The Pennant Group, Inc.

Good day, and thank you for standing by. Welcome to the Pennant Group's second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To remove yourself from the queue, 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 Kirk Cheney, Corporate Secretary. Please begin.

Thank you, Norma. Welcome, everyone, and thank you for joining us today. Here with me today, I have Brent Garasoli, our CEO, John Gochner, our President and COO, and Lynette Waldom, our 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.pennantgroup.com. A replay of this call will also be available on our website until 5 p.m. Mountain on August 8, 2024. We want to remind anyone who may be listening to a replay of this call that all statements are made as of today, August 9, 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 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. Set 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 reasons. In addition, the Pennant Group Incorporated 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 operating subsidiaries through contractual relationships with such subsidiaries. The words Pennant Company, we, our, and us refer to the Pennant Group Incorporated 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 tenant group Inc. has direct operating assets, employees, or revenue, or that any of the subsidiaries are operated by the tenant 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 that they should not be relied upon to the exclusion of GAAP reports. The GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our 10Q. And with that, I will turn the call over to Brent Gerasole, our CEO. Brent?

Thanks, Kirk, and welcome, everyone, to our second quarter 2023 earnings call. To begin, I'd like to recognize and thank our incredible frontline partners across the Pennant footprint who are committed each day to providing life-changing service to our patients, residents, and clients. We are here because of you and appreciate your consistent contributions. We are pleased to report that Q2 was a solid execution quarter. Collectively, our Q2 consolidated results reflect revenue of $132.3 million, an increase of $16 million or 13.7% over the prior year quarter, adjusted EBITDA of $10.1 million, significantly outpaced revenue growth, with an increase of 2.5 million or 32.3% over the prior year quarter, an adjusted EPS of 18 cents, an increase of 4 cents or 28.6% over the prior year quarter. This progress is largely due to our concentrated efforts and rigorous commitment to the five key focus areas we discussed last quarter, leadership development, top and bottom line growth, clinical excellence, and employee experience. As a result, we have generated significant growth in all business lines, improved margins, reduced turnover, and achieved strong clinical outcomes, keeping us on track with 2023 earnings guidance. Our senior living segment made remarkable progress in the quarter. As our segment adjusted EBITDA increased 33.2% over the prior year quarter and 14.1% sequentially. and segment adjusted EBITDA increased 277.4% over the prior year quarter and 58.5% sequentially. The senior living results demonstrate the power of our model and the importance of local leadership with strong cluster support. By cluster support, we mean peer support, which enhances leadership development and execution at the local level. The turnaround in this business truly is a leadership story. In 2021, Our senior living business was at a nadir as many of our local leaders struggled to embrace and harness the power of our unique operating model. One by one, new leaders were added. Existing leaders transformed, clusters rebuilt, and collectively, we deepened our commitment to our core values in our operating model. Now, the segment has entrepreneurial local leaders who function like owners and strong clusters which thrive on peer accountability. The senior living business now has a deep bench of current and future leaders and contributes meaningfully to our earnings. We are also primed to grow thoughtfully and opportunistically and to further unlock the latent potential that has existed in this platform since our spinoff in 2019. Our model continues to demonstrate its effectiveness in our home health and hospice segment as well. Last quarter, we discussed the census pressures we experienced to begin the year and the reduction in our home health Medicare reimbursement rate. Despite these headwinds, our home health and hospice segment adjusted EBITDA increased 1.2 million or 9.2% over the prior quarter and segment adjusted EBITDA margin improved 70 basis points. We are pleased with this progress and also see opportunity to continue to build momentum. With that said, Let me take a moment to comment on the home health proposed rule. We were disappointed in CMS's aggressive cuts to home health reimbursement, which contrasts with its more nuanced treatment of other post-acute care services and risks dramatically reducing access to critical care in the most cost-effective healthcare setting as providers are still facing staffing pressures and rising costs. Together with partners throughout the industry, we look forward to working with CMS and the legislative branch to pursue solutions that work better for beneficiaries and providers. Our commitment to leadership development remains our top priority. As we discussed last quarter, we are diligently focused on developing a robust pipeline of exceptional leaders who will make us better and drive our future growth. We have made tremendous progress in these efforts, and our leadership bench in both business lines is as strong as it has ever been. We are also on the way to achieving our goal of developing 100 local CEOs, as well as dramatically increasing the total number of C-level leaders over the next several years. As we explained last quarter, 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. Progress in this key initiative is essential and will be the foundation upon which our growth and success will thrive for many years to come. While we are pleased with this progress in each of the five key initiatives, we remain laser focused on driving bottom line improvement. We know that entrepreneurial leaders who exercise discipline and diligence in their operations and deliver exceptional results in all types of macroeconomic cycles and rate environments. Many of our local leaders are doing just that, and their efforts are showing in the bottom line. In Q2, our adjusted EBITDA margin improved on a consolidated basis to 7.8% from 6.6%, a 120 basis point increase over the prior year quarter, and a 140 basis point increase sequentially. We are encouraged by the overall improvement that we recognize there remains significant upside opportunity. We continue to appropriately drive bottom line improvement by carefully managing utilization and staff productivity, optimizing service line and reimbursement mix, and urgently addressing underperforming operations. Finally, we are excited to see movement on the acquisition front, as we have completed multiple transactions in both segments in the first half of the year. With the growth of our leadership bench and a robust pipeline of attractive acquisitions that are poised to unlock the potential of our future leaders through our disciplined growth strategy. With that, I'll turn the call over to John to provide more detail on our second quarter operational results.