Pennant Group remains bullish on transactions despite a difficult second quarter in which it lost $2.6 million.
“We are poised to return to a brisk pace of strategic acquisitions,” CEO Brent Guerisoli said in a second-quarter earnings call on Tuesday. “We have our share of challenges to continue to overcome and we still have significant inherent value to unlock. But we know where we are going, how to get there and we are excited about the progress we are making toward operational excellence and our ability to generate and deploy cash toward accretive growth in an active M and A landscape.”
The company said it targets solid-performing small- to medium-sized agencies for acquisitions.
“When evaluating potential home health and hospice acquisitions, we look for small- to medium-size agencies with strong clinical and operational reputations that provide a platform for organic census growth and expense management,” said Guerisoli who recently took the reins as CEO after his predecessor Danny Walker stepped down on Aug. 1.
Still Pennant Group acknowledged labor and inflationary challenges that are likely to persist for the rest of the year. It also is bracing for the possible implementation of the home health proposed rule, which would lead to a 4.2% decrease in Medicare payments and include a severe permanent behavioral assumption reduction of -7.69% related to the Patient-Driven Groupings Model.
“We are preparing now for the potential impact should the proposed rule be finalized, and much like the change to reimbursement affected through PDGM several years ago, we are confident will pull the right levers to continue our growth even in a challenging reimbursement environment,” John Gochnour, president and chief operating officer, said during the call.
Despite the second-quarter loss, revenues climbed by 5.4% in the second quarter this year. Revenue in the home health and hospice segment totaled $85.3 million in the 2022 second quarter, an increase of 9.3% compared to the 2021 second quarter.
The company, which owns 89 home health and hospice agencies and 49 senior living communities, reaffirmed its guidance for 2022. Full year 2022 adjusted earnings per diluted share is anticipated to be between $0.60 and $0.68, and full year 2022 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is expected to be between $33.2 million and $35.7 million. It projects total revenue between $450 million and $460 million.
For additional coverage of the call, see McKnight’s Senior Living.
