspired to see our people daily rising to the challenge. We are pleased to report another record-breaking quarter with strong performance across our business, resulting in revenue of $209.8 million, an increase of $52.9 million, or 33.7% over the prior year quarter; consolidated adjusted EBITDA of $16.4 million, an increase of $5.1 million, or 45.9% over the prior year quarter; and adjusted diluted earnings per share of $0.27, an increase of $0.07, or 35% over the prior year quarter. Our first quarter success can be attributed to our consistent focus on five key initiatives: leadership development, clinical excellence, employee experience, margin improvement, and growth. As we make progress in each of these areas, the flywheel also continues to turn in each of our business segments, allowing us to opportunistically add and transition new operations as our existing operations drive strong performance and organic growth. This is primarily a product of our innovative operating model and multiyear focus on leadership development and building a robust pipeline of leaders. As we’ve explained before, Pennant is a leadership company committed to providing life-changing opportunities for local leaders to achieve C-level performance in their operations and become owners in Pennant. Our local CEOs and other C-level leaders earn this designation by demonstrating true ownership and creating clinical, financial, and cultural value. In the process, they typically generate higher annual earnings than our non-CEO executive directors, along with better clinical and cultural outcomes. Since January of last year, 52 local leaders earned C-level designations in…

Thanks, Brent. I’m pleased to report strong performance across both operating segments in the first quarter. Our focus on leadership has allowed us to pair robust organic growth with the effective transition of newly acquired operations, leading to exceptional financial and clinical results. Our Home Health and Hospice segment delivered another record-setting quarter. In Q1, segment revenue reached $159.9 million, up $43.4 million, or 37.2%, and adjusted EBITDA rose to $25.1 million, an increase of $7.3 million, or 40.6%, each over the prior year quarter. We also remain steadily focused on improved clinical outcomes and strong cost discipline at the local level, resulting in an adjusted EBITDA margin of 15.8%, a 10 basis point improvement, even as we experienced rapid growth and significant acquisition activity. The growth in our hospice programs reflected this momentum. Hospice admissions rose to 3,783, an increase of 22.8%, and average daily census climbed to 3,794, up 28.1% each over the prior year quarter. Organic growth was a key contributor to this improvement, as length of stay increased and same-store average daily census rose 10.4% over the prior year quarter. Among other drivers, these results reflect our ongoing investment in developing geriatric primary care, palliative care, and specialty clinical care programs in several of our communities. These locally-led programs, supported by our provider services resource team, are designed to address critical gaps in local care continuums and ensure that patients receive the right care in the right setting at the right time to improve clinical outcomes and patient satisfaction. In many cases, these provider-driven programs have helped us open new doors and expand referrals across the care continuum. The proposed 2026 hospice rule released last month includes a 2.4% rate increase. Based on our initial modeling, we expect to receive a similar 2.42% upward adjustment, which…

Thank you, John, and good morning, everyone. Detailed financial results for the three months ended March 31, 2025, are included in our 10-Q and press release filed yesterday. Key metrics for the three months ended March 31, 2025, include $56.7 million drawn on our revolving line of credit with $193.3 million available and $5.2 million in cash on hand at quarter end, and a 0.83x net debt to adjusted EBITDA. The company’s cash flows used in operations was $21.2 million, a decrease of operating cash flow of $21.8 million compared to the prior year quarter. This was due to significant acquisitions we made in the first quarter of 2025, which come with elevated accounts receivable due to revenue growth and normal transition-related payment reconciliation processes. In addition, first quarter operating cash flows were impacted by our annual incentive payouts and payroll accrual timing. In short, this swing is a function of acquisitions and accrual timing and not a fundamental change in our longer-term operating cash flow expectation. Cash collections remain strong as our days sales outstanding have improved year-over-year and over the sequential quarter. We expect our 2025 cash flows from operations to be between $35 million and $45 million. We have sufficient available funds on our revolver to execute on the UnitedHealth-Amedisys transaction and remain well within our covenants. With our strong operating results in Q1, we are trending towards the upper end of our 2025 guidance. As a reminder, our guidance includes revenue of $800 million to $865 million, adjusted EBITDA of $63.1 million to $68.2 million, and adjusted EPS of $1.03 to $1.11. I would now like to spotlight a few of our leaders in our organization who earned the Flag Award in 2024, which is Pennant’s most prestigious award to recognize an outstanding achievement in all…

Thanks, Lynette. As we conclude, I’d like to once again thank all the operators and clinicians who, like those highlighted above, dedicate themselves daily to providing life-changing service to our patients and residents. You are truly making a difference in the lives and communities we serve, and it is an honor to work alongside you. With that, we’ll open it up for questions. Josh, can you please instruct the audience on the Q&A procedure?

Thank you. [Operator Instructions] Our first question comes from Stephen Baxter with Wells Fargo. You may proceed.

Hi. Thanks. I just wanted to start with the reacceleration of same-store growth, particularly in the home health and hospice business. It looked a lot more like the growth you had in the early part of last year than maybe the growth you saw in the fourth quarter. I was wondering if there’s anything that you would call out in the first quarter, specifically as a driver of that reacceleration or anything as you look back at the fourth quarter that gives you maybe a sense that there was something about the fourth quarter that was a little bit of a one-off dynamic that you’ve now worked through. Maybe we could start there, and I have a couple of follow-ups.

Yes. Thanks for the question, Stephen. And I think as you look at the trajectory that we experienced last year that same-store growth was strong throughout the year. And we really believe that, that is consistent with our unique approach to being a locally driven solution in the community. Every year in the fourth quarter, we experience some seasonal decline during the holiday season as patients and their families often are reticent to choose hospice and sometimes even home health. And then we see that pick back up in the first quarter. And so I don’t think there’s anything there more than seasonal change. But as far as you look year-over-year, we’ve continued to have that double-digit growth from an ADC standpoint on the hospice side and on the home health admissions side. And so we think that it reflects some really positive trends in the community choosing us. And we’re excited to see it building steam in the first quarter.

Okay. I appreciate that. And then just hoping that maybe you could expand a little bit on the guidance expectations. Loud and clear that you’re now expecting to be in the upper part of the range. Just as we think about the outperformance, would you call out maybe one business as maybe a bigger contributor than the other in terms of the segments? Are we thinking EBITDA margins are also higher or the same kind of EBITDA margins that were embedded on the initial guidance, but potentially just higher revenue against that? Like, how do we think about the moving pieces inside the guidance as well? Thank you.

Yes. This is Brent. And I might let Lynette respond on specifics in the guidance model. What I would say is both of our segments have performed really well. So we’re excited about the progress, the revenue quality on the senior living side, and in addition to some of the margin improvement. We’ve had really outsized performance as well on the home health and hospice side. And we called out Signature, the transition of those – that larger acquisition. Part of the reason for – I mean, at this point, we’re essentially pointing to the top end of the guidance. We’re really excited about the progress that we’ve made. But with any new transition, we’re always – we want to be conservative and ensure that sort of the trends continue. So we would expect, if we continue to perform well, to see opportunities on the guidance front. So at this point, we’re really excited about the progress we’ve made. Obviously, we had a really strong quarter, and we’re seeing strong improvement in both segments at the same time. So all in all, it’s just really good momentum across the businesses.

Okay. I’ll get back in the queue then. Thank you.

Thank you. [Operator Instructions] And I’m not showing any further questions at this time. I would like to turn the call back – we have one question. One moment please. Our next question comes from Stephen Baxter, Wells Fargo. You may proceed.

Yes. Thanks. I had a couple more maybe to touch on if there’s the time for it. So I was hoping – I’m not sure how much you can really say at this point in time around the Optum transaction that there was the announcement on. Just philosophically, as you think about your willingness to look at a transaction, it looks like that. Would love to get a little bit of color about what goes into the evaluation of that. I mean, how we should think about that looking in terms of potentially requiring new clusters versus folding into existing geographies. I’d love to just get the company’s philosophical perspective on looking at a transaction that may be a little bit different than other ones you’ve pursued in the past.

Yes. Stephen, it’s a great question. Obviously, we’ve already mentioned it. We filed the 8-K, and due to the ongoing antitrust process, we’re pretty limited on what we’re going to be discussing. We’re certainly excited to partner with UHG and Amedisys. We see these as high-quality assets. And it doesn’t give us an opportunity to expand in new and compelling markets. Beyond that, we’ll refer you to the 8-K on any additional details. The one thing I’ll say just in general about the way that we evaluate any sort of acquisitions is really the opportunity to have great leaders step into place. So we’ve been building a leadership pipeline over time. And so we feel confident that we’ll have – we have leaders, and we’ll continue to develop leaders to be able to step into those opportunities and that we can support it through our current operations. And so those are kind of two of the key factors. And then, obviously, it has to be a compelling opportunity overall. And so as we evaluate this deal along with any other deal, that’s kind of the way that we process it. The other thing I would point to, obviously the Signature transaction was a larger transaction for us, and we’ve been really positive with the early returns in that, and it’s given us confidence to continue to build on a larger platform and especially where you’ve got strong assets and performing assets, to be able to sort of fold in strong assets and create opportunities for local leaders. It creates a pretty compelling story. And so those are just a couple of the factors that we consider as we evaluate a deal such as this.

Got it. Okay. And then I’ll just lob in a couple of other ones. In terms of thinking about the level of, I guess, rate growth that you saw in the senior living business in the first quarter, I think obviously, that’s a very strong number. Obviously, the first quarter occurred before a lot of the current day broader macro and maybe market uncertainty that we’re kind of dealing with right now. Just remind us philosophically how to think about the senior living’s sort of economic sensitivity and how to think about these people are obviously dealing with a fixed income situation here as they’re considering the potential changes. Just in general, what’s the right way to think about your ability to maybe continue to realize the strong price growth in the back half of the year and whether the macro gives you any kind of concern or there’s risk to that as a result.

Yes. There’s always some sensitivity to the macroenvironment, especially in particular for our private pay residents. That being said, and we kind of talked about it in the call. Our focus over the last really couple of years has been improving our revenue quality. That could mean by payer, it could mean by just ensuring that we’re charging the right rates at the local operations. And so, we’ve had a pretty robust effort to improve, and that’s why you’ve seen such robust – we were over 11% this quarter year-over-year. And so, from that standpoint, there is sensitivity, but there’s also sort of a balance between in many of the markets that we have. We do have roughly about 30% of our business that is Medicaid or state labor program. And so there’s an – and oftentimes, those programs are robust enough that they create value. And so from that standpoint, we’ve been able to partner in the right way with the right programs to create opportunities there. So that does impact a little bit some of that sensitivity because we can go and find a partner with some of these programs and still, in many cases, get reimbursed at or near private pay rates. And then from an occupancy standpoint, we’ve been pretty flat, and I think it’s primarily because of that focus on really getting the right level of revenue quality. One of the things that we’re really, really focused on now is sort of thinking about that price sensitivity, ensuring that we can couple increase RevPOR growth with occupancy growth. And so we’ve sort of targeted a mid-single-digit RevPOR growth over the year. Obviously, we’re trending above that right now, and so that’s a good sign. But it also means that there may be some opportunity to drive census growth as we sort of manage that RevPOR growth at the same time.

Okay. Thank you. And then maybe the last one for me would just be, it would be great to get an update on what you’re seeing in the hiring environment, whether you feel like there’s been any change in the trends that you’ve maybe discussed more recently. That’s probably it for me. Thank you.

Yes. No, appreciate that. And what I would say, Stephen, is that we have seen strong trends both in hiring and retention, and we’re excited about that. Because any time you’re experiencing the type of growth that we are experiencing, it comes back to our ability to attract and retain talent. And so adding more than 200 net nurses in the first quarter year-over-year is something that we’re excited about. It shows sort of our capacity to retain those existing talented clinicians who have entrusted us with their careers, also to add new clinicians, both from Signature and across the platform. And so really strong trends on that side of the business. Similarly, in senior living, we’ve been able to continue to staff and be prepared for growth as that occurs. And so we feel pretty excited about where we stand right now. Obviously, there’s a lot of economic dislocation that could happen as things trend over the year. And so we’re watching it very closely. But the trend so far this year have been positive. On the labor inflation side, we continue to see somewhat elevated labor cost inflation, particularly on the senior living side, I would say, where we saw about just under 5% labor inflation. On the home health and hospice side, we saw it was a little more normalized in the 3.2% range. And so we continue to see a little bit of normalization, and that’s going to be an important piece in us continuing the growth that we’ve experienced throughout the last few years.

Okay. Got it. Thanks so much.

You bet.

Thank you. I would now like to turn the call back over to Brent Guerisoli for any closing remarks.

Right. Well, thank you, Josh, and thank you, everyone, for joining us today.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.