Transcript • Feb. 26, 2026 5:00 PM • The Pennant Group, Inc. Common Stock (PNTG)
Transcript
Feb. 26, 2026 5:00 PM
The Pennant Group, Inc. Common Stock (PNTG)
David: but we anticipate that the Southeast will become an area of strength for us and that we can grow significantly there. And we've seen it already as we've incorporated these operations. We've had a significant number of folks that we've been able to add to the team, others that have reached out to us, and there's ample opportunity for us to grow. And so we're excited about the potential that that allows us to have. And certainly as we look forward right now, you know, we've put a little bit of a pause on the large growth. We'll do tuck-in acquisition opportunities. It actually doesn't change our approach on the senior living side. And we've got, you know, there's always opportunities in the pipeline there. But on the home health and hospice side, there's been plenty of outreach as well. There's much more recognition. I think as you expand into different geographies, certainly it opens up the door for more opportunities to expand as well. And so assuming that we transition the way that we expect to, that we're looking forward to, you know, really doing the integration, but then seeking significant expansion opportunities going forward as well.
Unknown Speaker: Okay, David. Thanks very much. on the market share question. We do think that the Southeast is different than where we operate in the West, in part because there has been so much consolidation. And we believe that gives us a unique opportunity to set ourselves apart because of our local operating model. And so where there's all of the the competitors are national in scope and scale, we think that gives us a competitive advantage because of our unique locally driven focus. And so that there is an opportunity to gain market share over where this business was when we acquired it. And that's part of the compelling growth opportunity that we see just in these assets, but also as we expand in the Southeast. So thanks for the question. Thank you.
Lisa: Thank you. One moment for the next question. And the next question is coming from the line of Raj Kumar of Stevens. Please go ahead.
Raj Kumar: Hey, good morning. Maybe just following up on the kind of senior living kind of 100-bits occupancy improvement and mid-single-digit kind of red core baked into 26 guides, I guess what's the kind of underlying cost assumption as we're trying to parse out kind of incremental margin improvement in the kind of senior living segment. And then, you know, historically, you know, I believe you've kind of called out, you know, a kind of operating income margin in the kind of mid-teens for this segment. And, you know, now you're kind of in the double-digit range. So as we kind of think about that opportunity, what does that kind of look like from, you know, an occupancy standpoint as we kind of think about the long-term trajectory of the senior living business?
Brent Garzoli: Yeah, thanks, Raj. When we're talking about the 1% increase in occupancy over the year, what that will allow us to do, again, is those operations where we've kind of achieved that break even of where we're able to drop more to the bottom line from a rent. We've covered our rent hurdle. We look at that as being about 30% of that can flow down through the bottom line to get us to higher and more adjusted EBITDA. That would be the math on that one.
David: Yeah, I mean, just to provide a little more color, Raj, you know, that 100 BIPs increase really calculates, in our current incremental operating margin, just a little under $1 million in value for every 100 basis point increase. And so, obviously, There is expansion in that, so if that margin increases a little bit, then that opportunity increases a little bit as well. But hopefully that gives you a little bit more just clarity on the kind of incremental increase on the occupancy front.
Raj Kumar: Got it. And then maybe just a couple quick ones from a modeling perspective. Just kind of any kind of goalposts around operating cash flow and then as we think about kind of CapEx and the kind of view integration, any framing around that would be helpful.
Brent Garzoli: Yeah, from an operating cash flow perspective for the year, we're looking at between $45 and $55 million. I think we will have some noise that comes in there from cash collections as we're starting to transition those operations and working under a TSA that we've built into that number. And then from a CapEx perspective, we are – forecasting roughly 15 million in capex spend in 2026. Some of that increases due to some of the buildings that we've acquired that needed a little more capex spend to get them to where we want them to be from a property standpoint.
Unknown Speaker: Got it. Thank you. Thank you. One more for the next question.
Lisa: And our next question is coming from the line of Jared Hoppe of Williams-Laron Company. Please go ahead.
Jared Hoppe: Hey, guys. Thanks for taking the questions. Maybe I'll ask another one about 2026 and try and take a slightly different angle. But when you think about the moving parts this year with the transition and, you know, some of the incremental costs that are sort of absorbed in 2026 and kind of having this mindset of, you know, targeting, having most of the optimization efforts completed by year end, I'm wondering if there's sort of a way to frame what the exit run rate for EBITDA could look like by year end relative to what you're actually guiding to. Obviously, not to get too far ahead of things, but just, you know, think it might be helpful to sort of frame what the jumping off point could look like for 2027.
David: Yeah, well, I will just jump in. I mean, our goal, we talk about, I mean, our current rate is, you know, between 15 and 16%. And so that would sort of be kind of a target natural place to get to is to sort of where we currently are running. And then our optimal level is around 18% is what we've talked about. And so, you know, that might be aggressive to get there by the end of the year. However, we're going to push toward that number. But that kind of gives you an idea of the potential upside there if we can drive to kind of our current operational levels.
Jared Hoppe: Got it. That sounds cool. And then as my follow-up, I would like to drill into the hospice segment. I'm curious what the competitive backdrop is like these days. Obviously, you guys continue to put up really strong organic growth, strong ADC growth on a same agency basis. It seems like others in the market are experiencing strong organic growth trends as well. So just kind of curious to hear your perspective on the competitive dynamics in that business.
Unknown Speaker: I think you've seen a normalization, right? We went through an acceleration at the beginning of the pandemic. We went through a deceleration after the pandemic ended because of the sort of pull forward that happened because we lost so many lives that would have otherwise received more extended hospice care during the pandemic. And so I think you've now sort of, you're starting to see the beginning of what for years has been sort of called the silver wave, where that generation of Americans, our average The average age of our hospice patient is 83 years old. So you go back 83 years and what was happening? It was 1944 and the war was ending and you start to see the beginning of that baby boomer generation. And so it's there is in part, you know, I think I think people were anticipating the silver way of beginning. But during the war, there was a downturn in birth. And so now we're getting to the other side of that. And you look at and say, okay, going forward, we've got some real opportunity to care for people at this most important stage of their life when they need medical help and they need an interdisciplinary team that can provide everything from psychosocial to medical director care. And that, I think, is why we feel so blessed to be in the hospice business and have the opportunity to serve and care for these patients. But I think that is part of the backdrop. I think you also see not everyone is doing, you know, is seeing that kind of growth. I think what you're seeing is folks who have an ability to meet the needs of their local communities. Those are the folks who are doing well. And I think that is highlighted by our over 8% quarter over quarter same store growth. It's highlighted by our 7.5% year over year same store growth. That just shows that across our platform, our teams are doing a great job of meeting the needs of their communities, and that's giving them an opportunity to care for this silver wave of aging patients that desperately need this care to improve their quality of life during that last stage of life.
Unknown Speaker: Very, very helpful. Thank you.
Lisa: Thank you. And this does conclude today's Q&A session. I would now like to turn the call back over to Brent Garzoli. CEL for closing remarks. Please go ahead.
David: Thank you, Lisa, and thank you, everyone, for joining us today. Have a great day.
Unknown Speaker: This concludes today's program. For today, you may all disconnect.
