The Pennant Group, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Appendix Group Fourth Quarter 2020 Earnings Call. At this time, all participant lines are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your host, Derek Munker, please go ahead.

Thank you, Sarah. Welcome, everyone, and thank you for joining us today. Here with me today I have Danny Walker, our CEO, Brent Garrisoli, our president, Jen Freeman, our CFO, and John Gochner, our COO. Before we begin, I have a few housekeeping matters. We filed our earnings press release in 10-K yesterday. The 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 p.m. Mountain on Friday, March 26, 2021. We want to remind anyone that may be listening to a replay of this call that all statements made are as of today, February 25, 2021, and these statements have not been nor will be updated subsequent to 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 as a result of new information, future events, changing circumstances, or for any other reason. In addition, the Pending Group, Inc. is a holding company with no direct operating assets, employees, or revenues. Certain of our wholly owned 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 in the service center are operated by separate, wholly owned, 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, and our, and similar terms used today are not meant to imply, nor should it be construed as meaning 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. A GAAP to non-GAAP reconciliation is available in yesterday's press release and in our 10-K. Now with that, I'll turn the call over to Danny Walker, our CEO. Danny?

Thank you, Derek, and good morning, everyone. Thank you for joining us today to discuss Pennant's full year and fourth quarter 2020 results. Our first year as a public company was eventful, challenging, and ultimately rewarding. We navigated the complexities and dynamics of a new reimbursement methodology in PDGM. We completed the successful transition of key enterprise, financial, human capital, and IT systems related to our spinoff from the Ensign Group. And we dealt with and continue to deal with the impact of an unprecedented pandemic. I am proud of our collective efforts on each of these fronts, and I want to say thank you to each one of our leaders, resources, and team members for the courage and grit that you've consistently displayed. Despite the challenges faced, we were able to achieve strong results both clinically and financially, and we are well positioned to continue growing in 2021. Our overall 2020 results were headlined by an incredible year for our home health and hospice segment, which achieved approximately 51% adjusted EBITDA growth in 2020 over the prior year and nearly 60% adjusted EBITDA growth in the fourth quarter over the prior year quarter. These impressive growth rates were underpinned by strong performances in nearly all facets of the business and were comprised of growth in both new and existing operations. Excluding home health agencies acquired in the previous 12 months, our 2020 total Medicare home health admissions grew nearly 7%, and inclusive of the benefits of the sequestration holiday, our average Medicare revenue per 60-day episode grew 10% as the reimbursement levels were rebased under PDGM to more appropriately account for the higher nursing acuity of our patient population. Similarly, in hospice, excluding agencies acquired in the previous 12 months, our total hospice admissions grew 32%. Our hospice average daily census grew 8.4%, and inclusive of the benefits of the sequestration holiday, Our average Medicare revenue per day increased 4.1% each over the prior year quarter. This growth occurred as a result of strong clinical performance, as evidenced by our average home health star rating improving to 4.3 stars across Pennant, above the national average of three stars. And the percentage of agencies achieving a five-star rating grew from 3% to 30% sequentially in the fourth quarter. Our home health discharge community rate, home health acute care hospitalization rate, and hospice quality composite measures continue to outpace national averages as reported by CMS. The foundation for these clinical results was laid years ago, and we continue to see the benefits of those investments year after year. And these outcomes are all the more impressive in light of the significant challenges faced during the pandemic. In our senior living segment, we continue to confront a difficult operating environment, but we feel confident in the long-term potential notwithstanding these near-term challenges. When we shared an update last quarter, we had seen our occupancy decline moderate and even slightly increase from September to October of 2020. Since then, however, we felt the acute impact of the second COVID-19 surge as the markets in which we operate experienced accelerating positive cases. Our segment results in the fourth quarter were negatively impacted, even as we moved to offset pressures on occupancy and staffing, and we expect this trend to continue to some degree or another in the first half of 2020. We are also hopeful the ongoing vaccine rollout will bolster public confidence and unlock pent-up demand for senior living services. particularly as restrictions on in-person visitation and touring abate. We are pleased that all of our communities have had or have scheduled their first vaccination clinics, with 76% of our current residents having received the vaccine. While the current operating environment is a significant short-term headwind, we are confident in our ability to overcome these challenges as our leaders apply our proven principles and look forward to taking advantage of opportunistic acquisitions resulting from industry disruption in the wake of the pandemic. In short, these near-term pressures equate to long-term opportunity in the senior living segment. And as an organization, we are built to work through the challenges that come with turning around difficult operating situations. As Jen will discuss, we announced yesterday that we increase the capacity of our revolver from 75 million to 150 million. As our long-term stakeholders are aware, we opportunistically allocate capital where we have healthy operating markets and a strong leadership pipeline. In our senior living segment, we have not allocated and do not anticipate allocating capital for strategic acquisitions in the near term. as our leaders focus their efforts on navigating the challenges of the pandemic and driving improved results in our existing buildings. On the other hand, we have deployed a significant amount of capital opportunistically in the home health and hospice segment, and our capacity to deploy even more continues to increase because we have multiple healthy operating markets and a strong leadership pipeline. We are grateful to our lending partners for entrusting us with increased borrowing capacity to execute our discipline growth strategy. And we continue to work diligently to improve the health of our operating markets and strengthen our leadership pipeline so we can strategically invest across many markets in both segments simultaneously. As we announced yesterday in our press release, we are affirming our 2021 annual revenue and annual adjusted earnings per share guidance. This strong momentum in our home health and hospice business lays the foundation for our continued year-over-year growth. We are cognizant of the ongoing challenges facing our senior living business, and there are multiple reasons to be optimistic we will return to growth in late 2021. Last year, we maintained annual guidance when the uncertainties regarding COVID-19 were at their peak, based on the confidence we had in the ability of our local leaders to drive results despite the unexpected impact of the pandemic. With more visibility into how the pandemic is affecting top and bottom line performance in both segments, including the strength exhibited in the home health and hospice and the very real headwinds in senior living, we are affirming our 2021 guidance because we have similar confidence we can navigate the complexities of the current operating environment and perform consistent with the high expectations we've set for ourselves. We commend our local leaders for continuing to execute in the face of the adversity we have encountered this past year and for positioning us to continue our growth trajectory in 2021 in spite of the ongoing uncertainties. Now, with that, I'll hand it off to Derek to discuss our recent investment activities.