• Pennant Reports First Quarter 2025 Results

    Source: Nasdaq GlobeNewswire / 06 May 2025 15:08:00   America/Chicago

    EAGLE, Idaho, May 06, 2025 (GLOBE NEWSWIRE) -- The Pennant Group, Inc. (NASDAQ: PNTG), the parent company of the Pennant group of affiliated home health, hospice and senior living companies, today announced its operating results, reporting GAAP diluted earnings per share of $0.22 for the first quarter of 2025. Pennant also reported adjusted diluted earnings per share of $0.27 for the quarter(1).

    First Quarter Highlights

    • Total revenue for the first quarter was $209.8 million, an increase of $52.9 million or 33.7% over the prior year quarter;

    • Net income for the first quarter was $7.8 million, an increase of $2.9 million or 58.5% over the prior year quarter;

    • Adjusted net income for the first quarter was $9.6 million, an increase of $3.7 million or 61.4% over the prior year quarter;

    • Consolidated Adjusted EBITDAR for the first quarter was $28.0 million, an increase of $6.6 million or 31.0% over the prior year quarter;

    • Consolidated Adjusted EBITDA for the first quarter was $16.4 million, an increase of $5.1 million or 45.9% over the prior year quarter;

    • Home Health and Hospice Services segment revenue for the first quarter was $159.9 million, an increase of $43.4 million or 37.2% over the prior year quarter;

    • Home Health and Hospice Services segment adjusted EBITDAR from operations for the first quarter was $27.3 million, an increase of $7.7 million or 39.5% over the prior year quarter; and segment adjusted EBITDA from operations for the first quarter was $25.1 million, an increase of $7.3 million or 40.6% over the prior year quarter;

    • Total home health admissions for the first quarter were 18,878, an increase of 4,229 or 28.9% over the prior year quarter; total Medicare home health admissions for the first quarter were 7,599, an increase of 1,253 or 19.7% over the prior year quarter;

    • Hospice average daily census for the first quarter was 3,794, an increase of 832 or 28.1% compared to the prior year quarter;

    • Senior Living Services segment revenue for the first quarter was $50.0 million, an increase of $9.5 million or 23.6% over the prior year quarter; average occupancy for the first quarter was 78.5%, which is flat with the prior year quarter, and average monthly revenue per occupied room for the first quarter was $5,193, an increase of $526 or 11.3% over the prior year quarter;

    • Senior Living segment adjusted EBITDAR from operations for the first quarter was $14.4 million, an increase of $2.4 million or 20.3% over the prior year quarter; and segment adjusted EBITDA from operations for the first quarter was $4.9 million, an increase of $1.4 million or 40.8% over the prior year quarter.
    (1) See "Reconciliation of GAAP to Non-GAAP Financial Information.”
    (2) Same store senior living results is defined as all senior living communities excluding affiliate memory care units in transition, and new senior living operations acquired in 2024 or 2025.
        

    Operating Results

    “We are off to a strong start in 2025,” said Brent Guerisoli, the Company’s Chief Executive Officer. “Our ongoing investments in leadership development are fueling record operational results. We are encouraged to see positive momentum across all facets of our business, which is showing in our clinical, cultural and financial outcomes.”

    “Our home health and hospice segment performance is at all time highs as we add quality acquisitions to robust organic growth,” said John Gochnour, the Company’s President and Chief Operating Officer. “Our senior living segment is anchored by solid leaders whose results continue to improve. We are pleased to begin the year with a quarter that significantly exceeded our targets and commitments across the Company.”

    A discussion of the Company’s use of Non-GAAP financial measures is set forth below. A reconciliation of net income to EBITDA, adjusted EBITDAR and adjusted EBITDA, as well as a reconciliation of GAAP earnings per share, net income to adjusted net earnings per share and adjusted net income, appear in the financial data portion of this release. More complete information is contained in the Company’s Form 10-Q for the three months ended March 31, 2025, which has been filed with the SEC today and can be viewed on the Company’s website at www.pennantgroup.com.

    Conference Call

    A live webcast will be held tomorrow, May 7, 2025 at 10:00 a.m. Mountain time (12:00 p.m. Eastern time) to discuss Pennant’s first quarter 2025 financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Pennant’s website at https://investor.pennantgroup.com. The webcast will be recorded and will be available for replay via the website.

    About Pennant

    The Pennant Group, Inc. is a holding company of independent operating subsidiaries that provide healthcare services through 137 home health and hospice agencies and 60 senior living communities located throughout Arizona, California, Colorado, Idaho, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming. Each of these businesses is operated by a separate, independent operating subsidiary that has its 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," "its" and similar verbiage, are not meant to imply that The Pennant Group, Inc. has direct operating assets, employees or revenue, or that any of the home health and hospice businesses, senior living communities or the Service Center are operated by the same entity. More information about Pennant is available at www.pennantgroup.com.

    Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

    This press release contains, and the related conference call and webcast will include, forward-looking statements that are based on management’s current expectations, assumptions and beliefs about its business, financial performance, operating results, the industry in which it operates and other future events. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding growth prospects, future operating and financial performance, and acquisition activities. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to materially and adversely differ from those expressed in any forward-looking statement.

    These risks and uncertainties relate to the company’s business, its industry and its common stock and include: reduced prices and reimbursement rates for its services; its ability to acquire, develop, manage or improve operations, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of operations; its ability to access capital on a cost-effective basis to continue to successfully implement its growth strategy; its operating margins and profitability could suffer if it is unable to grow and manage effectively its increasing number of operations; competition from other companies in the acquisition, development and operation of facilities; its ability to defend claims and lawsuits, including professional liability claims alleging that our services resulted in personal injury, and other regulatory-related claims; and the application of existing or proposed government regulations, or the adoption of new laws and regulations, that could limit its business operations, require it to incur significant expenditures or limit its ability to relocate its operations if necessary. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the company’s periodic filings with the Securities and Exchange Commission, including its Form 10-Q and/or 10-K, for a more complete discussion of the risks and other factors that could affect Pennant’s business, prospects and any forward-looking statements. Except as required by the federal securities laws, Pennant does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.

    Contact Information

    Investor Relations
    The Pennant Group, Inc.
    (208) 506-6100
    ir@pennantgroup.com

    SOURCE: The Pennant Group, Inc.

    THE PENNANT GROUP, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF INCOME
    (unaudited, in thousands, except for per-share amounts)
     
     Three Months Ended March 31,
      2025   2024 
        
    Revenue$209,842  $156,915 
        
    Expense   
    Cost of services 168,745   125,995 
    Rent—cost of services 11,715   10,384 
    General and administrative expense 14,840   11,436 
    Depreciation and amortization 1,892   1,331 
    Gain on disposition of property and equipment, net —   (755)
    Total expenses 197,192   148,391 
    Income from operations 12,650   8,524 
    Other (expense) income, net:   
    Other (expense) income (69)  85 
    Interest expense, net (1,205)  (1,792)
    Other expense, net (1,274)  (1,707)
    Income before provision for income taxes 11,376   6,817 
    Provision for income taxes 2,854   1,759 
    Net income 8,522   5,058 
    Less: Net income attributable to noncontrolling interest 747   152 
    Net income attributable to The Pennant Group, Inc.$7,775  $4,906 
    Earnings per share:   
    Basic$0.23  $0.16 
    Diluted$0.22  $0.16 
    Weighted average common shares outstanding:   
    Basic 34,471   30,046 
    Diluted 35,202   30,403 
     


    THE PENNANT GROUP, INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (in thousands, except par value)
     
     March 31, 2025 December 31, 2024
    Assets   
    Current assets:   
    Cash$5,221  $24,246 
    Accounts receivable—less allowance for doubtful accounts of $373 and $232, respectively 94,992   81,302 
    Prepaid expenses and other current assets 23,676   17,308 
    Total current assets 123,889   122,856 
    Property and equipment, net 43,524   43,296 
    Operating lease right-of-use assets 278,210   270,586 
    Restricted and other assets 24,214   17,477 
    Goodwill 154,904   129,124 
    Other indefinite-lived intangibles 118,882   96,182 
    Total assets$743,623  $679,521 
    Liabilities and equity   
    Current liabilities:   
    Accounts payable$18,800  $18,737 
    Accrued wages and related liabilities 27,691   43,106 
    Operating lease liabilities—current 20,557   19,671 
    Other accrued liabilities 20,925   20,186 
    Total current liabilities 87,973   101,700 
    Long-term operating lease liabilities—less current portion 260,236   253,420 
    Deferred tax liabilities, net 2,776   1,861 
    Other long-term liabilities 17,112   10,575 
    Long-term debt 52,500   — 
    Total liabilities 420,597   367,556 
    Commitments and contingencies   
    Equity:   
    Common stock, $0.001 par value; 100,000 shares authorized; 34,736 and 34,445 shares issued and outstanding at March 31, 2025, respectively; and 34,670 and 34,373 shares issued and outstanding at December 31, 2024, respectively 35   35 
    Additional paid-in capital 238,630   236,091 
    Retained earnings 64,997   57,222 
    Treasury stock, at cost, 3 shares at March 31, 2025 and December 31, 2024 (65)  (65)
    Total The Pennant Group, Inc. stockholders’ equity 303,597   293,283 
    Noncontrolling interest 19,429   18,682 
    Total equity 323,026   311,965 
    Total liabilities and equity$743,623  $679,521 
     


    THE PENNANT GROUP, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (in thousands)
     
    The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented:
     
     Three Months Ended March 31,
      2025   2024 
    Net cash (used in) provided by operating activities$(21,229) $545 
    Net cash used in investing activities (50,301)  (23,636)
    Net cash provided by financing activities 52,505   19,754 
    Net decrease in cash (19,025)  (3,337)
    Cash beginning of period 24,246   6,059 
    Cash end of period$5,221  $2,722 
     


    THE PENNANT GROUP, INC.
    REVENUE BY SEGMENT
    (unaudited, dollars in thousands)
     
    The following table sets forth our total revenue by segment and as a percentage of total revenue for the periods indicated:
     
     Three Months Ended March 31,
      2025   2024 
     Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage
            
    Home health and hospice services       
    Home health$74,118 35.3% $57,212 36.5%
    Hospice 70,586 33.6   54,607 34.8 
    Home care and other(a) 15,166 7.2   4,671 3.0 
    Total home health and hospice services 159,870 76.1   116,490 74.3 
    Senior living services 49,972 23.9   40,425 25.7 
    Total revenue$209,842 100.0% $156,915 100.0%
     


    (a) Home care and other revenue is included with home health revenue in other disclosures in this press release.
       


    THE PENNANT GROUP, INC.
    SELECT PERFORMANCE INDICATORS
    (unaudited, total revenue dollars in thousands)
     
    The following table summarizes our overall home health and hospice performance indicators for the each of the dates or periods indicated:
     
     Three Months Ended March 31,    
     2025 2024 Change % Change
    Total agency results:       
    Home health and hospice revenue$159,870 $116,490  43,380 37.2%
            
    Home health services:       
    Total home health admissions 18,878  14,649  4,229 28.9%
    Total Medicare home health admissions 7,599  6,346  1,253 19.7%
    Average Medicare revenue per 60-day completed episode(a)$3,801 $3,477 $324 9.3%
    Hospice services:       
    Total hospice admissions 3,783  3,080  703 22.8%
    Average daily census 3,794  2,962  832 28.1%
    Hospice Medicare revenue per day$190 $187 $3 1.6%
                


    (a) The year to date average for Medicare revenue per 60-day completed episode includes post period claim adjustments for prior periods.
       


     Three Months Ended March 31,    
     2025 2024 Change % Change
    Same agency(b) results:       
    Home health and hospice revenue$122,451 $110,015 $12,436 11.3%
            
    Home health services:       
    Total home health admissions 14,082  12,554  1,528 12.2%
    Total Medicare home health admissions 5,812  5,536  276 5.0%
    Average Medicare revenue per 60-day completed episode(a)$3,623 $3,422 $201 5.9%
    Hospice services:       
    Total hospice admissions 3,181  3,080  101 3.3%
    Average daily census 3,270  2,962  308 10.4%
    Hospice Medicare revenue per day$190 $187 $3 1.6%
     


    (a) The year to date average for Medicare revenue per 60-day completed episode includes post period claim adjustments for prior periods.
    (b) Same agency results represent all agencies purchased or licensed prior to January 1, 2024.
       

    The following table summarizes our senior living performance indicators for the periods indicated:

     Three Months Ended March 31,     
      2025   2024  Change % Change 
    Total senior living results:        
    Senior living revenue$49,972  $40,425  $9,547  23.6% 
             
    Occupancy 78.5%  78.5%  —%   
    Average monthly revenue per occupied unit$5,193  $4,667  $526  11.3% 
     


     Three Months Ended March 31,     
      2025   2024  Change % Change
    		 
    Same store senior living(a) results:        
    Senior living revenue$43,263  $39,739  $3,524  8.9% 
             
    Occupancy 79.2%  79.4%  (0.2)%   
    Average monthly revenue per occupied unit$5,093  $4,641  $452  9.7% 
     


    (a) Same store senior living results is defined as all senior living communities excluding affiliate memory care units in transition, and new senior living operations acquired in 2024 or 2025.
       


    THE PENNANT GROUP, INC.
    REVENUE BY PAYOR SOURCE
    (unaudited, dollars in thousands)
     
    The following table presents our total revenue by payor source as a percentage of total revenue for the periods indicated:
     
      Three Months Ended March 31,
       2025   2024 
      Revenue Dollars Revenue Percentage Revenue Dollars Revenue Percentage
             
    Revenue:        
    Medicare $101,125 48.2% $76,981 49.1%
    Medicaid  27,338 13.0   25,066 16.0 
    Subtotal  128,463 61.2   102,047 65.1 
    Managed Care  30,714 14.6   20,122 12.8 
    Private and Other(a)  50,665 24.2   34,746 22.1 
    Total revenue $209,842 100.0% $156,915 100.0%
     


    (a) Private and other payors includes revenue from all payors generated in the Company’s home care operations and management services agreement.


    THE PENNANT GROUP, INC.
    RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
    (unaudited, in thousands, except per share data)
     
    The following table reconciles net income to Non-GAAP net income for the periods presented:
     
     Three Months Ended March 31,
      2025   2024 
        
    Net income attributable to The Pennant Group, Inc.$7,775  $4,906 
        
    Non-GAAP adjustments   
    Costs at start-up operations(a) 93   80 
    Share-based compensation expense(b) 2,167   1,526 
    Acquisition related costs and credit allowances(c) 272   137 
    Costs associated with transitioning operations(d) 75   (573)
    Unusual, non-recurring or redundant charges(e) 51   275 
    Provision for income taxes on Non-GAAP adjustments(f) (809)  (389)
    Non-GAAP net income$9,624  $5,962 
        
    Dilutive Earnings Per Share As Reported   
    Net Income$0.22  $0.16 
    Average number of shares outstanding 35,202   30,403 
        
    Adjusted Diluted Earnings Per Share   
    Net Income$0.27  $0.20 
    Average number of shares outstanding 35,202   30,403 
     


    (a) Represents results related to start-up operations.
         Three Months Ended March 31,
          2025   2024 
      Revenue$(865) $(2,410)
      Cost of services 943   2,328 
      Rent 7   156 
      Depreciation & amortization 8   6 
      Total Non-GAAP adjustment$93  $80 
            
    (b) Represents share-based compensation expense incurred for the periods presented.
         Three Months Ended March 31,
          2025   2024 
      Cost of services$1,195  $762 
      General and administrative 972   764 
      Total Non-GAAP adjustment$2,167  $1,526 
            
    (c) Represents costs incurred to acquire an operation that are not capitalizable.
       


    (d) During the year ended December 31, 2023, an affiliate of the Company placed its memory care units into transition and is converting the facility into an assisted living community. We received insurance proceeds related to the property in 2024 which were recorded as a gain on asset disposition on the consolidated statements of income.
         Three Months Ended March 31,
          2025  2024 
      Cost of services 20  (628)
      Rent 52  52 
      Depreciation 3  3 
      Total Non-GAAP adjustment$75 $(573)
            
    (e) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses.
            
    (f) Represents an adjustment to the provision for income tax to the year-to-date effective tax rate of 26.1% and 26.0% for the three months ended March 31, 2025 and 2024, respectively. This rate excludes the tax benefit of share-based payment awards.
       

    The table below reconciles Consolidated net income to the Consolidated Non-GAAP financial measures, Consolidated Adjusted EBITDA, and to the Non-GAAP valuation measure, Consolidated Adjusted EBITDAR, for the periods presented:

     Three Months Ended March 31,
      2025   2024 
        
    Consolidated net income$8,522  $5,058 
    Less: Net income attributable to noncontrolling interest 747   152 
    Add: Provision for income taxes 2,854   1,759 
    Net interest expense 1,205   1,792 
    Depreciation and amortization 1,892   1,331 
    Consolidated EBITDA 13,726   9,788 
    Adjustments to Consolidated EBITDA   
    Add: Start-up operations(a) 78   (82)
    Share-based compensation expense(b) 2,167   1,526 
    Acquisition related costs and credit allowances(c) 272   137 
    Activities associated with transitioning operations(d) 20   (628)
    Unusual, non-recurring or redundant charges(e) 51   275 
    Rent related to items (a) and (d) above 59   208 
    Consolidated Adjusted EBITDA 16,373   11,224 
    Rent—cost of services 11,715   10,384 
    Rent related to items (a) and (d) above (59)  (208)
    Adjusted rent—cost of services 11,656   10,176 
    Consolidated Adjusted EBITDAR(f)$28,029   
     


    (a) Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations.
    (b) Share-based compensation expense and related payroll taxes incurred. Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense.
    (c) Non-capitalizable costs associated with acquisitions, credit allowances, and write offs for amounts in dispute with the prior owners of certain acquired operations.
    (d) During the year ended December 31, 2023, an affiliate of the Company placed its memory care units into transition and is converting the facility into an assisted living community. We received insurance proceeds related to the property in 2024 which were recorded as a gain on asset disposition on the consolidated statements of income.
    (e) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses.
    (f) This measure is a valuation measure and is displayed thusly, it is not a performance measure as it excludes rent expense, which is a normal and recurring operating expense and, as such, does not reflect our cash requirements for leasing commitments. Our presentation of Consolidated Adjusted EBITDAR should not be construed as a financial performance measure.
       

    The following table present certain financial information regarding our reportable segments. General and administrative expenses are not allocated to the reportable segments:

     Home Health and Hospice Services Senior Living Services All Other Total
    Three Months Ended March 31, 2025       
    Revenue$159,443 $49,534 $865 $209,842
    Segment Cost of Services$132,169 $35,085    
    Segment Adjusted EBITDAR from Operations$27,274 $14,449   $41,723
    Three Months Ended March 31, 2024       
    Revenue$114,490 $40,015 $2,410 $156,915
    Segment Cost of Services$94,940 $28,004    
    Segment Adjusted EBITDAR from Operations$19,550 $12,011   $31,561
     

    The table below provides a reconciliation of Segment Adjusted EBITDAR from Operations above to income from operations:

     Three Months Ended March 31,
      2025   2024 
        
    Segment Adjusted EBITDAR from Operations(a)$41,723  $31,561 
    Less: Unallocated corporate expenses 13,694   10,161 
    Less: Depreciation and amortization 1,892   1,331 
    Rent—cost of services 11,715   10,384 
    Other income (69)  85 
    Adjustments to Segment EBITDAR from Operations:   
    Less: Start-up operations(b) 78   (82)
    Share-based compensation expense(c) 2,167   1,526 
    Acquisition related costs and credit allowances(d) 272   137 
    Activities associated with transitioning operations(e) 20   (628)
    Unusual, non-recurring or redundant charges(f) 51   275 
    Add: Net income attributable to noncontrolling interest 747   152 
    Income from operations$12,650  $8,524 
     


    (a) Segment Adjusted EBITDAR from Operations is net income attributable to the Company's reportable segments excluding interest expense, provision for income taxes, depreciation and amortization expense, rent, unallocated corporate and administrative expenses, and, in order to view the operations’ performance on a comparable basis from period to period, certain adjustments including: (1) start-up operations, (2) share-based compensation expense, (3) acquisition related costs and credit allowances, (4) costs associated with transitioning operations, (5) unusual, non-recurring, or redundant charges, and (6) net income attributable to noncontrolling interest. “All Other” consists of revenues generated at operating locations not included in the segment financial information reviewed by the CODM. Revenue included in the “All Other” category is insignificant individually, and therefore does not constitute a reportable segment. General and administrative expenses are not allocated to the reportable segments, and are included as “Unallocated corporate expenses”, accordingly the segment earnings measure reported is before allocation of corporate general and administrative expenses. The Company's segment measures may be different from the calculation methods used by other companies and, therefore, comparability may be limited.
    (b) Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations.
    (c) Share-based compensation expense and related payroll taxes incurred. Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense.
    (d) Non-capitalizable costs associated with acquisitions, credit allowances, and write offs for amounts in dispute with the prior owners of certain acquired operations.
    (e) During the year ended December 31, 2023, an affiliate of the Company placed its memory care units into transition and is converting the facility into an assisted living community. We received insurance proceeds related to the property in 2024 which were recorded as a gain on asset disposition on the consolidated statements of income.
    (f) Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses.
       

    The tables below reconcile Segment Adjusted EBITDAR from Operations to Segment Adjusted EBITDA from Operations for each reportable segment for the periods presented:

     Three Months Ended March 31,
     Home Health and Hospice Senior Living
      2025   2024   2025   2024 
            
    Segment Adjusted EBITDAR from Operations$27,274  $19,550  $14,449  $12,011 
    Less: Rent—cost of services 2,142   1,729   9,573   8,655 
    Rent related to start-up and transitioning operations (7)  (65)  (52)  (143)
    Segment Adjusted EBITDA from Operations$25,139  $17,886  $4,928  $3,499 
     

    Discussion of Non-GAAP Financial Measures

    EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes, and (c) depreciation and amortization. Adjusted EBITDA consists of net income attributable to the Company before (a) interest expense, net (b) provisions for income taxes, (c) depreciation and amortization, (d) results related to start-up operations, including rent and excluding depreciation, interest and income taxes, (e) share-based compensation expense, (f) non-capitalizable acquisition related costs and credit allowances, (g) activities associated with transitioning operations, (h) unusual, non-recurring or redundant charges and (i) net income attributable to noncontrolling interest. Consolidated Adjusted EBITDAR is a valuation measure applicable to current periods only and consists of net income attributable to the Company before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) rent-cost of services, (e) results related to start-up operations, excluding rent, depreciation, interest and income taxes, (f) share-based compensation expense, (g) acquisition related costs and credit allowances, (h) activities associated with transitioning operations, (i) unusual, non-recurring or redundant charges and (j) net income attributable to noncontrolling interest. The company believes that the presentation of EBITDA, adjusted EBITDA, consolidated adjusted EBITDAR, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the company’s operating performance. The company believes disclosure of adjusted net income, adjusted net income per share, EBITDA, adjusted EBITDA and consolidated adjusted EBITDAR has economic substance because the excluded revenues and expenses are infrequent in nature and are variable in nature, or do not represent current revenues or cash expenditures. A material limitation associated with the use of these measures as compared to the GAAP measures of net income and diluted earnings per share is that they may not be comparable with the calculation of net income and diluted earnings per share for other companies in the company's industry. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. For further information regarding why the company believes that this non-GAAP measure provides useful information to investors, the specific manner in which management uses this measure, and some of the limitations associated with the use of this measure, please refer to the company's periodic filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The company’s periodic filings are available on the SEC's website at www.sec.gov or under the "Financial Information" link of the Investor Relations section on Pennant’s website at http://www.pennantgroup.com.


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