The Pennant Group, Inc. (PNTG) Q3 2026 earnings review
Pennant's hospice care grows fast, but senior living occupancy slips
Pennant's established home health and hospice agencies grew faster, while its senior living communities lost occupancy and higher interest costs weighed on profit per share. The operator of 175 home health and hospice agencies and 70 senior living communities grew total sales 32% to $302 million, mostly from locations bought last October. Chief executive Brent Guerisoli kept the full-year outlook unchanged, which by our math leaves fourth-quarter sales growing 2% from a year ago once that big acquisition enters the comparison base.
| Same-agency home health and hospice revenue | $169.2M +10.5% from a year ago |
|---|---|
| Total revenue | $302.3M +32.0% from a year ago |
| Profit per share, excluding one-offs | $0.35 +17% from a year ago |
| Full-year outlook | Unchanged middle of the range: 25% revenue growth |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because faster patient growth at established hospice locations and an 80% jump in third-quarter operating cash flow by our math were offset by a pause in total hospice patient count and a drop in senior living occupancy. Same-store senior living occupancy fell 0.6 percentage points from a year ago after rising in five of the prior six quarters, and higher staffing and operating costs held segment profit growth to 3%.
The question now is whether the acquired Southern agencies can lift their profit margins toward the rest of the group after they finish moving off UnitedHealth's computer systems this quarter. Either lower federal wage rates in the South cap their margins below the core business, or the end of transition fees and new local leaders lift profit in 2027. Fourth-quarter margins and the 2027 outlook will tell.
🐂 Bull Case
Established Hospice Agencies Added Patients Faster
Pennant runs home health and hospice agencies that care for patients at home, and most of its 38.2% segment sales growth came from buying 75 locations over the past two years. To see how the underlying business is performing, look at same-agency results, which track locations owned before January 2025. Chief operating officer John Gochnour said investments in local leaders let the group transition acquisitions while improving existing agencies.
- Same-agency hospice average daily patient count: 4,164, up 13.0% from a year ago
- Same-agency Medicare home health admissions: 7,383, up 12.0%
- Same-agency home health and hospice revenue: $169.2 million, up 10.5%
- Same-agency Medicare revenue per 60-day home health episode: $3,807, up 1.6%
That 13.0% hospice patient growth is faster than the 10.8% pace in the second quarter and 10.2% in the first. It matters because Pennant will pass the one-year mark of its biggest acquisition in the fourth quarter, so existing agencies must carry growth next year. Higher Medicare rates at established locations also offset lower rates at newly acquired Southern agencies, where total revenue per episode fell 2.2% to $3,632.
What to watch: same-agency hospice daily patient growth in the fourth quarter. Holding a double-digit pace as the acquired agencies enter the comparison base would show organic demand can carry 2027 revenue.
Operating Cash Flow Jumped 80% in the Third Quarter
Acquiring and transitioning more than 50 home health and hospice locations over the past year tied up working capital during the first half of 2026. In the first six months, Pennant generated $18.4 million in cash from operations, leaving a wide gap to reach management's full-year cash flow target of $45 million to $58 million.
Cash collection picked up in the third quarter. Nine-month operating cash flow reached $43.5 million, which by our math means the healthcare provider generated $25.1 million in the third quarter alone, up 80.5% from $13.9 million a year earlier. That single quarter brought nine-month cash generation to within $1.5 million of the bottom of the full-year target range and allowed Pennant to trim net debt.
What to watch: fourth-quarter operating cash flow against the $58 million top end of the full-year plan. Reaching the top half of the range would show billing transitions at the acquired Southern agencies are settled.
Hartford Joint Venture Multiplied Its Profit Contribution
Earlier this year Pennant paid $28.4 million for a 30% profit-and-loss stake in Hartford HealthCare at Home, the largest home health and hospice provider in Connecticut. Because Pennant does not control the venture, it records none of Hartford's sales in revenue and instead reports its share of profit on a single line.
In the second quarter that line contributed $370 thousand, raising concern that Pennant borrowed money to buy an asset with a small initial return. In the third quarter, income from the equity method investment rose nearly fourfold to $1.38 million, bringing the nine-month total to $1.75 million. The carrying value on the balance sheet also rose to $30.2 million, showing the Northeast partnership is starting to cover its financing cost.
What to watch: fourth-quarter equity method income and any revenue details in the quarterly filing. Another step up would show the Connecticut venture can earn a double-digit return on the $28.4 million outlay.
Positives this quarter didn't test
Two standing drivers sit in the fourth quarter and 2027, so the third-quarter numbers could not test them yet.
- Medicare reimbursement rates: a 2.3% federal hospice rate increase took effect on October 1, and a proposed 2.4% home health rate increase for 2027 awaits the final government rule in the fourth quarter.
- Margin recovery at acquired Southern agencies: Pennant paid UnitedHealth $1.55 million in transition service fees this quarter, and the profit lift from moving those agencies off UnitedHealth's systems arrives after the final transition waves finish in the fourth quarter.
🐻 Bear Case
Senior Living Occupancy Slipped at Established Communities
"Over the last two years, we have added 75 home health and hospice locations and 16 senior living communities to our organization," chief operating officer John Gochnour said, adding that investments let Pennant integrate deals while "simultaneously improving results at our same store operations". In senior living, which provides housing and care for older adults, the third-quarter numbers cut against that claim.
- Same-store senior living occupancy: 81.2%, down 0.6 percentage points from a year ago and down from 81.6% in the second quarter
- Total senior living occupancy: 78.4%, down 2.5 percentage points from a year ago
- Same-store monthly revenue per occupied room: $5,370, up 4.6% from a year ago
- Senior living cost of services: 73.3% of segment revenue, up 1.7 percentage points from a year ago by our math
Established communities had raised occupancy for five of the prior six quarters, including a 1.5-point gain last quarter, so this drop interrupts the lease-up trend. Because operating costs at the communities rose faster than revenue, segment profit excluding one-offs and before interest, taxes and depreciation grew 3.0% to $5.7 million, and its margin shrank by 0.9 percentage points to 9.5% by our math.
What to watch: same-store senior living occupancy in the fourth quarter. A second straight decline would show that room-rate increases of nearly 5% are starting to cost Pennant residents.
Total Hospice Patient Count Edged Down From Last Quarter
Average daily census in hospice — the average number of hospice patients Pennant cares for each day — is the main volume driver for a business that brings in 34.7% of company sales. While total daily patient count rose 34.6% from a year ago to 5,443 because of last October's acquisition of 54 Southern locations from UnitedHealth and Amedisys, it fell by 34 patients from the second quarter's 5,477.
Total hospice admissions also dipped from 4,844 in the second quarter to 4,590 in the third, and total home health admissions slipped from 28,947 to 28,479. Because same-agency patient counts grew 13.0% from a year ago, the sequential pause sits in the newer agencies undergoing brand and software transitions during the final integration waves.
What to watch: total hospice daily patient count in the fourth quarter after the final transition wave finishes. A rebound above 5,500 would show the third-quarter dip was temporary transition friction.
Acquisition Lapping Cuts Implied Fourth-Quarter Growth to 2%
"Our third quarter results are consistent with our full-year guidance and put us on track for a successful conclusion to the year," chief executive Brent Guerisoli said. Holding that full-year plan, which has a midpoint of $1,180.6 million in sales, means the headline growth rate is about to drop sharply as Pennant passes the October 1 anniversary of its UnitedHealth and Amedisys acquisition.
With $885.6 million of revenue already booked in the first nine months, the middle of the full-year outlook leaves $295.0 million for the fourth quarter by our math. That implies fourth-quarter revenue growth of 2.0% from a year ago and a 2.4% decline from the third quarter. Profit per share excluding one-offs faces a similar comparison, with the plan leaving $0.345 at the midpoint for the fourth quarter, up 1.5% from $0.34 a year ago.
What to watch: fourth-quarter revenue against the $295.0 million implied by the middle of the full-year plan. Finishing above $304.5 million, the top of the range, would keep sequential revenue growing.
Risks this quarter didn't answer
Five standing concerns from prior filings were not addressed in the third-quarter earnings release and await the Form 10-Q filing or the conference call.
- Acquired Southern operations' standalone profit: guided annually at $17.0 million to $18.6 million of adjusted EBITDA on $196 million to $198 million of sales, but never broken out quarterly.
- California hospice reimbursement cap: accrued at $3.6 million last quarter for patients staying longer than Medicare's annual cap allows; updated liability sits in the 10-Q footnotes.
- Medicaid waiver funding exposure: Medicaid brought in 13.2% of revenue ($40.0 million) this quarter, and state waiver exposure under federal funding changes requires call commentary.
- Medicare payment audits: 16 operating subsidiaries had payment reviews scheduled or under appeal last quarter amid a national enrollment moratorium; updated count lives in the 10-Q.
- Ensign master leases: Pennant leases half its senior living communities from its former parent under master leases with cross-default clauses, disclosed in the 10-Q related-party footnote.
💲 Other KPIs
Overhead costs grew 6.9% from a year ago while total sales grew 32.0%, so general and administrative expense fell by 1.6 percentage points of revenue, from 8.4% to 6.8% by our math. That back-office savings offset a 0.4-point dip in gross margin and lifted the operating margin by 1.0 percentage point to 5.5%.
Total debt less cash edged down from $182.2 million at the end of June to $179.9 million at the end of September by our math, as cash rose to $18.4 million and long-term debt stood at $198.3 million including current maturities. Interest expense still more than tripled from a year ago to $3.6 million because of last year's acquisition borrowing.
Uncollected customer and government bills rose 36.2% from $96.1 million a year ago and 6.3% from $123.1 million at year-end, running slightly ahead of 32.0% revenue growth as Pennant transitions billing systems for the acquired Southern home health and hospice agencies.
🔮 Guidance
Unchanged. Chief executive Brent Guerisoli said third-quarter results were consistent with the full-year outlook, which calls for 24.6% sales growth at the $1,180.6 million midpoint. By our math, that leaves $295.0 million for the fourth quarter, or 2.0% growth from a year ago and a 2.4% drop from the third quarter, as the October 2025 acquisition enters the comparison base.
Unchanged. The plan calls for profit before interest, taxes, depreciation and one-offs to rise 32.8% at the $96.2 million midpoint. With $70.7 million delivered in the first nine months, the middle of the range leaves $25.5 million for the fourth quarter by our math — up 14.1% from a year ago and up 3.3% from the third quarter.
Unchanged. Before subtracting the profit share belonging to joint-venture partners, the full-year plan has a $103.3 million midpoint, up 34.8% from 2025. After $75.7 million in the first nine months, the middle of the range leaves $27.6 million for the fourth quarter by our math, up 14.4% from a year ago.
Unchanged. The full-year forecast has profit per share excluding one-offs rising 16.5% at the $1.375 midpoint. Pennant earned $1.03 in the first nine months, so the middle of the range leaves $0.345 for the fourth quarter by our math, almost level with $0.35 in the third quarter and $0.34 a year ago despite the October hospice rate increase.
❓ Key Questions
Why did hospice patient count slip from last quarter?
Total hospice average daily census edged down by 34 patients from the second quarter to 5,443 even though established agencies grew 13.0% from a year ago. Did the acquired Southern agencies lose patients during software and brand transitions?
Why did established senior living occupancy turn down?
Same-store senior living occupancy fell 0.6 percentage points from a year ago to 81.2% after five quarters of gains, and segment service costs rose 1.7 points of revenue. Are 4.6% room-rate increases slowing move-ins?
What are the Southern agencies' actual sales and margins?
Pennant set a full-year target of $196 million to $198 million in sales and $17.0 million to $18.6 million in adjusted EBITDA for the former UnitedHealth and Amedisys locations, but has not reported their quarterly numbers.
When do the UnitedHealth transition service fees end?
Pennant paid $1.55 million in transition service fees to UnitedHealth in the third quarter and $6.86 million over nine months. How much of that expense disappears in the first quarter of 2027 once the final transition wave finishes?