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Pennant Reports Second Quarter 2024 Results

EAGLE, Idaho, Aug. 06, 2024 (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 second quarter of 2024, reporting GAAP diluted earnings per share of $0.18 for the second quarter of 2024. Pennant also reported adjusted diluted earnings per share of $0.24 for the quarter (1).

Second Quarter Highlights

  • Total revenue for the second quarter was $168.7 million, an increase of $36.5 million or 27.6% over the prior year quarter;
  • Net income for the second quarter was $5.7 million, an increase of $2.9 million or 103.4% over the prior year quarter;
  • Adjusted net income for the second quarter was $7.3 million, an increase of $1.9 million or 35.0% over the prior year quarter;
  • Segment Adjusted EBITDAR from Operations for the second quarter was $23.5 million, an increase of $4.0 million or 20.5% over the prior year quarter;
  • Adjusted EBITDA for the second quarter was $13.2 million, an increase of $3.1 million or 30.6% over the prior year quarter;
  • Home Health and Hospice Services segment revenue for the second quarter was $125.3 million, an increase of $30.3 million or 31.9% over the prior year quarter;
  • Home Health and Hospice Services segment adjusted EBITDAR from operations for the second quarter was $21.2 million, an increase of $5.5 million or 35.3% over the prior year quarter; and segment adjusted EBITDA from operations the second quarter was $19.6 million, an increase of $5.2 million or 36.3% over the prior year quarter;
  • Total home health admissions for the second quarter were 14,140, an increase of 3,699 or 35.4% over the prior year quarter; total Medicare home health admissions for the second quarter were 5,738, an increase of 889 or 18.3% over the prior year quarter;
  • Hospice average daily census for the second quarter was 3,220, an increase of 726 or 29.1% compared to the prior year quarter;
  • Senior Living Services segment revenue for the second quarter was $43.4 million, an increase of $6.2 million or 16.6% over the prior year quarter; average occupancy for the second quarter was 78.8%, an increase of 80 basis points over the prior year quarter, and average monthly revenue per occupied room for the second quarter was $4,790 an increase of $378 or 8.6% over the prior year quarter;
  • Senior Living segment adjusted EBITDAR from operations for the second quarter was $12.8 million, an increase of $1.1 million or 9.6% over the prior year quarter; and segment adjusted EBITDA from Operations for the second quarter was $4.1 million, an increase of $0.5 million or 14.8% over the prior year quarter.
(1)  See "Reconciliation of GAAP to Non-GAAP Financial Information.”
    

Operating Results

“We are pleased to report excellent second quarter results, which reflect strong performance in our mature operations, coupled with robust acquisition activity,” said Brent Guerisoli, Pennant’s Chief Executive Officer. “Our on-going investment in leadership has positioned us well to add value to our existing operations even as we acquire new ones. With our solid operating results and healthy balance sheet, we are excited for continued success in the second half of the year. We are updating our annual guidance based on the sustainable momentum we see in the business, and the accretive additions that will contribute to the bottom line through the remainder of 2024.”

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-Q for the three and six months ended June 30, 2024, which has been filed with the SEC today and can be viewed on the Company’s website at www.pennantgroup.com.

2024 Guidance

Management is updating its annual guidance as follows: total revenue is anticipated to be between $654.0 million and $694.5 million; full year 2024 adjusted earnings per diluted share is anticipated to be between $0.89 and $0.95; and full year 2024 adjusted EBITDA is anticipated to be between $50.7 million and $53.8 million.

“The Company’s updated guidance incorporates current operations and organic growth, diluted weighted average shares outstanding of approximately 30.7 million, and a 25.8% effective tax rate,” stated Lynette Walbom, Pennant’s Chief Financial Officer. “It anticipates continued strong operating performance through the end of the year, hospice reimbursement rate adjustments, increased interest expense, and the contributions from our joint ventures and management agreements. It excludes unannounced acquisitions, the announced purchase of Signature’s Oregon assets, start-ups, share-based compensation, acquisition-related costs, or one-time implementation and unusual items.”

Conference Call

A live webcast will be held tomorrow, August 7, 2024 at 10:00 a.m. Mountain time (12:00 p.m. Eastern time) to discuss Pennant’s second 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 117 home health and hospice agencies and 54 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 Relations
The Pennant Group, Inc.
(208) 506-6100
ir@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 June 30, Six Months Ended June 30,
  2024   2023   2024   2023 
        
Revenue$168,745  $132,281  $325,660  $258,745 
        
Expense       
Cost of services 135,313   106,176   261,308   208,778 
Rent—cost of services 10,524   9,836   20,908   19,433 
General and administrative expense 11,878   8,791   23,314   17,496 
Depreciation and amortization 1,468   1,214   2,799   2,494 
Loss (gain) on disposition of property and equipment, net    3   (755)  3 
Total expenses 159,183   126,020   307,574   248,204 
Income from operations 9,562   6,261   18,086   10,541 
Other (expense) income, net:       
Other (expense) income (2)  35   83   65 
Interest expense, net (1,622)  (1,453)  (3,414)  (2,859)
Other expense, net (1,624)  (1,418)  (3,331)  (2,794)
Income before provision for income taxes 7,938   4,843   14,755   7,747 
Provision for income taxes 1,844   1,921   3,603   2,828 
Net income 6,094   2,922   11,152   4,919 
Less: Net income attributable to noncontrolling interest 404   125   556   272 
Net income attributable to The Pennant Group, Inc.$5,690  $2,797  $10,596  $4,647 
Earnings per share:       
Basic$0.19  $0.09  $0.35  $0.16 
Diluted$0.18  $0.09  $0.35  $0.15 
Weighted average common shares outstanding:       
Basic 30,142   29,809   30,094   29,780 
Diluted 30,781   30,193   30,583   30,171 
                


THE PENNANT GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
 
 June 30, 2024 December 31, 2023
Assets   
Current assets:   
Cash$3,043  $6,059 
Accounts receivable—less allowance for doubtful accounts of $253 and $259, respectively 76,089   61,116 
Prepaid expenses and other current assets 14,981   12,902 
Total current assets 94,113   80,077 
Property and equipment, net 40,905   28,598 
Right-of-use assets 267,353   262,923 
Deferred tax assets, net 114    
Restricted and other assets 11,953   9,337 
Goodwill 110,487   91,014 
Other indefinite-lived intangibles 77,542   67,742 
Total assets$602,467  $539,691 
Liabilities and equity   
Current liabilities:   
Accounts payable$15,392  $10,841 
Accrued wages and related liabilities 30,601   28,256 
Operating lease liabilities—current 18,473   17,122 
Other accrued liabilities 19,223   15,330 
Total current liabilities 83,689   71,549 
Long-term operating lease liabilities—less current portion 251,613   248,596 
Deferred tax liabilities, net 1,336   1,855 
Other long-term liabilities 10,662   8,262 
Long-term debt, net 82,174   63,914 
Total liabilities 429,474   394,176 
Commitments and contingencies   
Equity:   
Common stock, $0.001 par value; 100,000 shares authorized; 30,493 and 30,150 shares issued and outstanding, respectively, at June 30, 2024; and 30,297 and 29,948 shares issued and outstanding, respectively, at December 31, 2023 30   29 
Additional paid-in capital 110,311   105,712 
Retained earnings 45,259   34,663 
Treasury stock, at cost, 3 shares at June 30, 2024 and December 31, 2023 (65)  (65)
Total The Pennant Group, Inc. stockholders’ equity 155,535   140,339 
Noncontrolling interest 17,458   5,176 
Total equity 172,993   145,515 
Total liabilities and equity$602,467  $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:
 
 Six Months Ended June 30,
  2024   2023 
Net cash provided by operating activities$11,036  $15,533 
Net cash used in investing activities (33,280)  (11,226)
Net cash provided by (used in) financing activities 19,228   (3,548)
Net (decrease) increase in cash (3,016)  759 
Cash beginning of period 6,059   2,079 
Cash end of period$3,043  $2,838 
 


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 June 30,
  2024   2023 
 Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage
        
Home health and hospice services       
Home health$61,637 36.5% $42,411 32.1%
Hospice 59,347 35.2   46,562 35.2 
Home care and other(a) 4,317 2.6   6,047 4.6 
Total home health and hospice services 125,301 74.3   95,020 71.9 
Senior living services 43,444 25.7   37,261 28.1 
Total revenue$168,745 100.0% $132,281 100.0%


(a) Home care and other revenue is included with home health revenue in other disclosures in this press release.


 Six Months Ended June 30,
  2024   2023 
 Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage
        
Home health and hospice services       
Home health$118,849 36.5% $84,191 32.5%
Hospice 113,954 35.0   89,851 34.7 
Home care and other(a) 8,988 2.7   12,057 4.7 
Total home health and hospice services 241,791 74.2   186,099 71.9 
Senior living services 83,869 25.8   72,646 28.1 
Total revenue$325,660 100.0% $258,745 100.0%
 


(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 June 30,    
 2024 2023 Change % Change
Total agency results:        
Home health and hospice revenue$125,301 $95,020  30,281  31.9%
        
Home health services:       
Total home health admissions 14,140  10,441  3,699  35.4%
Total Medicare home health admissions 5,738  4,849  889  18.3%
Average Medicare revenue per 60-day completed episode(a)$3,752 $3,519 $233  6.6%
Hospice services:       
Total hospice admissions 3,051  2,322  729  31.4%
Average daily census 3,220  2,494  726  29.1%
Hospice Medicare revenue per day$184 $189 $(5) (2.6)%


 Three Months Ended June 30,    
 2024 2023 Change % Change
Same agency(b) results:        
Home health and hospice revenue$108,516 $94,417 $14,099 14.9%
        
Home health services:       
Total home health admissions 12,227  10,306  1,921 18.6%
Total Medicare home health admissions 5,074  4,785  289 6.0%
Average Medicare revenue per 60-day completed episode(a)$3,623 $3,520 $103 2.9%
Hospice services:       
Total hospice admissions 2,654  2,302  352 15.3%
Average daily census 2,864  2,494  370 14.8%
Hospice Medicare revenue per day$189 $189 $ %


 Six Months Ended June 30,    
 2024 2023 Change % Change
Total agency results:        
Home health and hospice revenue$241,791 $186,099 $55,692  29.9%
        
Home health services:       
Total home health admissions 28,789  21,351  7,438  34.8%
Total Medicare home health admissions 12,084  9,797  2,287  23.3%
Average Medicare revenue per 60-day completed episode(a)$3,624 $3,467 $157  4.5%
Hospice services:       
Total hospice admissions 6,131  4,773  1,358  28.5%
Average daily census 3,091  2,467  624  25.3%
Hospice Medicare revenue per day$185 $186 $(1) (0.5)        %


 Six Months Ended June 30,    
 2024 2023 Change % Change
Same agency(b) results:        
Home health and hospice revenue$212,193 $185,496 $26,697 14.4%
        
Home health services:       
Total home health admissions 24,402  21,140  3,262 15.4%
Total Medicare home health admissions 10,433  9,700  733 7.6%
Average Medicare revenue per 60-day completed episode(a)$3,557 $3,468 $89 2.6%
Hospice services:       
Total hospice admissions 5,346  4,753  593 12.5%
Average daily census 2,782  2,467  315 12.8%
Hospice Medicare revenue per day$188 $186 $2 1.1%


(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 June 30, Six Months Ended June 30,
  2024   2023   2024   2023 
Total senior living results:       
Senior living revenue$43,444  $37,261  $83,869  $72,646 
        
Occupancy 78.8%  78.0%  78.7%  78.1%
Average monthly revenue per occupied unit$4,790  $4,412  $4,730  $4,357 


 Three Months Ended June 30, Six Months Ended June 30,
  2024   2023   2024   2023 
Same store senior living(a) results:        
Senior living revenue$39,691  $36,785  $78,595  $72,099 
        
Occupancy 79.2%  79.6%  79.5%  79.3%
Average monthly revenue per occupied unit$4,753  $4,390  $4,698  $4,342 


(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 June 30,
   2024   2023 
  Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage
         
Revenue:        
Medicare $81,880 48.5% $64,214 48.5%
Medicaid  26,462 15.7   18,931 14.3 
Subtotal  108,342 64.2   83,145 62.8 
Managed Care  21,349 12.7   17,254 13.1 
Private and Other(a)  39,054 23.1   31,882 24.1 
Total revenue $168,745 100.0% $132,281 100.0%
 


(a) Private and other payors includes revenue from all payors generated in the Company’s home care operations and management services agreement.


  Six Months Ended June 30,
   2024   2023 
  Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage
         
Revenue:        
Medicare $158,861 48.8% $124,970 48.3%
Medicaid  51,528 15.8   36,562 14.1 
Subtotal  210,389 64.6   161,532 62.4 
Managed Care  41,471 12.7   34,380 13.3 
Private and Other(a)  73,800 22.7   62,833 24.3 
Total revenue $325,660 100.0% $258,745 100.0%


(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 June 30, Six Months Ended June 30,
  2024   2023   2024   2023 
        
Net income attributable to The Pennant Group, Inc.$5,690  $2,797  $10,596  $4,647 
        
Non-GAAP adjustments       
Costs at start-up operations(a) 98   471   178   1,001 
Share-based compensation expense(b) 1,949   1,354   3,475   2,773 
Acquisition related costs and credit allowances(c) 365   72   502   104 
Costs associated with transitioning operations(d) 87   570   (486)  669 
Unusual, non-recurring or redundant charges(e) 32   226   307   624 
Provision for income taxes on Non-GAAP adjustments(f) (878)  (49)  (1,267)  (531)
Non-GAAP net income$7,343  $5,441  $13,305  $9,287 
        
Dilutive Earnings Per Share As Reported       
Net Income$0.18  $0.09  $0.35  $0.15 
Average number of shares outstanding 30,781   30,193   30,583   30,171 
        
Adjusted Diluted Earnings Per Share        
Net Income$0.24  $0.18  $0.44  $0.31 
Average number of shares outstanding 30,781   30,193   30,583   30,171 
 


(a) Represents results related to start-up operations.
     Three Months Ended June 30, Six Months Ended June 30,
      2024   2023   2024   2023 
  Revenue$(2,546) $(3,286) $(4,956) $(5,893)
  Cost of services 2,491   3,351   4,819   6,161 
  Rent 150   401   306   723 
  Depreciation & amortization 3   5   9   10 
  Total Non-GAAP adjustment$98  $471  $178  $1,001 
            
(b) Represents share-based compensation expense incurred for the periods presented.
     Three Months Ended June 30, Six Months Ended June 30,
      2024   2023   2024   2023 
  Cost of services$983  $781  $1,745  $1,469 
  General and administrative 966   573   1,730   1,304 
  Total Non-GAAP adjustment$1,949  $1,354  $3,475  $2,773 
            
(c) Represents costs incurred to acquire an operation that are not capitalizable.


(d) During the three months ended March 31, 2023, an affiliate of the Company placed its memory care units into transition and began seeking to sublease the units to an unrelated third party. The amount above represents the net operating impact attributable to the units in transition. The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with one of the entities transitioned to Ensign.
   
     Three Months Ended June 30, Six Months Ended June 30,
      2024  2023  2024  2023
  Revenue$(1) $ $(1) $
  Cost of services 34   538  (594)  585
  Rent 52   27  104   79
  Depreciation 2   5  5   5
  Total Non-GAAP adjustment$87  $570 $(486) $669
            
(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 26.0% and 26.0% for the six months ended June 30, 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 June 30, Six Months Ended June 30,
  2024   2023   2024   2023 
        
Consolidated net income$6,094  $2,922  $11,152  $4,919 
Less: Net income attributable to noncontrolling interest 404   125   556   272 
Add: Provision for income taxes 1,844   1,921   3,603   2,828 
Net interest expense 1,622   1,453   3,414   2,859 
Depreciation and amortization 1,468   1,214   2,799   2,494 
Consolidated EBITDA 10,624   7,385   20,412   12,828 
Adjustments to Consolidated EBITDA       
Add: Costs at start-up operations(a) (55)  65   (137)  268 
Share-based compensation expense(b) 1,949   1,354   3,475   2,773 
Acquisition related costs and credit allowances(c) 365   72   502   104 
Costs associated with transitioning operations(d) 33   538   (595)  585 
Unusual, non-recurring or redundant charges(e) 32   226   307   624 
Rent related to items (a) and (d) above 202   428   410   802 
Consolidated Adjusted EBITDA 13,150   10,068   24,374   17,984 
Rent—cost of services 10,524   9,836   20,908   19,433 
Rent related to items (a) and (d) above (202)  (428)  (410)  (802)
Adjusted rent—cost of services 10,322   9,408   20,498   18,631 
Consolidated Adjusted EBITDAR(f)$23,472    $44,872   


(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 three months ended March 31, 2023, an affiliate of the Company placed its memory care units into transition and began seeking to sublease the units to an unrelated third party. The amount above represents the net operating impact attributable to the units in transition. The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with one of the entities 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 and are included in “All Other”:

 Home Health and Hospice Services Senior Living Services All Other Total
Segment GAAP Financial Measures:       
Three Months Ended June 30, 2024       
Revenue$125,301 $43,444 $  $168,745
Segment Adjusted EBITDAR from Operations$21,214 $12,804 $(10,546) $23,472
Three Months Ended June 30, 2023       
Revenue$95,020 $37,261 $  $132,281
Segment Adjusted EBITDAR from Operations$15,681 $11,680 $(7,885) $19,476
             


 Home Health and Hospice Services Senior Living Services All Other Total
Segment GAAP Financial Measures:       
Six Months Ended June 30, 2024       
Revenue$241,791 $83,869 $  $325,660
Segment Adjusted EBITDAR from Operations$40,764 $24,815 $(20,707) $44,872
Six Months Ended June 30, 2023       
Revenue$186,099 $72,646 $  $258,745
Segment Adjusted EBITDAR from Operations$30,093 $21,921 $(15,399) $36,615
             

The table below provides a reconciliation of Segment Adjusted EBITDAR from Operations above to Condensed Consolidated Income from Operations:

 Three Months Ended June 30, Six Months Ended June 30,
  2024  2023  2024  2023
        
Segment Adjusted EBITDAR from Operations(a)$23,472  $19,476 $44,872  $36,615
Less: Depreciation and amortization 1,468   1,214  2,799   2,494
Rent—cost of services 10,524   9,836  20,908   19,433
Other income (2)  35  83   65
Adjustments to Segment EBITDAR from Operations:       
Less: Costs at start-up operations(b) (55)  65  (137)  268
Share-based compensation expense(c) 1,949   1,354  3,475   2,773
Acquisition related costs and credit allowances(d) 365   72  502   104
Costs associated with transitioning operations(e) 33   538  (595)  585
Unusual, non-recurring or redundant charges(f) 32   226  307   624
Add: Net income attributable to noncontrolling interest 404   125  556   272
Consolidated Income from Operations$9,562  $6,261 $18,086  $10,541
 


(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 three months ended March 31, 2023, an affiliate of the Company placed its memory care units into transition and began seeking to sublease the units to an unrelated third party. The amount above represents the net operating impact attributable to the units in transition. The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with one of the entities 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 June 30,
 Home Health and Hospice Senior Living
  2024   2023   2024   2023 
        
Segment Adjusted EBITDAR from Operations$21,214  $15,681  $12,804  $11,680 
Less: Rent—cost of services 1,664   1,374   8,860   8,462 
Rent related to start-up and transitioning operations (57)  (83)  (145)  (345)
Segment Adjusted EBITDA from Operations$19,607  $14,390  $4,089  $3,563 
 


 Six Months Ended June 30,
 Home Health and Hospice Senior Living
  2024   2023   2024   2023 
        
Segment Adjusted EBITDAR from Operations$40,764  $30,093  $24,815  $21,921 
Less: Rent—cost of services 3,393   2,697   17,515   16,736 
Rent related to start-up and transitioning operations (122)  (176)  (288)  (626)
Segment Adjusted EBITDA from Operations$37,493  $27,572  $7,588  $5,811 
 

Discussion of Non-GAAP Financial Measures

EBITDA consists of net income before (a) interest expense, net, (b) (benefits) 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) (benefits) 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) (benefits) 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) redundant or non-recurring transition services costs, (i) costs associated with transitioning operations, (j) 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.


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