Pennant Bullish on Hospice, Home Health Acquisitions

The Pennant Group (NASDAQ: PNTG) plans to be an active acquirer during 2021 with an emphasis on hospice and home health targets. The hospice, home health and senior living provider increased its revolving line of credit by $75 million to a total $150 million this week, pledging to apply those resources to buying new operations.

While pursuing deals, the company also saw substantial organic growth in the fourth quarter of 2020. Pennant’s average daily hospice census reached 2,308, up more than 25% from the prior year’s period. For the full year, census rose to 2,083, a 24% increase from 2019.

Pennant plans to invest its M&A dollars into home health and hospice rather than its senior living business for the time being, largely due to headwinds associated with the pandemic.


“We have deployed a significant amount of capital opportunistically in the home health and hospice segment, and our capacity to deploy even more continues to increase,” said Pennant CEO Daniel Walker in an earnings conference call. “This strong momentum in our home health, and hospice business lays the foundation for our continued year-over-year growth.”

Pennant completed several transactions during the second half of 2020. Last October brought the acquisition of Harmony Hospice in Las Vegas, which had been affiliated with two other hospices that Pennant had purchased: Prime Hospice, located near Phoenix, and Harmony Hospice of Arizona. Financial terms of these deals were undisclosed.

In July, Pennant also acquired hospice and home health assets of Signature Health Care at Home for an undisclosed sum, each with multiple locations throughout southeastern Idaho and northern Utah. Pennant also completed a number of home health acquisitions.


The company last November announced the launch of two start-ups, one in Washington state and one in California.

“Our investment in these operations reflect the many ways in which we can grow through our disciplined deployment of capital and leadership talent,” Derek Bunker, Pennant’s chief investment officer, said. “We extend it strategically within existing geographies and into adjacent markets. We expanded the continuum by adding home health services where we have a hospice agency and vice versa.”

Pennant, which owns and operates hospice provider Cornerstone Healthcare, was spun in 2019 off from The Ensign Group (NASDAQ: ENSG). Pennant retained Ensign’s hospice, home health and senior living operations.

Pennant’s home health and hospice services segment brought in $253.7 million during 2020, up 22% from 2019. For the fourth quarter of last year, segment revenue topped $74.5 million, a 35% boost from the same period in 2019. The segment’s full-year adjusted EBITDAR from operations reached $49.5 million, a 48% rise from 2019.

Pennant operates 65 home health and hospice agencies, 51 senior living operations, and mobile diagnostics and lab operations located across 14 states, with 23 of the senior living assets subject to leases with third-party landlords, as well as mobile diagnostic services and clinical laboratory operations. Pennant also manages 28 senior living communities pursuant to new, long-term triple-net leases with Ensign subsidiaries.

“Our historical track record of acquisitions is a good indicator of our likely future growth rate, our capacity to execute a higher number, and larger, more complex transactions increases as our operating markets mature,” Bunker said. “Our access to capital and a favorable M&A landscape combined to represent an exciting period of growth, particularly in the home health, hospice and home care spaces.” 

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