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Pennant Group Shares Fly 40% Higher on Q2 Earnings and Raised FY Adjusted EPS Guidance

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Shares of The Pennant Group reached a new 52-week high after the company reported a 12.1% increase in Q2/20 revenue and raised FY/20 adjusted EPS guidance by 34.2%.

After U.S. markets closed for trading yesterday afternoon, The Pennant Group Inc. (PNTG:NASDAQ), which operates the Pennant group home health, hospice and senior living facilities, announced financial results for the second quarter of 2020 ended June 30, 2020. The company reported that in Q2/20 it posted GAAP diluted earnings per share of $0.15 and adjusted diluted earnings per share of $0.24.

The Pennant Group indicated that Q2/20 revenue increased by 12.1% to $92.7 million, compared to $82.7 million in Q2/19. The company added that Q2/20 GAAP earnings per share increased 15.4% to $0.15, compared to $0.13 in Q2/19 and that adjusted earnings per share increased to $0.24, compared to $0.16 in Q2/19.

The firm reported that in Q2/20, Home Health and Hospice Services revenue increased by 15.5% to $58.0 million and Senior Living Services revenue increased 6.9% to $34.8 million, compared to Q2/19.

The company stated that hospice average daily census was 1,979 in Q2/20, an increase of 18.3% over Q2/19. In addition, hospice total admissions were 1,954, total home health admissions were 5,259 and total home health Medicare admissions were 2,459 in the second quarter.

The company's CEO Daniel Walker remarked, "In the face of an unprecedented pandemic, our local leaders in both segments continued to produce strong clinical and financial results, all while sharpening our ability to navigate the complexities of the Patient Driven Groupings Model (PDGM) and continuing our spin-related transition from Ensign to Pennant systems...With our proven operating model, strong balance sheet and tremendous growth opportunities, we are stronger today than ever and poised to provide even better care to current and future patients and residents."

"In our home health and hospice business, we achieved strong financial results through consistent operational execution within our model, disciplined cost management and a continued focus on improving clinical outcomes and meeting the unique needs of each healthcare community we serve, which were made more complex by the spread of COVID-19. From the low point in mid-May, we experienced steady growth in home health total and Medicare admissions and are now seeing census trend slightly ahead of pre-COVID levels. Meanwhile, our hospice average daily census grew steadily throughout the quarter," CEO Walker added.

Derek Bunker, Pennant's chief investment officer, stated, "During the quarter and since, the company announced that it completed the acquisition of four hospice agencies and two home health agencies across Arizona, Utah and Idaho, bringing the total number of operations acquired in 2019 and since to 21. As we look to the rest of 2020 and beyond, we continue to see tremendous opportunities for acquisitions both within our footprint and in new markets."

Pennant's CFO Jennifer Freeman commented, "the company ended the second quarter with $12.1 million cash on hand and $70.0 million availability on its $75 million revolving line of credit. The company's results and cash position do not include any funds from the Provider Relief Fund established through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which the company rejected and returned during the quarter."

The firm reaffirmed annual revenue guidance of $376-386 million and stated that its revised FY/20 earnings estimates are all based upon diluted weighted average shares outstanding of approximately 30.0 million and a 26.4% effective tax rate. The company advised that it has raised its FY/20 adjusted earnings per share guidance to a range of $0.71-0.78 and that the midpoint represents a 34.2% increase over previous midpoint guidance provided.

The Pennant Group Inc. is a holding company of independent operating subsidiaries based in Eagle, Idaho. The group stated that it "provides healthcare services through 71 home health and hospice agencies and 54 senior living communities located throughout Arizona, California, Colorado, Idaho, Iowa, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming."

Pennant Group started the day with a market capitalization of around $729.5 million with approximately 27.91 million shares outstanding and a short interest of about 3.0%. PNTG shares opened almost 15% higher today at $30.00 (+$3.86, +14.77%) over yesterday's $26.14 closing price and reached a new 52-week high price today of $38.00. The stock has traded today between $27.78 and $38.00 per share and is currently trading at $36.70 (+$10.56, +40.40%).


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