News Release Details

Pennant Reports Third Quarter 2024 Results

November 6, 2024 at 4:11 PM EST
Conference Call and Webcast scheduled for tomorrow, November 7, 2024 at 10:00 am MT

EAGLE, Idaho, Nov. 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 third quarter of 2024, reporting GAAP diluted earnings per share of $0.20 for the third quarter of 2024. Pennant also reported adjusted diluted earnings per share of $0.26 for the quarter (1).

Third Quarter Highlights

  • Total revenue for the third quarter was $180.7 million, an increase of $40.5 million or 28.9% over the prior year quarter;
  • Net income for the third quarter was $6.2 million, an increase of $1.8 million or 41.6% over the prior year quarter;
  • Adjusted net income for the third quarter was $8.2 million, an increase of $2.2 million or 36.8% over the prior year quarter;
  • Segment Adjusted EBITDAR from Operations for the third quarter was $26.0 million, an increase of $5.4 million or 25.9% over the prior year quarter;
  • Adjusted EBITDA for the third quarter was $15.1 million, an increase of $4.3 million or 39.2% over the prior year quarter;
  • Home Health and Hospice Services segment revenue for the third quarter was $135.7 million, an increase of $34.2 million or 33.7% over the prior year quarter;
  • Home Health and Hospice Services segment adjusted EBITDAR from operations for the third quarter was $23.7 million, an increase of $6.5 million or 37.4% over the prior year quarter; and segment adjusted EBITDA from operations the third quarter was $21.9 million, an increase of $6.0 million or 37.5% over the prior year quarter;
  • Total home health admissions for the third quarter were 14,993, an increase of 4,164 or 38.5% over the prior year quarter; total Medicare home health admissions for the third quarter were 6,071, an increase of 1,431 or 30.8% over the prior year quarter;
  • Hospice average daily census for the third quarter was 3,444, an increase of 746 or 27.7% compared to the prior year quarter;
  • Senior Living Services segment revenue for the third quarter was $45.0 million, an increase of $6.3 million or 16.3% over the prior year quarter; average occupancy for the third quarter was 79.1%, an increase of 20 basis points over the prior year quarter, and average monthly revenue per occupied room for the third quarter was $4,836 an increase of $350 or 7.8% over the prior year quarter;
  • Senior Living segment adjusted EBITDAR from operations for the third quarter was $13.4 million, an increase of $1.9 million or 16.9% over the prior year quarter; and segment adjusted EBITDA from Operations for the third quarter was $4.4 million, an increase of $1.3 million or 43.8% over the prior year quarter.
(1 )   See "Reconciliation of GAAP to Non-GAAP Financial Information.”
       

Operating Results

“Our strong third quarter financial results demonstrate the momentum we are building across the business, and we are pleased to see robust performance in our existing operations even as we integrate new ones. The equity offering we executed after quarter end, coupled with the expansion of our revolving credit facility during the quarter, position us exceptionally well for future growth. With these operating results and a healthy balance sheet, we are poised for success through the remainder of 2024 and beyond,” said Brent Guerisoli, the Company’s Chief Executive 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-Q for the three and nine months ended September 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 $665.3 million and $706.5 million; full year 2024 adjusted earnings per diluted share is anticipated to be between $0.90 and $0.96; and full year 2024 adjusted EBITDA is anticipated to be between $51.9 million and $55.2 million.

“The Company’s updated guidance reflects the continued momentum in the business, and incorporates current operations and organic growth, diluted weighted average shares outstanding of approximately 32.5 million, and a 26.0% effective tax rate,” stated Lynette Walbom, Pennant’s Chief Financial Officer. “It anticipates consistent operating performance through the end of the year, hospice reimbursement rate adjustments, decreased interest expense, and 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, November 7, 2024 at 10:00 a.m. Mountain time (12:00 p.m. Eastern time) to discuss Pennant’s third 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 122 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
September 30,
  Nine Months Ended
September 30,
    2024       2023       2024       2023  
               
Revenue $ 180,688     $ 140,192     $ 506,348     $ 398,937  
               
Expense              
Cost of services   144,468       112,384       405,776       321,162  
Rent—cost of services   10,906       10,006       31,814       29,439  
General and administrative expense   13,023       9,417       36,337       26,913  
Depreciation and amortization   1,493       1,323       4,292       3,817  
Loss (gain) on disposition of property and equipment, net   4       1       (751 )     4  
Total expenses   169,894       133,131       477,468       381,335  
Income from operations   10,794       7,061       28,880       17,602  
Other (expense) income, net:              
Other income (expense)   109       (37 )     192       28  
Interest expense, net   (2,892 )     (1,496 )     (6,306 )     (4,355 )
Other expense, net   (2,783 )     (1,533 )     (6,114 )     (4,327 )
Income before provision for income taxes   8,011       5,528       22,766       13,275  
Provision for income taxes   1,354       1,066       4,957       3,894  
Net income   6,657       4,462       17,809       9,381  
Less: Net income attributable to noncontrolling interest   452       79       1,008       351  
Net income attributable to The Pennant Group, Inc. $ 6,205     $ 4,383     $ 16,801     $ 9,030  
Earnings per share:              
Basic $ 0.20     $ 0.15     $ 0.56     $ 0.30  
Diluted $ 0.20     $ 0.15     $ 0.54     $ 0.30  
Weighted average common shares outstanding:              
Basic   30,281       29,912       30,157       29,825  
Diluted   31,363       30,206       30,869       30,178  


 
THE PENNANT GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
 
  September 30, 2024   December 31, 2023
Assets      
Current assets:      
Cash $ 4,464     $ 6,059  
Accounts receivable—less allowance for doubtful accounts of $313 and $259, respectively   84,025       61,116  
Prepaid expenses and other current assets   13,307       12,902  
Total current assets   101,796       80,077  
Property and equipment, net   41,865       28,598  
Right-of-use assets   265,441       262,923  
Deferred tax assets, net   245        
Restricted and other assets   12,173       9,337  
Goodwill   129,337       91,014  
Other indefinite-lived intangibles   95,902       67,742  
   Total assets $ 646,759     $ 539,691  
Liabilities and equity      
Current liabilities:      
Accounts payable $ 15,888     $ 10,841  
Accrued wages and related liabilities   36,565       28,256  
Operating lease liabilities—current   19,113       17,122  
Other accrued liabilities   19,029       15,330  
Total current liabilities   90,595       71,549  
Long-term operating lease liabilities—less current portion   248,907       248,596  
Deferred tax liabilities, net   818       1,855  
Other long-term liabilities   10,277       8,262  
Long-term debt, net   108,875       63,914  
Total liabilities   459,472       394,176  
Commitments and contingencies      
Equity:      
Common stock, $0.001 par value; 100,000 shares authorized; 30,565 and 30,308 shares issued and outstanding, respectively, at September 30, 2024; and 30,297 and 29,948 shares issued and outstanding, respectively, at December 31, 2023   31       29  
Additional paid-in capital   117,947       105,712  
Retained earnings   51,464       34,663  
Treasury stock, at cost, 3 shares at September 30, 2024 and December 31, 2023   (65 )     (65 )
Total The Pennant Group, Inc. stockholders’ equity   169,377       140,339  
Noncontrolling interest   17,910       5,176  
Total equity   187,287       145,515  
Total liabilities and equity $ 646,759     $ 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:
 
  Nine Months Ended September 30,
    2024       2023  
Net cash provided by operating activities $ 18,729     $ 27,910  
Net cash used in investing activities   (66,287 )     (17,576 )
Net cash provided by (used in) financing activities   45,963       (9,030 )
Net (decrease) increase in cash   (1,595 )     1,304  
Cash beginning of period   6,059       2,079  
Cash end of period $ 4,464     $ 3,383  


 
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 September 30,
    2024       2023  
  Revenue Dollars   Revenue Percentage   Revenue Dollars   Revenue Percentage
               
Home health and hospice services              
Home health $ 60,988     33.8 %   $ 44,921     32.0 %
Hospice   62,757     34.7       50,371     35.9  
Home care and other(a)   11,927     6.6       6,182     4.4  
Total home health and hospice services   135,672     75.1       101,474     72.3  
Senior living services   45,016     24.9       38,718     27.7  
Total revenue $ 180,688     100.0 %   $ 140,192     100.0 %


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


  Nine Months Ended September 30,
    2024       2023  
  Revenue Dollars   Revenue Percentage   Revenue Dollars   Revenue Percentage
               
Home health and hospice services              
Home health $ 172,773     34.1 %   $ 129,112     32.4 %
Hospice   176,711     34.9       140,222     35.1  
Home care and other(a)   27,979     5.5       18,239     4.6  
Total home health and hospice services   377,463     74.5       287,573     72.1  
Senior living services   128,885     25.5       111,364     27.9  
Total revenue $ 506,348     100.0 %   $ 398,937     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
September 30,
       
    2024       2023     Change   % Change
Total agency results:              
Home health and hospice revenue $ 135,672     $ 101,474       34,198     33.7 %
               
Home health services:              
Total home health admissions   14,993       10,829       4,164     38.5 %
Total Medicare home health admissions   6,071       4,640       1,431     30.8 %
Average Medicare revenue per 60-day completed episode(a) $ 3,760     $ 3,480     $ 280     8.0 %
Hospice services:              
Total hospice admissions   2,987       2,433       554     22.8 %
Average daily census   3,444       2,698       746     27.7 %
Hospice Medicare revenue per day $ 183     $ 183     $     %


  Three Months Ended
September 30,
       
    2024       2023     Change   % Change
Same agency(b) results:              
Home health and hospice revenue $ 110,748     $ 98,732     $ 12,016     12.2 %
               
Home health services:              
Total home health admissions   12,221       10,570       1,651     15.6 %
Total Medicare home health admissions   5,008       4,521       487     10.8 %
Average Medicare revenue per 60-day completed episode(a) $ 3,587     $ 3,488     $ 99     2.8 %
Hospice services:              
Total hospice admissions   2,624       2,351       273     11.6 %
Average daily census   2,995       2,650       345     13.0 %
Hospice Medicare revenue per day $ 184     $ 186     $ (2 )   (1.1 )%


  Nine Months Ended
September 30,
       
    2024       2023     Change   % Change
Total agency results:              
Home health and hospice revenue $ 377,463     $ 287,573     $ 89,890     31.3 %
               
Home health services:              
Total home health admissions   43,782       32,180       11,602     36.1 %
Total Medicare home health admissions   18,155       14,437       3,718     25.8 %
Average Medicare revenue per 60-day completed episode(a) $ 3,646     $ 3,467     $ 179     5.2 %
Hospice services:              
Total hospice admissions   9,118       7,206       1,912     26.5 %
Average daily census   3,209       2,544       665     26.1 %
Hospice Medicare revenue per day $ 182     $ 184     $ (2 )   (1.1 )%


  Nine Months Ended
September 30,
       
    2024       2023     Change   % Change
Same agency(b) results:              
Home health and hospice revenue $ 322,941     $ 284,228     $ 38,713     13.6 %
               
Home health services:              
Total home health admissions   36,623       31,710       4,913     15.5 %
Total Medicare home health admissions   15,441       14,221       1,220     8.6 %
Average Medicare revenue per 60-day completed episode(a) $ 3,546     $ 3,469     $ 77     2.2 %
Hospice services:              
Total hospice admissions   7,970       7,104       866     12.2 %
Average daily census   2,851       2,528       323     12.8 %
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
September 30,
  Nine Months Ended
September 30,
    2024       2023       2024       2023  
Total senior living results:              
Senior living revenue $ 45,016     $ 38,718     $ 128,885     $ 111,364  
               
Occupancy   79.1 %     78.9 %     78.9 %     78.4 %
Average monthly revenue per occupied unit $ 4,836     $ 4,486     $ 4,758     $ 4,401  


  Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2024       2023       2024       2023  
Same store senior living(a) results:              
Senior living revenue $ 41,030     $ 38,126     $ 119,625     $ 110,225  
               
Occupancy   80.2 %     80.1 %     79.7 %     79.6 %
Average monthly revenue per occupied unit $ 4,790     $ 4,454     $ 4,724     $ 4,380  


(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 September 30,
      2024       2023  
    Revenue Dollars   Revenue Percentage   Revenue Dollars   Revenue Percentage
                 
Revenue:                
Medicare   $ 86,919     48.1 %   $ 67,925     48.5 %
Medicaid     22,715     12.6       19,893     14.2  
Subtotal     109,634     60.7       87,818     62.7  
Managed Care     24,652     13.6       19,158     13.6  
Private and Other(a)     46,402     25.7       33,216     23.7  
Total revenue   $ 180,688     100.0 %   $ 140,192     100.0 %


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


    Nine Months Ended September 30,
      2024       2023  
    Revenue Dollars   Revenue Percentage   Revenue Dollars   Revenue Percentage
                 
Revenue:                
Medicare   $ 245,746     48.5 %   $ 192,895     48.3 %
Medicaid     66,386     13.1       56,455     14.2  
Subtotal     312,132     61.6       249,350     62.5  
Managed Care     66,084     13.1       53,538     13.4  
Private and Other(a)     128,132     25.3       96,049     24.1  
Total revenue   $ 506,348     100.0 %   $ 398,937     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
September 30,
  Nine Months Ended
September 30,
    2024       2023       2024       2023  
               
Net income attributable to The Pennant Group, Inc. $ 6,205     $ 4,383     $ 16,801     $ 9,030  
               
Non-GAAP adjustments              
Costs at start-up operations(a)   66       59       244       1,060  
Share-based compensation expense(b)   2,342       1,391       5,817       4,164  
Acquisition related costs and credit allowances(c)   494       71       996       175  
Interest expense - write off deferred financing fees(e)   428             428        
Costs associated with transitioning operations(d)   68       90       (418 )     759  
Unusual, non-recurring or redundant charges(e)   239       1,009       546       1,633  
Provision for income taxes on Non-GAAP adjustments(f)   (1,675 )     (1,031 )     (2,942 )     (1,562 )
Non-GAAP net income $ 8,167     $ 5,972     $ 21,472     $ 15,259  
               
Dilutive Earnings Per Share As Reported              
Net Income $ 0.20     $ 0.15     $ 0.54     $ 0.30  
Average number of shares outstanding   31,363       30,206       30,869       30,178  
               
Adjusted Diluted Earnings Per Share              
Net Income $ 0.26     $ 0.20     $ 0.70     $ 0.51  
Average number of shares outstanding   31,363       30,206       30,869       30,178  


(a)   Represents results related to start-up operations.
          Three Months Ended
September 30,
  Nine Months Ended
September 30,
            2024       2023       2024       2023  
    Revenue $     $ (2,928 )   $ (4,956 )   $ (8,821 )
    Cost of services   65       2,820       4,884       8,981  
    Rent         162       306       885  
    Depreciation & amortization   1       5       10       15  
    Total Non-GAAP adjustment $ 66     $ 59     $ 244     $ 1,060  
                       
(b)   Represents share-based compensation expense incurred for the periods presented.
          Three Months Ended
September 30,
  Nine Months Ended
September 30,
            2024       2023       2024       2023  
    Cost of services $ 1,069     $ 819     $ 2,814     $ 2,288  
    General and administrative   1,273       572       3,003       1,876  
    Total Non-GAAP adjustment $ 2,342     $ 1,391     $ 5,817     $ 4,164  
                       
(c)   Represents costs incurred to acquire an operation that are not capitalizable.


(d)   During the nine months ended September 30, 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 an entity transitioned to Ensign.
     
          Three Months Ended
September 30,
  Nine Months Ended
September 30,
            2024       2023       2024       2023  
    Revenue $     $ (4 )   $ (1 )   $ (4 )
    Cost of services   12       14       (582 )     599  
    Rent   53       77       157       156  
    Depreciation   3       3       8       8  
    Total Non-GAAP adjustment $ 68     $ 90     $ (418 )   $ 759  
                       
(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 25.9% for the nine months ended September 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
September 30,
  Nine Months Ended
September 30,
    2024       2023       2024       2023  
               
Consolidated net income $ 6,657     $ 4,462     $ 17,809     $ 9,381  
Less: Net income attributable to noncontrolling interest   452       79       1,008       351  
Add: Provision for income taxes   1,354       1,066       4,957       3,894  
Net interest expense   2,892       1,496       6,306       4,355  
Depreciation and amortization   1,493       1,323       4,292       3,817  
Consolidated EBITDA   11,944       8,268       32,356       21,096  
Adjustments to Consolidated EBITDA              
Add: Costs at start-up operations(a)   65       (108 )     (72 )     160  
Share-based compensation expense(b)   2,342       1,391       5,817       4,164  
Acquisition related costs and credit allowances(c)   494       71       996       175  
Costs associated with transitioning operations(d)   12       10       (583 )     595  
Unusual, non-recurring or redundant charges(e)   239       1,009       546       1,633  
Rent related to items (a) and (d) above   53       239       463       1,041  
Consolidated Adjusted EBITDA   15,149       10,880       39,523       28,864  
Rent—cost of services   10,906       10,006       31,814       29,439  
Rent related to items (a) and (d) above   (53 )     (239 )     (463 )     (1,041 )
Adjusted rent—cost of services   10,853       9,767       31,351       28,398  
Consolidated Adjusted EBITDAR(f) $ 26,002         $ 70,874      


(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 nine months ended September 30, 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 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 and are included in “All Other”:
 
  Home Health
and Hospice
Services
  Senior Living
Services
  All Other   Total
Segment GAAP Financial Measures:              
Three Months Ended September 30, 2024              
Revenue $ 135,672     $ 45,016     $     $ 180,688  
Segment Adjusted EBITDAR from Operations $ 23,724     $ 13,411     $ (11,133 )   $ 26,002  
Three Months Ended September 30, 2023              
Revenue $ 101,474     $ 38,718     $     $ 140,192  
Segment Adjusted EBITDAR from Operations $ 17,271     $ 11,473     $ (8,097 )   $ 20,647  


  Home Health
and Hospice
Services
  Senior Living
Services
  All Other   Total
Segment GAAP Financial Measures:              
Nine Months Ended September 30, 2024              
Revenue $ 377,463     $ 128,885     $     $ 506,348  
Segment Adjusted EBITDAR from Operations $ 64,488     $ 38,226     $ (31,840 )   $ 70,874  
Nine Months Ended September 30, 2023              
Revenue $ 287,573     $ 111,364     $     $ 398,937  
Segment Adjusted EBITDAR from Operations $ 47,364     $ 33,394     $ (23,496 )   $ 57,262  


The table below provides a reconciliation of Segment Adjusted EBITDAR from Operations above to Condensed Consolidated Income from Operations:
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2024       2023       2024       2023  
               
Segment Adjusted EBITDAR from Operations(a) $ 26,002     $ 20,647     $ 70,874     $ 57,262  
Less: Depreciation and amortization   1,493       1,323       4,292       3,817  
Rent—cost of services   10,906       10,006       31,814       29,439  
Other income   109       (37 )     192       28  
Adjustments to Segment EBITDAR from Operations:              
Less: Costs at start-up operations(b)   65       (108 )     (72 )     160  
Share-based compensation expense(c)   2,342       1,391       5,817       4,164  
Acquisition related costs and credit allowances(d)   494       71       996       175  
Costs associated with transitioning operations(e)   12       10       (583 )     595  
Unusual, non-recurring or redundant charges(f)   239       1,009       546       1,633  
Add: Net income attributable to noncontrolling interest   452       79       1,008       351  
Consolidated Income from Operations $ 10,794     $ 7,061     $ 28,880     $ 17,602  


(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 nine months ended September 30, 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 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 September 30,
  Home Health and
Hospice
  Senior Living
    2024       2023       2024       2023  
               
Segment Adjusted EBITDAR from Operations $ 23,724     $ 17,271     $ 13,411     $ 11,473  
Less: Rent—cost of services   1,861       1,439       9,045       8,567  
Rent related to start-up and transitioning operations         (72 )     (53 )     (167 )
Segment Adjusted EBITDA from Operations $ 21,863     $ 15,904     $ 4,419     $ 3,073  


  Nine Months Ended September 30,
  Home Health and
Hospice
  Senior Living
    2024       2023       2024       2023  
               
Segment Adjusted EBITDAR from Operations $ 64,488     $ 47,364     $ 38,226     $ 33,394  
Less: Rent—cost of services   5,254       4,136       26,560       25,303  
Rent related to start-up and transitioning operations   (122 )     (248 )     (341 )     (793 )
Segment Adjusted EBITDA from Operations $ 59,356     $ 43,476     $ 12,007     $ 8,884  


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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Source: Pennant Group, Inc.