The Pennant Group, Inc.

Good day and thank you for standing by. Welcome to the Penta Group third quarter 2025 earnings call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the 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 withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would like to hand the conference over to your speaker today, Kirk Cheney, Executive Vice President. Please go ahead.

Thank you, Kevin. 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 Walden, our CFO. Before we begin, I have a few housekeeping matters. We filed our earnings press release in 10Q yesterday. This announcement is available on the investor relations section of our website. A replay of this call will also be available on our website until 5 p.m. Mountain Time on November 5th, 2026. All statements are made as of today, November 6, 2025, and these statements will not 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 operating environment. These statements are subject to risks and uncertainties that could cause our actual results to materially differ. 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 publicly update or revise any forward-looking statements where changes arise from new information, future events, 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 operating subsidiaries, collectively referred to as the service center, provide administrative 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 use of the terms we, us, our, and similar terms do not imply that 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 is available in our 10-K. And with that, I will turn the call over to Brent Garasoli, our CEO. Brent?

Thanks, Kirk, and welcome, everyone, to our third quarter 2025 earnings call. we are pleased to report another successful quarter with strong results across our business. The third quarter brought new highs in revenue, census, occupancy, and earnings, even as we prepared for the largest transaction in our history. In Q3, we reported revenues of 229 million, an increase of 48.4 million, or 26.8%, adjusted EBITDA of 17.3 million, an increase of 2.2 million, or 14.5 percent, and adjusted EPS of 30 cents, an increase of 4 cents, or 15.4 percent, each over the prior year quarter. We closed on the UnitedHealth-Amedisys transaction on October 1st. We are excited to add these operations to Pennant. The UnitedAmedisys process created a unique opportunity to add high-quality assets in desirable markets at an attractive valuation rarely seen on larger deals with sophisticated operators. As we've closed the transaction and dived into the businesses, our excitement has only grown. We have met many incredible leaders and team members who are deeply committed to their local communities. In the near term, we are heavily engaged in the complex integration matters that accompany such acquisitions, which we expect to create some lumpiness and results through the transition. But in the longer term, we see immense potential in these operations. A recent signature transition gives us a model. Only a year ago, signature was the largest transaction in our history. Completed in two tranches, from August 2024 to January 2025, with locations across three states, the signature acquisition was similar in many respects to this most recent deal. Signature enjoyed a deserved reputation as a quality operator, and we saw, that we could build on their legacy through the Pennant model. Signature's transition has been a tremendous success. We have seen former signature leaders enthusiastically embrace the Pennant model and culture and lift their operations to new heights. They have expressed how they now feel unlocked, capable of owning their operations, and empowered to grow. Thanks to the efforts of these leaders, along with new leaders developed in our training program, the acquired signature operations have outpaced our financial expectations while maintaining or improving their clinical and quality metrics. In much the same way, we expect that, over time, these new operations we've acquired in the Southeast will demonstrate that the Pennant model adds value not only to turnaround situations but to stable, solidly performing operations. Over the past several years, our focus has been on recruiting and developing great leaders and continuously improving our transitions. As a result, we have delivered increasingly strong performance in our recent acquisitions, and we now see this powerful flywheel continuing to accelerate. Across senior living, hospice, and home health, our local leaders have consistently stepped up to the operating challenges in their communities by directly controlling outcomes and relentlessly driving improvement. At present, the uncertainty surrounding the 2026 home health rule has cast a pall over the industry. But Pennant is not a passive index tied to home health reimbursement rates. With less than 20% of our revenue arising from Medicare home health fee for service reimbursement, we are a diversified post-acute provider with strength across hospice, senior living, and home health. And more importantly, we are a locally driven leadership company that empowers leaders to adapt proactively to external challenges. We will continue to advocate against the proposed rule as bad for patients, providers, and taxpayers. Ultimately, we will respond operationally to the outcome of the final rule, and we believe that home health care will continue to play a vital role in the post-acute continuum for many years to come. We are positioned to be at the forefront of that care and remain invested in driving growth in home health along with the growth we foresee in our hospice and senior living operations. Based on the sustained momentum in our businesses and the addition of the operations in the southeast, we are again raising annual earnings guidance. We anticipate full year revenue of $911.4 million to $948.6 million, adjusted EBITDA of $70.9 million to $73.8 million, and adjusted earnings per share of $1.14 to $1.18. the earnings per share midpoint of $1.16 represents a 23.4% increase over our 2024 earnings per share. With that, I'll turn the call over to John to provide more detail on our third quarter operational results.

Thank you, Brent, and good morning, everyone. Q3 brought strong performance in both operating segments. Our home health and hospice segment continued to drive record-breaking clinical and financial results. Segment revenue of $173.6 million increased 37.9 million, or 27.9%, and segment-adjusted EBITDA of 26.8 million increased 5 million, or 22.7%, each over the prior year quarter. This was fueled by continued robust organic growth coupled with continued execution on successful transitions. Our local leaders continued to demonstrate their ability to operate successfully through dynamic markets and conditions. As we have consistently said, our clinical results are the foundation of strong and lasting financial performance. In Q3, we saw an average CMS reported star rating of 4.1 compared with the industry average of three stars. Potentially preventable hospitalizations decreased to 8.4%, well below the national average of 9.9%. CMS reported hospice quality composite score improved to 97%. well above the national average of 92%. In short, our unique model of empowering local clinical leaders to make key decisions and support their teams based on local community needs continues to drive clinical outperformance. The impact of this clinical excellence continues to be demonstrated in our strong growth. Total home health admissions of 20,426 represent an increase of 36.2%. same-store admissions increased 7%, and revenue per episode increased 2.9% each over the prior year quarter. Our hospice business generated similar momentum as average daily census increased 17.4%, hospice admissions increased 16.6%, same-store average daily census increased 6.1%, and average revenue per day increased 3.3% each over the prior year quarter. We see significant opportunity for growth in our existing operations and an ability to add hospices to the many home health agencies we have recently acquired that currently lack an overlapping hospice operation. The momentum in our senior living business is significant. As the multi-year growth story in this segment continues to unfold, senior living segment revenue of $55.5 million is up 23.2% over the prior year quarter. and 3.7% sequentially. Adjusted EBITDA of $5.6 million has increased 26.2% over the prior year and 8.4% sequentially. Segment adjusted EBITDA margin increased 50 basis points over the prior year quarter, reaching a new post-pandemic high of 10.3% and continuing its path toward our target segment margin of 15%. Same-store occupancy reached a new high of 81.8% and all store occupancy also passed the 80% mark at 80.9%. This record occupancy represents a major milestone, especially because it was achieved alongside 7.4% year over year rate growth, following several years of high single digit or low double digit increases. Not withstanding all of this progress, we're far from satisfied. As we continue to drive occupancy with high revenue quality, having covered the fixed costs in our communities, the opportunity for incremental margin expands dramatically. The latent upside in this segment remains significant. Just as we continuously invest in future operational leaders to fuel our growth, throughout the year we have invested significantly in our service center. We recognize that we must have the right people and technology to execute well on our critical transitions and that attracting talented individuals to join us is an essential component of our future success. The return on these investments becomes clear when you look at the accretive results of our recent acquisitions, along with our strong organic growth. We expect G&A expense to remain slightly elevated during this period of transition. But as the revenue and earnings from the latest acquisitions come online, we expect to see economies of scale on these front-loaded investments in people and technology and return back to historical levels. On the regulatory front, We will experience positive revenue adjustment of approximately 2.6% related to the hospice final rule beginning on October 1st, 2025. The home health final rule has not been issued. We expect it to arrive in the coming weeks. We cannot predict whether the delay is a positive sign signaling that CMS went back to the drawing board to make much needed changes or whether it is solely related to the government shutdown. But we can say this with certainty. During this rulemaking cycle, policymakers, including CMS, legislators, and others have become more aware of the harmful and self-defeating impacts that the proposed rule would have on the American healthcare continuum. If implemented, the proposed rule would underbind the lowest cost setting most preferred by patients. It would force agency closures and consolidation. It would increase hospital visits and aggregate Medicare spend. In short, it would be bad policy. We are hopeful that the final rule will recognize this in some fashion, but if not, we have worked with industry partners to craft contingency plans and will continue to advocate assertively for a legislative solution. Regardless, our focus remains intently on controlling the things we can control, and each of our operators has prepared plans at the local level to adapt to the cuts and take advantage of the opportunities created by reimbursement down cycles. They are reacting nimbly and will continue to drive improvement and growth as they have through the last three years of weak reimbursement and rising costs. Healthcare reimbursement is cyclical, and we have unshaken faith in the long-term value of home health services. The long-term trend is toward more care in the home. That's what patients want and what makes the most sense for our nation. Over time, we believe rates will reflect that. Turning to growth. It's been a busy and productive quarter. In addition to the grand care acquisition in Southern California, which closed on July 1st, and which we discussed in our Q2 earnings call, in September, we closed on a single site agency in Gillette, Wyoming, called Healing Hearts Home Health and Healing Hearts Outpatient Therapy. After quarter end, we completed two senior living transactions, each of which included the acquisition of the associated real estate. On November 1, we acquired Two Rivers Senior Living in Lewiston, Idaho, which adds an exciting opportunity near our well-established home health and hospice agencies. On November 4, we purchased Honey Creek Heights Senior Living in West Allis, Wisconsin. This was an underperforming building with serious issues impacting the license and the continued viability of the operations. We stepped in under a management agreement, collaborated with the state, cleared up the outstanding issues, and most importantly, restored dignity and joy to the residents. We've now formally purchased the operation and the related real estate and look forward to providing a quality home for residents in West Dallas for many years to come. Much of the quarter was spent preparing for the October 1st closing of the United and Medicis acquisition in Tennessee, Georgia, and Alabama. This purchase includes 54 locations, with combined trailing 12-month revenues of $189.3 million for a purchase price of $146.5 million. The trailing 12-month EBITDA reflects a purchase price multiple comfortably within our target range of four to seven times for home health acquisitions, which we view as attractive for a large and well-operated platform comprised of roughly 70% home health and 30% hospice revenues, primarily in certificate of need states. As we've shared many times previously, We typically expect acquisitions to be optimized within nine quarters and we anticipate some variability of results during that interim. That said, our transition efforts are well underway and we are excited by the quality of leaders, team members, and operations. Much like our signature transition, we will build on the local strength, community ties, and long history of success of these operations in the region. These new operations have already joined clusters with seasoned and successful pennant operators to help implement the unique pennant model. We are bullish on the long-term potential of these operations and the additional expansion they will enable in the southeastern United States for years to come. Market forces and our own reputation as a quality buyer continue to drive a very robust pipeline of acquisition opportunities in all of our segments. As I just discussed, our focus is on successfully integrating our recent acquisitions. We will maintain discipline and we will not compromise the priority of those efforts, but remain open to additional hospice and home health opportunities. We also see many potential transactions in the senior living space that fit our acquisition criteria and our senior living leaders will continue to prudently pursue growth in that segment. With that, I'll hand it over to Lynette for a review of the financials.

Lynette? Thank you, John, and good morning, everyone. Detailed financial results for the three months ended September 30th, 2025 are contained in our 10Q and press release filed yesterday. For the quarter ended September 30th, 2025, we reported total GAAP revenue of $229 million, adjusted EBITDA of $17.3 million, GAAP diluted earnings per share of $0.17, and adjusted diluted earnings per share of $0.30. This week we closed on an amendment that added a $100 million term loan to our credit facility. We consider this prudent balance sheet management. As described in more detail in the 8K and press release we issued yesterday, this amendment frees up additional capacity under our revolver and provides dry powder to deploy when appropriate. Key metrics for the three months ended September 30th, 2025 include $30.2 million drawn on our revolving line of credit and $2.3 million in cash on hand at quarter end. 0.38 times net debt to adjusted EBITDA and cash flows provided from operations of $27.3 million year-to-date, including $13.9 million in Q3. Our year-to-date results and the impact of our purchase of United Medicis assets merit an increase in our full-year guidance. Accordingly, we are revising and raising our full year 2025 guidance as follows. Full year total revenue is anticipated to be between $911.4 million and $948.6 million. Full year adjusted earnings per diluted share between $1.14 and $1.18. And full year adjusted EBITDA between $70.9 million and $73.8 million. This updated guidance incorporates current operations and organic growth diluted weighted average shares outstanding of approximately $35.7 million and a 26% effective tax rate. It anticipates continued strong operating performance through the end of the year, hospice reimbursement rate adjustments, increased interest expense, and contributions from announced acquisitions. It excludes unannounced acquisitions, startups, share-based compensation, acquisition-related costs, one-time implementation and unusual costs, and non-controlling interest income. I would like to spotlight a few of our leaders in our organization who have achieved exceptional results. Their stories demonstrate the remarkable progress that can occur when local leaders build strong culture and develop high-performing teams of C-level leaders in their operations. Zion's Way Home Health and Hospice in southern Utah and northern Arizona continues to build a legacy of excellence. Led by CEO Courtney Matthews, CMO Justin Hofer, Home Health CCO Jeremy Green, Hospice CCO Jason Olsen, COO Chad Christensen, and future COO Alexis Cutler, and along with other key branch leaders, Zions Way is a key resource to communities across its geographic service area. In 2025, the Zions Way team has again set records clinically, culturally, financially, and in the community. Zions Way locations each achieved five-star ratings for clinical quality, potentially preventable hospitalizations below 3.5% compared to a national average of 9.9%. Zions Way investment in leadership has created a world-class employee experience as turnover decreased to 15% and employee engagement was a remarkable 93%. These clinical and cultural results have fueled their 2025 financial performance as revenue increased 11% and EBITDA increased 34% over the prior year. As impressive as these 2025 results are, the Zions Way story reflects the unique ability our model creates for local leaders to generate value over the long term. We acquired Zions Way in 2012 as one of our first home health and hospice acquisitions. Since its first full year of operations in 2013, Through its projected 2025 results, Zion's Way has produced a compounded annual growth rate of 27% and has grown from two locations to eight. This growth reflects the trust and confidence of the community. On the senior living side, Lohar Senior Living is a community of choice in Southern California. Led by future CEO Jonathan Wheeler and future CCO Yolanda Torres, the Lohar team has created a special environment that is fun and welcoming. and that continues to attract residents as evidenced by their consistent 100% occupancy. LOHAR's investment in the employee experience has led to a remarkable 92% employee engagement score and a 20% year-over-year reduction in turnover. When employees are engaged, it shows in the operational results and LOHAR is no exception with revenue up 16% and EBITDA up 306% year-over-year In addition, the Lohar team is a true partner to its peer operations throughout the California market, helping to raise all ships. Jonathan and Yolanda truly model our core principles of accountability and ownership. With that, I'll turn the call back over to Brent for concluding comments.

Thanks, Lynette. As we conclude, I'd like to thank all the operators and clinicians who, like those highlighted above, dedicate themselves daily to providing life-changing service to our patients and residents. You are truly making a difference in the lives and communities we serve, and it is an honor to work alongside you. With that, we'll open it up for questions. Kevin, can you please instruct the audience?

Sorry about that. Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster.

Our first question comes from Brian Tanquillit with Jefferies.

Your line is open.

Hi, this is Megan Holton for Brian Tanquillit. Congratulations on closing the Amedisys transaction and starting there. Now that you're a month in, what are some of your top priorities for integration, including the JV with the University of Tennessee? And then how should we be thinking about these assets contributing to earnings in 2026?

Yeah, Megan, thanks for the question. We're really, really excited about what we've found as we've gotten a chance to get into the operations and work closely with the teams out there. There's an amazing group of talented leaders, clinicians, and staff, and it's been fun for our teams. And we've got folks from across the organization, owners who are anxious to help those agencies implement dependent models successfully. Our focus right now is first identifying and elevating leaders into our model where we've got an executive director and a clinical director in each local community able to meet the needs of that community. And so that's sort of our first in the order of operations Our second, of course, we're focused on ensuring that these agencies receive exceptional support. So we are building a shared services organization that can ensure that the services they historically have received from Amedisys and from United through LHC, that they experience no diminishment in those services. The third thing I'd highlight, and you called it out, the University of Tennessee joint venture. It's a really exciting joint venture with a lot of potential. We just had our first board meeting out there, and there's a strong, strong sense of support from the University of Tennessee. There's strong engagement in both hospice and home health. And so we're excited to add that to our JVs in California and our relationship with Hartford in Connecticut to allow us to continue to innovate clinically, to continue to produce outstanding financial results, and to drive improvement in the legacy of what they've already created. So that's always sort of where we start is with leadership. And then, of course, implementing our systems and processes. The transition, we expect it to be completed by the end of Q3 next year. And so we've got a transition services agreement in place for that period. And then we are gradually pulling each of those locations off of their systems and onto ours. As far as contribution, initially we anticipate relatively light contribution in the fourth quarter. That's simply because we continue to have elevated costs associated with the transition, and then bringing those businesses on and having a full picture of their performance will help us provide better guidance. In 2026, as we look forward, those businesses are currently performing about a 12.5% margin. We anticipate a modest decline as we go through a brand change, as we go through a home care home base re-implementation into our tenant. And as we gradually wean off of the transition services agreement, so we anticipate them performing between 9.5% and 11% in 2026. So that gives you a little bit of an idea. We're not guiding yet because we expect to have more clarity as we spend more time with the business and go through several month-end closes through the fourth quarter. But that's the way we're thinking about it right now.

Okay, thanks. And then for my follow-up, looking at the senior housing, you've seen strong momentum and occupancy approaches levels where operating leverage becomes more pronounced. I guess, how should we be thinking about the trajectory of margins going forward in that business?

Yeah, great question. You know, really, it's just a matter of, as we add occupancy, we think that there's going to be more that's going to move to the bottom line. So, really, over the last several years, the focus has been building the foundation and getting to, you know, back to the levels of occupancy that we were at pre-pandemic, and so we're pretty excited about the margin opportunity there. I mean, we've had some pressures this past year just because some of the ARPA funding has gone away, so normally we probably would have seen a little bit more elevated margin, but because of some of those pressures and other labor-related pressures, it hasn't moved quite as much, but From an incremental improvement standpoint, as we see additional occupancy rise, we should see incremental improvement on the bottom line margin as well.

Thank you. One moment for our next question. Our next question comes from Steven Baxter with Wells Fargo. Your line is open.

Hi, this is Mitchell on for Steve. Just on the margin guidance, your previous guide assumed EBITDA margins would improve year over year in the second half, but the new guidance looks closer to flat. I know you mentioned G&A, but just want to understand if there are any other dynamics to consider there, specifically on the core business. Yeah, thanks for calling on that.

Yeah, when we look at the other piece that needs to be factored in is NCI. We continue to have the NCI growth. as we add this JV. And so because we back out NCI or it's backed out in this guidance, that's also another piece that is impacting that EBITDA margin. So when you consider the NCI through the third quarter was 2.4 million, and we're anticipating about 1.9 million in NCI in Q4 impacting that EBITDA margin. And so I think that's a piece that's missing in and maybe your look at it.

Got it. Very helpful. And then maybe just one more on same store hospice length of stay. It appears to have increased year over year in each of the past three quarters. Is there anything you'd call out that's driving that? And just how are you thinking about that going forward? Thank you.

Yeah, appreciate the question, Mitchell. And really what I would point out is we continue to return closer and closer to pre-pandemic levels. And this really is about where is the location of our patients who are receiving services? Historically, we had a very good mix between assisted living communities, senior skilled nursing facilities, and then of course, most of our care is delivered in the home. We've seen a small pickup in the percent of care that's delivered in assisted living. We're really excited about where we sit from a length of stay standpoint. It reflects continued work to identify patients that are appropriate earlier in the process and allowing them to receive the benefits of hospice for a longer time. And that's why you can see the strength of our ADC on top of our strong admission momentum, both organically and with our new transitions. But that's really what's driving it is just a very modest uptick in the percent of our hospice patients that are housed in senior living communities.

Thank you. One moment for our next question.

Our next question comes from David McDonald with Truist. Your line is open.

Good afternoon, guys. A couple of quick questions. One, just coming back to the Metasys deal, that deal obviously took kind of a uniquely long time to close. I'm just curious if you could talk a little bit about the employees, what you're seeing in terms of just excitement that they now have visibility in terms of where those assets have landed, just anything that you can talk about in terms of the reception that you're getting internally in terms of the assets that you picked up.

Yeah, appreciate that question, David. It's been really remarkable to be a part of. We went out at the end of September, just before the close, and had operators from across our organization and key resources from across Pennant who went to every location and met with the teams in town halls and took the opportunity to listen and to hear what their experience had been through the history and also through the transition period, and also answer questions about who we are. Our web and media team did a remarkable job of putting together a website to consistently deliver information, both in video form as well as constantly updating frequently asked questions. And our goal has been throughout this process, like it is in any transition process, to be as transparent as we can and to be as responsive as we can to employees, because we believe that in the long run, if we create a world-class employee experience, that we're gonna get the best talent and keep the best talent and be able to grow our business and impact the community we serve. And certainly in this transition, we've seen a group of remarkable people, many of whom have been with these agencies for longer than 10 years, but certainly a very strong contingent of clinicians who really believe in what they do and are committed to their communities and have embraced Penn and our locally driven operating model and focus on how we can meet the needs of local referral sources and patients. And so that's been really exciting. And I think is part of the reason why we feel a sense of optimism that despite the challenges of COVID, offering new brands in the community, despite the fact that we've got to go through an HCHB transition. We haven't experienced material turnover at all. And I think we are doing our best to make sure people understand what life will be like at Pennant. And as a result, we're hopeful that we can keep these great teams together and build on the legacy that they've created.

Yeah, I would just add one additional thought. One of the other things that has been really impressive about this group of leaders in these teams is even in the midst of all of this kind of chaos is obviously this process has gone on for a long time. They've continued to perform at a high level with very little, if any, drop-off in census and financial performance, clinical performance. And that's really a credit. to the teams that are there. They, in many ways, they're like us. They love being in the communities they serve, and they reflect the people of their communities. And so they take a lot of pride in the work that they do. And so we've inherited a great group of operators that really want to make a difference. And so that's just another element of this that, you know, we might have expected to see a drop-off, but it's actually, they continue to perform well.

And then just one other quick follow-up. If, you know, we look at the occupancy and senior living year over year, the growth in occupancy accelerated pretty nicely in the third quarter relative to the second quarter. Is there anything that you guys would call out in terms of, you know, stuff that you've been doing that is, you know, incrementally resonating or, you know, is that just kind of a little bit of, You know just kind of ongoing growth just just anything you would call out there.

Just given the sequential improvement Yeah, well I think it's been years of ongoing investment in multiple different ways First and foremost it's been the investment in the leaders really occupancy moves the the quickest when we've got a great group of leaders and team members that are driving it creating the right experience for residents and really reaching out in the community and so as we've invested in the local leaders and they've been the ones that have really turned the tide from an occupancy standpoint. The other thing, just we've actually made significant CapEx investments in a lot of these buildings over the last two or three years to bring them up to the standards that we'd expect and create an ambiance or an experience for our residents that is meaningful and really just a great place to live. And then the other thing that I would say is we've had this balance of driving rate in terms of our revenue per occupied unit with the occupancy. And so as we've tried to improve the revenue quality, I think that's part of the reason why the occupancy has been somewhat flat. And now that we've, I don't want to say totally optimized, but for the most part, our revenue equality is at a really strong level. And so because of that, the focus can be less on, you know, really replacing the low or poor revenue quality with better revenue quality and really driving occupancy improvements. That's another element. And then the last thing, which is probably a really critical piece in all of this, is our overall digital marketing efforts. We've made significant investments in improving the sophistication of our outreach into the communities. We've basically overhauled all of the brand websites and created kind of a local needs brand experience that has resonated with the communities that's driving improvement there. And then our ability to just capture leads is, as I said before, much more sophisticated. We've increased our spend as well. And so it's improving the outreach too. So we're just getting better all across the board in each of these areas. And so now you're starting to see kind of the momentum really hit. And that's why that flywheel has started to really drive.

OK. Thanks very much.

One moment for our next question. Our next question comes from Raj Kumar with Stevens. Your line is open.

Hi, good morning. Appreciate the commentary on prudent growth within senior living. Maybe just kind of touching upon that, there seems to be kind of increased activity amongst just market participants on the M&A front on that end. And Pennant has also made incremental investments throughout this year. So maybe just kind of Any update on what you're seeing from a market participant standpoint and a competitive standpoint on SL deals that you might be going after? What's the pricing environment looking like on that end and whether or not you're seeing anything that's outsized and beyond your comfort level and you're seeing any trend on that front?

Yeah, Raj. I would just say there is a lot of activity right now in the senior living space in terms of acquisition opportunities. And the pricing is all over the map. So there are plenty of opportunities that are outside of our comfortable range, but there are also plenty of opportunities that are square in our target range. And so we're excited about what the future holds, the robust pipeline that we have right now. And, you know, obviously we talked about this a lot. Our focus is really finding incredible leaders and getting them prepared to step into opportunities. And so that's the biggest limiting factor. There's going to be plenty of opportunities for us just in terms of availability. And we have a large pipeline of CITs in both on the home health and hospice and on the senior living side as we've ever had. And so from that standpoint, we're ready to go with these deals. And then just in terms of competition, yeah, I mean, there is a little more noise and there certainly are more players interested in this space. But at the same time, I think the amount of deals has increased as well. And so while there is competition in what we go out and try to get, at the same time, we have kind of a unique profile. And in a number of these deals, We have relationships with specific brokers or groups that have worked with us in the past that directly reach out to us and want us to participate. One of the things that we're seeing that's really critical right now, and we've seen it kind of over the last five years, COVID kind of bore out the fact that you've got to be a really good operator to be successful in senior living. And as we demonstrate our operating shops, These these folks want to come to us because they have confidence in our ability to provide great care and build a really strong presence in those buildings and so that has afforded us some some privileges or opportunities that maybe Others don't get because of because because of the reputation that we're establishing so we're excited about the pipeline we certainly have a lot of opportunity in front of us and continue to work toward growing and The last thing I will say just on the real estate side, so this last deal, we acquired two of the real estate assets on the building. So that brings us to a total of six, roughly 10% of our buildings now we own. And we see that as a really important lever that we can pull going forward. And we've kind of slowly gone into this just wanting to make sure that we can do this right and we can create the right value. And as that's proving out, we expect to continue to prudently invest in real estate as well and use that as an opportunity for growth.

Got it. And then maybe as my follow-up, just kind of focusing on the Ametis assets, I know the profile of the deal has kind of changed throughout its inception, but maybe as we kind of look at what the, you know, identifiable synergies are from a baseline perspective, are you kind of willing to size that opportunity and And in terms of where you're seeing it, is it kind of on the cost front or the contracting front with payers? Just kind of any color on that would be great.

I think there's opportunities, Raj, in a lot of places. I think I'd group them into three areas. One of them is certainly improving their margins up to our target margin. And so we see some opportunity there. like I telegraphed in the answer to Megan's question, we do expect through the transition a little softer margin, but once we get through the transition, like we've seen with Signature, we believe that our model of transparently sharing data with local operators and building aligned incentive structures around that will create opportunities to drive margin improvement and acceleration. I think the second thing I would focus on is growth. Again, these communities have not had They don't have as many local solutions. They've got lots of big regional and national players, but we feel like there's an opportunity to really be the local solution of choice in each community and that that can drive a bigger share of the market to our agencies. And so that's the second opportunity I'd highlight. And then I think the final thing that I would highlight is this is really a starting point or a jumping off point We feel like throughout the Southeast, there's an opportunity to take the pennant experience and the pennant model and for that to improve outcomes throughout the states that we serve. As far as contracting goes, we are optimistic. We obviously have already begun conversations and communications with those payers. We do think there's opportunity on the contract front, but it's early in the process. And so I don't want to get too far ahead in projecting that we're going to be able to move those rates significantly. I do think our clinical quality gives us a unique opportunity, particularly the preventable hospitalization data that we shared today that drives an overall lower cost to payers. And so we've got something unique to share in our clinical outcomes and in our ability to lower overall spend for managed care providers. And so we're confident going into those negotiations that we'll have success, but it's just early and too early to kind of project what that might look like.

Great. Thank you. You bet. Thanks, Raj.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Brent for any further remarks.

All right. Well, thank you, Kevin, and thank you, everyone, for joining us today.

Well, ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.