Good morning. Welcome to Oppenheimer's 36th Annual Healthcare Conference. I am Michael Wiederhorn, the healthcare analyst. It's our pleasure to introduce The Pennant Group CEO, Brent Guerisoli, and Chief Financial Officer, Lynette Walbom. Thank you guys for joining us to this fireside today, and I'm looking forward to the discussion. Why don't we start out with, you know, can you describe how you feel about the business exiting Q4? Yeah. Mike, well, thank you for hosting us today. You know, I would say just generally we're really optimistic about where we finished the year. We've got a lot of momentum, you know, as you know, the past year was about growth. We expanded significantly. At the beginning of the year, we concluded our Signature acquisition, that at the time was the largest in our history, and we closed out the year with our the largest acquisition in our history with the assets related to UnitedHealth Group and Amedisys. For that reason, and then along with all of the momentum that we have, you know, it's been a really exciting time for Pennant. We talk about being a leadership company, and one of the best things that we can do for our leaders is create opportunities for them. That's what we focus on. These deals and this growth has really enabled the myriad of CITs and other leaders that we've brought into the organization to have opportunities and to be able to participate in a meaningful way. We're excited about that. We certainly, you know, we're encouraged by the early signs with what we've experienced in the Southeast with this expansion, but recognize that there's a lot of work to be done through the transition and the integration of these businesses. That's really a lot of our focus. Also, you know, as we look across the entire organization at all of the business lines, we've got momentum in Home Health and Hospice, we've got momentum in Senior Living, but there's still a ton of potential, latent potential in the opportunity to optimize the businesses to create efficiencies and to continue to grow in a meaningful way. Overall, we're excited, but also cautiously, you know, approaching the next year of transition and just look forward to continuing to, you know, expand Pennant's footprint. That's great color. Why don't you guys kind of, you know, you obviously have your new guidance out there. You know, can you talk about how much conservatism is baked into the numbers? And what are some of the, you know, factors, wiggle room that could bring you to the top and bottom end of that range? Yeah. Mike, I would say there is definitely conservatism that's built into that, and a lot of that hinges on with the Amedisys UnitedHealth Group transaction, right? It's a large transaction. We took on those assets in October Q4 and started actually transitioning those operations in Q1 of this year. We wanted to make sure as we were going through that transition, that we were taking into account things like the fact that we were gonna be transitioning both the system from their HCHB instances into our HCHB instance, the transition of the brands, so transitioning from an Amedisys brand to our newly branded locations there, and also transitioning for employees. We think each one of those has its own factors that could drive you know some impacts on the revenue side. When we're talking about employees and the transition of those patients, there's gonna be some productivity impacts. That has definitely been built in to the guidance. The things that I think can really drive us towards, you know, the top end of our guidance is if we're doing that well, we're having strong collections coming through. We're also operating under a TSA, so collections for the first part of the transition is going to be done by an outside third party. It's being done by UnitedHealth Group and Amedisys. Those things, we wanted to make sure that we built those in so that we weren't overpromising and underdelivering. I do think that we have, as we're going through this transition and what we've seen in the first quarter, we're well on our way to having successful transitions and being able to meet guidance. Yeah. I would just chime in and say we did the same thing with Signature. There's a lot of unknowns that go into a large transition like this. The goal is obviously to outperform what we're projecting, and a lot of that has to do with the strength of the teams and the strength of the operations in general. What we did see with Signature was that ramp was a lot quicker than we initially anticipated. We'll see. This one's more complex, it's bigger, you know, it's in a geography that we haven't operated in, so there are additional factors that impact that. Generally speaking, you know, we feel really good. The other thing that I think to consider is, strategically speaking, going slow and being methodical about the way that we integrate these is really important because there's strong leaders and teams, and if we're too aggressive and if we're too, like, focused on getting it right perfect right out of the gate, I think there's additional risk inherent in that. We're trying to go through this in a very prudent and methodical way, but also get our culture and all of our systems and processes in place in an effective way. That's factoring that in as well. There's certainly a ton of upside if we can do it in a more, you know, expeditious sort of way. Perfect. Why don't we dig a little bit more about that deal, you know. If you can give some more color about how the integration is going in the early going. Have you seen similarities to some of your other larger deals like Signature that you mentioned? Then maybe compare and contrast versus that and kind of also the regional perspective, how has that affected it as well in terms of the integration? Yeah. I'd point to a few things. One, because of the size, we have five waves. We're taking different groups. Primarily they're, you know, if they were the former LHC assets and then the Amedisys, we've kinda divided up that way, and then service line home health versus hospice. Anyway, there's five total waves. We're in the process of completing the second wave. The rest of this transition should go through all the way to the end of October. That fifth wave should end in October. In comparison, there were two waves for Signature. We had one, essentially our Washington assets in August of 2024. And then the second one was January 2025, which was our Oregon assets. Just from a size standpoint, it's significantly larger. We got multiple waves. What I would say is the early returns are positive. There's always challenges related to it. But in general, what we've found is, by and large, strong teams, committed teams. Anytime you do a deal like this, one of the things we're thinking about is the risk of turnover or folks that are leaving. What we've found is a couple of things. There's a lot of talent in the Southeast, internal, in these teams already. Two, there's a lot of loyalty. We went and we met with every single team, every single employee, across the entire portfolio. The tenure of the majority of these folks was significant. I mean, we're talking lots of double-digit years of tenure in these operations. These aren't necessarily teams that are seeing a ton of turnover in general, and they've gone through some major disruption, right? Like LHC, they'd already gone through this transition into UnitedHealth Group. Amedisys, it was out there. In some ways, you know, there was concern early on that, oh, man, are they just are these folks sort of tired of all of this noise? The reality is, they're really excited about the fact that they have clarity now. You know, we're a culture-driven organization, and we've had really positive feedback from the leaders and the teams out there, and they're excited to be part of Pennant, and we're excited to have them be part of us. I think there's a mutual respect. You know, we're trying to teach them, but they're also teaching us. We're learning some leading practices from them, just like we're trying to teach them some of our culture and our ways of doing things. Overall, I think, you know, our first quarter was a good quarter. It was sort of along the lines of what we expected, maybe a little bit better than what we had sort of planned for. That's encouraging. There's still a lot of work to be done. Ultimately, I think we see a good ramp going into the end of the year. As we transition some of those TSAs, ACOs will drop down. We should get a little more efficiency in just general operations. I think by the end of the year, going back to the guide question, we expect to see the optimization of those businesses, moving on that track. We're thinking about in terms of, you know, a 12-24 month window to really get those businesses fully optimized. Okay. One last question, since you're kind of referring to margin. What should we think about the margin target on that book? I mean, it sounds like is it that 24 months off? Is that, you know, with the maturation of that, it would be helpful. I think as we're talking about 2026, we're looking at by the end of the year being close to 10.5% margin. Then as we go forward, again, our goal is to drive the margin in this line of business to where, you know, we're currently operating in our other business, in the rest of our Home Health and Hospice segment, and ultimately getting to that 18% target margin. That's 18% that would be prior to NCI. NCI is a little bit more of a discussion now, especially as we've added this University of Tennessee JV. Just to kinda clarify what Lynette said about the 10.5%, that's the annualized margin, right? We would expect that to sort of probably be ramping up. That's sort of the delta or the opportunity for 2026. If we can integrate more quickly, that 18% is obviously the optimized rate that we look at. You know, we're not saying that's where we're gonna get to. If we do this really well, we can get closer to the 18% versus sort of that modeled-out 10.5% that we've got in guidance right now. Perfect. Let's move off of that. Let's talk about, you know, kind of the general trends you're seeing in Home Health and Hospice, and some of the margin and organic growth assumptions that are built into your latest guidance. Well, when we're looking at our guidance right now, margin perspectives from both lines of business, we're looking at margin expansion from both lines of business with some of that for the core Home Health and Hospice segment being offset by some of the lower margin that's coming in from the Amedisys and LHC assets. Looking at an EBITDA margin on an annualized basis around 16% for the Home Health and Hospice segment. From Pinnacle or, Se nior Living side of the business, looking at margin expansion as we go through the year, getting us to an annualized margin of just right around 11%. Perfect. When we think about, obviously, you've seen these large deals, this vertical integration's been going on with home health and, you know, there's been a pickup. Are you seeing any changes in the competitive landscape, specifically, you know, because obviously these large platforms now being tied up in terms of, you know, dealing with the payers and has this changed your mix and kinda what are you seeing in the marketplace from that perspective? Yeah. The short answer is yes. When you think about the large players, whether it's LHC and Amedisys that are now tied to UnitedHealth Group or CenterWell that's part of Humana, you've also got the disruption with Enhabit. A lot of the pure plays are just out of their sort of normal operating cycle because they're integrating into these other businesses. From our perspective, the activity that we've seen has increased pretty significantly. Now, obviously, we're in the midst of a massive transition and a deal that we just completed. I guess the way that I would put it is that there is as robust opportunity as we've ever seen. We have expanded now into the Southeast through this deal with Amedisys and UnitedHealth Group, but also in our relationships with Hartford, we're in the Northeast. We're essentially seen as a national brand. What that has done is that has opened up a lot more opportunity from an acquisition standpoint to go along with what we already had in primarily in the West and in the Midwest, where we have a lot of strength. Overall, there's sort of less activity from the competition or from our peers. What I would say to that is I think that's temporary. I think over time, you know, we'll get kind of back to normal cycles. In the interim, because of the disruption, I think that's been sort of the trend that we've seen. The other thing that I would just point out too is, and this wasn't exactly your question, but as a national, seen as more of a larger player now, our relationships with payers and the ability to negotiate different rates and different contracts has improved as well. That's due to a couple of factors. One, the expansion and the exposure due to the expansion and the fact that we're more national. Two, we've made significant investments in our strategic partnerships team and really building out resources to be able to drive these contracts. Three, I would say probably the most important factor in all of this is our focus on quality. We are seen as one of the best, if not, you know, the best quality operator because of our returns from our outcomes to our value-based purchasing to our rehospitalization rate. All of those factors matter. When you're talking to payers, they see the value that comes from high-quality providers, and so they're asking us, "When can you come to these markets?" Or, "Are you able to cover certain markets, now that you've got more expansion?" That's exciting because that's going to obviously, the acquisition piece is for inorganic growth. On an organic growth standpoint, as we drive improvements in rates and create opportunities to expand through some of these programs where before maybe it was a per visit type of rate reimbursement, now you got PDGM-like reimbursement for a lot of these managed care partners. That's exciting for us to see and something that we can take advantage of as we go forward. Just touching on that, you know, kinda in light of obviously this large-scale M&A that's occurred, you know, this vertical integration. Do you think being independent is giving you an advantage from dealing with insurers on a contracting side? How is that, you know, what's your thoughts there versus, you know, being vertically integrated or independent? Yeah. Sure, yes. I mean, the independence helps us because we got a lot of flexibility to decide how we want to do it. Certainly in relationships with payers. The way that I see it in our interactions with payers, they're looking for high-quality providers that they can trust. As long as we can produce, they're gonna wanna work with us. So I really think the impact is on sort of the smaller players. I mean, we're in a fragmented business. You've got a lot of independents. When you say independent, like, truly independent, like they're a mom-and-pop operation. They're the ones that are gonna struggle a little bit more because for these big payers, they don't wanna go with folks that they know can cover multiple different geographies for them. There's an advantage there. We can be flexible in the way that we negotiate rates and come up with solutions. From a relationship standpoint, there are certainly advantages to being independent. I would also say on the operational side, it is interesting in our space as you think about what's happened to a lot of our peers. My experience and I think they can be successful, and there's certainly a path forward to that. Our focus has always been about local decision-making and local leadership. The ability for those teams at the local level to make decisions is critical to getting the right types of outcomes. When you integrate, the vertical integration, what that potentially can create is less decision-making or decision-making further away from the local teams. We've seen it as we've come into some of our relationships with hospital systems where we've been able to do these joint ventures, where we can come in and we apply our model, and all of a sudden we can improve quality outcomes, financial outcomes, community outcomes, all of those things that we measure, and we can do it quickly because we're nimble in the way that we lead, but also because, you know, there's a lot of bureaucracy or red tape or other things like that can factor in. It's just easier for us to integrate and sort of impact in a much more expeditious sort of way. One last question on that M&A front. You kinda touched on this before. You know, kind of what does the pipeline look like for you, and what is your appetite? Obviously, like you said, you've got a lot of integration going on right now. Is there still more capacity in your portfolio in the near term? You know, kind of what's your thoughts around that? Yeah. Well, we talk about this a lot, what is our approach to growth? You know, one is do we have the leaders? Two is, do we have the strength in operations to be able to support growth? Three, are there good deals? I can tell you that there are plenty of good deals on the table. From that standpoint, you know, I don't think there's gonna be a shortage of opportunities. On the leadership front, we added over 100 CITs, so leaders to our CEO-in-Training program in 2025. The quality and the just the capacity of the leaders that we're adding, every year it seems like they get better and better and stronger and stronger. We have the leaders lined up and ready to go for these opportunities. It's really that middle leg of the stool that is the most critical one. We're integrating these assets in the Southeast right now, and so it's taking a lot of our bandwidth to be able to integrate those. That's why we're gonna be a little more methodical in the way that we do deals. There will be tuck-in deals. We will look for opportunities. There's still leaders. We have multiple portfolios that are managing different businesses, and there's certain portfolios that are supporting this transition in the Southeast, but you've got other portfolios that aren't as involved. We'll grow in those areas, and we won't be. I mean, we spent $200 million on acquisitions last year. We're not gonna grow at that rate this year because we gotta integrate. We'll look for those opportunities in a where it makes sense because we've got to find opportunities for those leaders. Then two, on the Senior Living side, you've seen pretty significant growth every year, and there are plenty of deals in the pipeline. Part of that 100+ leaders is in the Senior Living side, about 40%. We can continue to grow there. What's exciting about the operational performance at Senior Living is it's opened up and expanded our opportunity to grow acquisitionally as well. We'll be more active on the Senior Living side, and that includes both acquiring the operations but also the real estate. You know, we've got, I think 10% of our buildings now we own them, and we'll look for the right deals to be able to do real estate deals there as well. But we're kinda taking that a little bit slower. We're not really aggressive on the real estate, but if the deal makes sense, then we've done that as well. Well, it's a perfect opportunity to shift 'cause you opened up the whole Senior Living. You know, why don't you know, kinda give us an update about the trends that what you're seeing in terms of occupancy, pricing, you know, kinda going forward on the senior housing, Senior Living front. Yeah. I think it's helpful to maybe go back a couple of years and just sort of talk about the state of Senior Living. We've made a ton of investments in leaders and leadership. We've also made a ton of capital investments in the buildings, and investments in just our sophistication around pricing and revenue quality. If you kinda look at our trends, we're growing, but it was relatively flat in terms of occupancy the last few years. Whereas the last year, we really ramped up much more significantly in 2025. That's due to a couple of factors. The investments that I talked about, but also part of what we were doing was trying to get the right revenue quality. We had occupancy at essentially low reimbursement rates in many of our buildings. It took time for us to understand, one, what's the right pricing mechanisms. But two, like, okay, what's our value in the marketplace, and what should we be pricing at and all of those things. You saw pretty dramatic RevPOR increases, like double-digit increases in 2023, 2024. In 2025, it was kind of mid single-digit increases, which is more historically where we've been. That's sort of an indicator that, all right, we've kind of leveled out on the revenue quality. We're dialed in there. Then what did you see? Well, you saw two percentage point increase in our occupancy in 2025. You've kinda got that balance between occupancy and revenue quality. I think we've hit that level, and then we've made additional investments in just our overall opportunity to reach out in our communities and, you know, have improved just experience from an onboarding standpoint for residents and finding folks in the community, but also our digital advertising campaigns. All of those things are helping to increase our improvements in occupancy there. You know, I don't know. Our goal ultimately is to optimize around 85%. That may be aspirational, but we're, you know, in around 81% right now. As we go forward, I think we should increase and, you know, maybe similar increase this year to what we saw last year in occupancy. I think that's what we've projected. We're excited about the momentum there. Obviously, some of the impact is as you grow, usually that has an impact on our overall occupancy number just because a lot of these assets are oftentimes have occupancy challenges. As you're integrating new business to go along with the same store business, there's always a little bit of a back and forth from an occupancy standpoint. Overall, we're excited about the progress that we've made. Perfect. I'll just be conscious of time. You know, one area obviously investors are always interested in is the regulatory environment. You know, if you wanna talk about that from your perspective, which I know you can talk on forever, but you know. Yeah Just give some highlights of what your thoughts are kind of, you know, from your perspective. Yeah. I would really just point to maybe two or three things. One, obviously, we were grateful that the rate adjustment for Home Health wasn't as significant as the initial proposal was. They dropped it down to just over 1% of a reduction. I think the big takeaway from that was this. They acknowledged that their methodology was flawed. And I think that's a win in some sense because they realized, oh, we're approaching this the wrong way. At least to starting at that point as a baseline, there is acknowledgment that there's value in the business, and the way that they've been thinking about it is probably not in line with what reality is. So, that was helpful. Two, the permanent adjustments are gone. Last year ended the permanent adjustments. We knew it was a guaranteed adjustment every year that had been through last year. That's helpful. Now we're just really sitting with the temporary adjustments in the clawback, and even though we don't love it, the way we kinda think about it is they're temporary. Whatever adjustment happens in 2026 gets pulled out, and they may be replaced by another temporary adjustment in 2027, but we're kind of optimistic to think it'll be perhaps similar, and in a sense, it'll be almost net neutral. There's always the risk that they could expedite the clawback and take more. I'm not saying that wouldn't happen, but we're hopeful that we'll kinda see a similar trend. We see that as sort of a net neutral, and so therefore, then really what you get is a market basket adjustment that could lead to even, you know, slight positive increases to reimbursement. You know as well as I do, Mike, that, you know, predicting what CMS is gonna do is next to impossible. We're appreciative of the fact that they acknowledge that there was flawed methodology, and we think there's some relief in the foreseeable future from a reimbursement standpoint. Wow. That's great. Well, we got about one, you know, one or two minutes left, so I'm gonna, you know, just give you a kind of an open platform here. Is there anything that you would like to point out to the investor community that you believe is either misunderstood or underappreciated at this point in time? Well, we always talk about our model, and there's a reason for that because, even though we're in healthcare and we believe and we love the businesses that we're in, we're a leadership company, and we're about creating opportunities. When you think about expansion and growth, whether it's through acquisition or organic growth, it's led at the local level by these entrepreneurial leaders that are seeking to build out their own personal opportunities. That's an important element of this because as you think about adjustments to the dynamic landscape that we're in, it creates so much. There's hundreds and hundreds of pilot programs in every single one of these markets figuring out how to best adapt. That's why we've seen. I think it's easy to see all of the acquisitional growth and go, "Wow, that's impressive." Equally as impressive is the organic growth that you see year over year over year because of these entrepreneurial leaders in those teams. I would just remind our investors that our model is about planting opportunities for leaders. As we continue to have leaders in the pipeline, there are going to be opportunities. That's what we are trying to do on a consistent basis. The other thing I would just say is I think it's important to touch on technology a little bit. We've had a lot of pressure around margin over the last five years, especially through the pandemic and then the rate reimbursement struggles, especially Home Health. As we have a major focus on investing in the right way and technology and AI solutions. I think over the next three to five years, you're gonna see some real opportunity to create value through those investments in technology. I'm not gonna speak to a ton of that. We don't have time for that. It is a major focus for us and an acknowledgement that in order for us to compete and really change the industry, we're going to have to come up with unique solutions in that space. We recognize it, and we're taking the right steps to put ourselves in a position to succeed. Hopefully that's maybe new for some of our investors to hear, but that's our focus. Well, that was great. Brent, Lynette, thank you very much for your time. I think it was a great discussion. Really appreciate it. Thanks, Mike. All right. Thank you, Mike. Thank you.