The Pennant Group, Inc.

Good day and thank you for standing by. Welcome to the Pendant Group first quarter 2023 earnings call. At this time, all participants are in the 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over To your speaker today, Kirk Cheney, corporate secretary. Please go ahead.

Thank you, Victor. Welcome, everyone, and thank you for joining us today. Here with me today, I have Brent Girasole, our CEO, John Gochner, our president and COO, and Jen Freeman, our interim 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.tenantgroup.com. A replay of this call will also be available on our website until 5 p.m. Mountain on May 4th, 2024. I want to remind anyone who may be listening to a replay of this call that all statements are made as of today, May 5th, 2023. And these statements have not been nor will they 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 risk 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 Pennant Group Inc. is a holding company with no direct operating assets, employees, or revenues. Certain of our independent subsidiaries, collectively referred to as a 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 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 Gap to Non-Gap Reconciliation is available in yesterday's press release and is available in our 10Q. And with that, I'll turn the call over to Brent Girasole, our CEO. Brent?

Thanks, Kirk, and welcome, everyone, to our first quarter 2023 earnings call. We are pleased to announce that Q1 brought solid revenue and census growth and overall financial performance in line with our expectations. Our local leaders and teams drove improvement in our clinical outcomes, reduced turnover, and grew admissions and occupancy. Their disciplined approach produced significant progress in an environment with ongoing inflationary headwinds and labor difficulties. Collectively, our Q1 consolidated results reflect revenue of $126.5 million, an increase of $12.6 million, or 11% over the prior year quarter, and adjusted EBITDA of $7.9 million, an increase of 1.8 million or 28.8% over the prior year quarter. Our unique, locally tailored approach resulted in continued growth in each of our primary lines of business, including reaching an all-time high in home health and hospice average daily census and achieving a same-store senior living occupancy of 79.1%, representing a fifth consecutive quarter of occupancy improvements We are excited about this progress and still see significant opportunities to improve our bottom line financial performance. With the benefit of the positive momentum built over the last several quarters, we remain on track to deliver on our 2023 earnings commitments. And we'll get there by focusing on the five key organizational priorities we identified on our most recent call. First, leadership development. Second, margin. Third, turnover. Fourth, growth. And fifth, clinical excellence. Leadership development continues to be our top priority, where I'm personally investing much of my time and attention. We are diligently focused on finding, hiring, and developing a robust pipeline of exceptional operational leaders who can optimize the many exciting growth opportunities that lay before us. Our expanded leadership development team now includes several key field and service center partners who work closely with markets and clusters to find, train, and develop future leaders. Specifically, over the next several years, our commitment is to develop 100 local CEOs. To earn the title of CEO, our leaders must not only achieve extraordinary clinical outcomes, culture, and growth, but also drive significant financial improvement in their operations. We have found that CEOs typically generate roughly $1 million more in annual earnings than our executive directors, as well as better clinical and cultural outcomes. To support this local CEO development, we have revamped and reinforced many elements of our leadership training programs for operators and clinical leaders. We have also increased the depth of our leadership pool. Year-to-date, we have appointed seven local CEOs, adding to the 22 existing local CEOs and another 10 C-level leaders. We also hired 11 CEOs in training, with many more in the pipeline. The future of our organization is in good hands, and this continued investment will drive our future growth. Value creation and margin improvement remain key operational priorities in 2023. Our local leaders are succeeding at growing revenues and census, But in a macroeconomic cycle of inflation and rising costs, we must be even more disciplined and innovative to ensure that our earnings outpace our revenue growth. We continue our multifaceted approach to optimize our operations and appropriately increase margins. First, our local teams carefully measure and manage utilization and staff productivity. Second, our teams diligently monitor payer mix to balance reimbursement with our commitment to be a solution to the needs of our communities. Finally, based on our strategy of acquiring and turning around underperforming operations, we continue to strengthen our transition process to ensure that our newer operations become accretive more quickly. Our standard for new operations is that they contribute meaningfully to earnings no later than the ninth quarter post acquisition. As an example, In early 2021, we acquired Home Health Operations in Phoenix and Tucson, Arizona. The first four quarters post acquisition were foundation building quarters, reinforcing culture, operational and clinical leadership teams, and community relationships. Over those four quarters, revenue increased 48% and earnings increased 13% year over year. In Q1 of 2023, the ninth quarter since the acquisition, These operations are now high performers with a 135% increase in revenue and a 200% increase in earnings since the acquisition. Their clinical performance is also impressive with star ratings consistently between four and four and a half stars. We've made progress in our employee turnover and are committed to being the employer of choice in each community we serve. We are leveraging our unique operating model to reduce turnover and improve employee satisfaction. We share turnover scorecards broadly, create accountability, and empower our clusters and individual operators to drive improvement. We're encouraging reductions in turnover in both segments, experiencing double-digit year-over-year improvement with the greatest impact realized in our senior living business. Turning to growth, our acquisition and growth strategy follows several core principles. First, we don't grow for growth's sake. Rather, we grow to provide meaningful opportunities for local leaders and communities, which leads to greater value creation for shareholders. Second, we invest where we have strength, strong leaders ready to step in and establish operations to serve and support as cluster partners. Third, we are disciplined in our valuation approach and seek to make opportunistic investments with significant long-term upside value. We will continue to invest consistently in home health and hospice through multiple avenues. These include traditional acquisitions, operational expansions such as branch expansions, strategic partnerships, and startup operations. This multi-pronged approach provides flexibility to expand and create opportunities for our developing leaders through changing economic cycles. We also plan to invest strategically in senior living. where we can quickly turn operations and create value. Senior living deals may be attractive based on a number of factors, including favorable lease terms and strong relationships with landlord partners such as Ensign, Care Trust, and others. We believe value-generating real estate acquisitions are on the horizon, and we will be disciplined yet opportunistic in pursuing these opportunities as we look to the future we see significant potential to invest in both segments and create long-term shareholder value through the post-acute care continuum. With that, I'll turn the call over to John to provide more detail on our first quarter operational results.