The Pennant Group spent time in the first half of 2022 streamlining its senior living portfolio, improving the average quality of its buildings and “positioning ourselves to accelerate organic growth and get back to modest acquisitive growth” in senior living, Chief Operating Officer John Gochnour said Tuesday during the Eagle, ID-based company’s second-quarter earnings call.
During the quarter, he said, the company completed the transfer of five senior living communities to affiliates of The Ensign Group and acquired the real estate underlying the operations of its 82-unit assisted living and memory care community in Twin Falls, ID, which will continue to be operated by an affiliate.
After the quarter ended, Pennant acquired the operations of Barber Station Assisted Living and Memory Care, a Class A senior living community with 39 assisted living and 45 memory care units in Boise, ID.
“With a favorable long-term triple-net lease, close proximity to our service center and strong home health and hospice partners, we are excited to welcome this community into our portfolio,” he said. “We will continue to be disciplined as we look to grow, ensuring we maintain momentum in our existing footprint of communities.”
Chief Investment Officer Derek Bunker said that the company’s pipeline of potential acquisitions in its senior living and home health and hospice segments “continues to expand with robust opportunity.”
“We remain focused on evaluating operations that fit our strategic criteria of small- to medium-sized operations with strong reputations in their communities with significant organic growth potential where our operational expertise can capture that upside for our stakeholders,” he said.
CEO Brent Guerisoli said that Pennant looks for “senior living communities with a quality of physical plant where our operational, sales and marketing and wellness expertise can drive revenue increases through occupancy growth, additional care capabilities and rate improvement with disciplined cost management.”
Senior living segment results for the quarter:
- Revenue was $31 million, a decrease of $1.3 million, or 3.9%, over the same quarter in 2021.
- Adjusted earnings before interest, taxes, depreciation, amortization and rent from senior living operations were $8.8 million, and earnings before interest, taxes, depreciation and amortization were $0.9 million, an increase of $0.1 million over the same quarter in 2021.
- Occupancy was 76.5%, an increase of 380 basis points (3.8%) over the same quarter in 2021, and average monthly revenue per occupied room was $3,470, an increase of $294 or 9.3% over the same quarter in 2021 and $99, or 2.9%, over the first quarter of 2022.
- Not including the six senior living operations exited this year, same-store average occupancy was 77.2%, an increase of 180 basis points (1.8%) over the first quarter of 2022 and 190 basis points (1.9%) over the same quarter in 2021.
- Same-store average revenue per occupied room increased 0.5% over the first quarter of 2022 and 5.8% over the same quarter in 2021.
Overall, Pennant reported a GAAP diluted loss per share of $0.09 and adjusted diluted earnings per share of $0.14 for the quarter.
Gochnour said that labor pressure generally is easing, although markets can vary. Its senior living business has seen “a significant reduction in turnover,” he said.
“While labor challenges linger and we saw average wages tick up in the second quarter by 0.9%, it was at a slower pace than we saw for much of 2021 and so far is in line with our expectations,” Gochnour said.
To improve occupancy, Pennant has invested in additional sales tools and resources to expand marketing outreach, better track and follow up with leads and target high-return-on-investment leads, he said. “These efforts are contributing to solid occupancy growth across our portfolio,” he said.
Guerisoli said that as the senior living industry evolves toward providing care for residents with greater healthcare needs, “our experience as a healthcare provider equips us to offer our residents a better quality of life experience at an affordable cost, thus appealing to a broader population.”
Having a home health and hospice segment offering complementary services, he added, means that Pennant is “well-positioned to take advantage of favorable demographic shifts as well as industry trends that reward providers offering quality care in lower-cost settings.”
Pennant has 48 senior living communities in its portfolio, down from 52 in the first quarter and 54 in the fourth quarter of 2021, according to an August presentation posted online. It has 89 agencies offering home health, hospice and home care.
For additional coverage of the call, see McKnight’s Home Care.
