Pennant Group (PNTG) Q2 2025: Home Health Revenue Jumps 28%, Southeast Expansion Set to Reshape Portfolio
Pennant Group’s Q2 saw home health revenue surge and senior living momentum strengthen, even as regulatory headwinds loomed. Management’s focus on operational depth, disciplined M&A, and leadership investment is positioning PNTG for scale in the Southeast, with the UnitedHealth-Amedisys deal set to further diversify the business. Investors face a complex landscape: robust segment growth, regulatory risk, and a pending portfolio transformation that will test the company’s integration playbook.
Summary
- Southeast Expansion: Acquisition of up to 50 agencies in Tennessee, Alabama, and Georgia will alter Pennant’s market mix.
- Segment Diversification: Home health, hospice, and senior living all posted double-digit growth, buffering regulatory risk.
- Operational Focus: Leadership development and local operating autonomy remain central to Pennant’s margin and growth strategy.
Performance Analysis
Pennant Group delivered broad-based growth across all major segments, with total revenue up sharply year over year. The home health and hospice segment was the primary engine, posting a 32.5% revenue increase, driven by higher admissions, improved clinical outcomes, and a strong acquisition pipeline. Hospice saw a 24.3% revenue gain, supported by a 14.7% jump in admits and a 21.4% rise in average daily census, underscoring the company’s ability to scale both new and mature operations. Home health admissions rose 26.1%, with Medicare admissions up 21.6% and revenue per episode up 5.9%, reflecting both volume and pricing power in a challenging reimbursement environment.
Senior living continued its turnaround, with revenue up 23.1% and occupancy exceeding 80% for the first time in years. Margin improvement in this segment more than offset the phaseout of pandemic support, as average monthly revenue per occupied room climbed 8.3%. Cash flow from operations was robust, supporting both organic growth and M&A activity.
- Home Health Outperformance: Segment revenue up 28.5%, admissions and pricing both contributed, with mature operations posting steady gains.
- Hospice Expansion: Double-digit growth in revenue and admits, though California cap exposure remains a drag.
- Senior Living Margin Leverage: Occupancy and pricing gains drove EBITDA improvement, offsetting lost COVID-era funds.
Overall, Pennant’s diversified revenue streams and disciplined cost management insulated the business from immediate regulatory shocks, while positioning the company to capitalize on future scale from acquisitions.
Executive Commentary
"At this moment, CMS's misguided and counterproductive 2026 proposed home health rule has generated negative investor sentiment about home health. We agree that the proposed rule is seriously flawed, and we are engaged in an urgent effort to improve the final rule. But we would also urge you to dig beneath that narrative and examine the strength of our home health operations and the diversity of our business."
Brent Garasoli, Chief Executive Officer
"This updated guidance incorporates current operations and organic growth... This guidance includes additional expenses in anticipation of the transaction with UnitedHealth Group and Amedisys, but no additional earnings because of the uncertainty surrounding the timing of our closing on that transaction."
Lynette Waldom, Chief Financial Officer
Strategic Positioning
1. Southeast Market Entry via Amedisys-UnitedHealth Divestiture
Pennant’s acquisition of up to 50 agencies in Tennessee, Alabama, and Georgia is a strategic leap, providing a “center of strength” in the Southeast and broadening the company’s geographic and payer mix. Management’s focus is on leveraging the Pennant operating model—local autonomy, peer accountability, and leadership depth—to accelerate integration and replicate its Western U.S. success. The deal, at a 4-8x EBITDA multiple, is expected to be accretive and is fully supported by existing balance sheet capacity.
2. Diversified Revenue Model Shields Against Regulatory Shocks
Traditional Medicare home health now represents just 18% of total revenue, with hospice and senior living comprising the bulk of the portfolio. This diversification lessens the earnings impact of the proposed CMS home health rate cut, while providing multiple levers for growth and margin expansion. Management’s advocacy efforts and operational flexibility are designed to mitigate reimbursement volatility, with local teams already preparing for scenario-based adjustments.
3. Leadership Development as a Growth Multiplier
Pennant’s CEO-in-training (CIT) and clinical leadership programs are scaling alongside the business, enabling rapid onboarding of new acquisitions and supporting organic growth. The company’s playbook of local ownership and transparent data sharing has proven effective in integrating large deals (e.g., Signature Healthcare at Home) and is now being deployed for the Southeast expansion. Leadership bench strength is cited as a key differentiator in both operational resilience and M&A execution.
4. Senior Living Turnaround Accelerates Margin Expansion
The senior living segment has moved from stabilization to growth, with occupancy now above 80% and average revenue per occupied room rising more than 8%. Leadership credits sustained focus on revenue quality and resident experience, with margin improvement flowing through as occupancy increases. The business is positioned for continued growth, with mid-single-digit revenue per room gains expected to persist.
5. M&A Discipline and Integration Capacity
Management maintains a disciplined approach to M&A, prioritizing leadership readiness, operational support, and deal economics. While the Amedisys-UnitedHealth integration will be a near-term focus, Pennant’s decentralized structure allows portfolio companies to pursue independent growth, ensuring that ongoing turnaround efforts and new deals are not sidelined by large-scale integrations.
Key Considerations
Pennant’s Q2 results highlight the interplay between organic growth, strategic M&A, and risk management. As the company readies for a major Southeast expansion, operational discipline and leadership depth will be tested. The regulatory environment remains a wild card, but Pennant’s business model is designed for adaptability.
Key Considerations:
- Regulatory Headwinds: CMS’s proposed 6.4% home health cut could ripple into managed care contracts, but direct exposure is limited by segment mix.
- Integration Playbook: Success with Signature Healthcare at Home provides a template, but the scale of the Southeast deal is unprecedented for Pennant.
- Margin Leverage: Senior living and hospice segments are driving incremental margin, offsetting reimbursement and cap expense pressure.
- Leadership Pipeline: Aggressive investment in CEO and clinical leader training is a core enabler for both organic and acquired growth.
- Balance Sheet Flexibility: Low leverage and healthy cash flow provide capacity for further M&A and operational investment.
Risks
Regulatory volatility remains the largest risk, with CMS’s proposed home health rate cut potentially impacting both Medicare and related managed care revenue. Integration risk is elevated given the size and geographic reach of the Southeast acquisition, while ongoing hospice cap exposure in California could continue to weigh on segment margins. Competitive dynamics in both senior living and home health may intensify as weaker operators struggle with reimbursement cuts, raising the bar for operational execution.
Forward Outlook
For Q3 2025, Pennant guided to:
- Continued revenue and margin growth across all segments, with operational improvements and new acquisitions contributing incrementally.
- Ongoing expense investments in anticipation of the Southeast agency acquisition, but no immediate earnings contribution until deal close.
For full-year 2025, management raised guidance:
- Revenue range of $852.8 million to $887.6 million
- Adjusted EPS of $1.09 to $1.15
- Adjusted EBITDA of $69.1 million to $72.7 million
Management noted that further guidance updates will be provided once the timing and closing conditions of the UnitedHealth-Amedisys deal are clear. Factors influencing the outlook include regulatory rulemaking, integration progress, and continued improvement in senior living and hospice operations.
- Potential upside from successful advocacy on CMS rulemaking
- Margin tailwind from hospice rate increase effective October 2025
Takeaways
Pennant’s Q2 underscores the company’s ability to grow through disruption, but the next phase will test its integration and operational resilience as it absorbs a major portfolio of new agencies.
- Growth Engines: Home health and hospice remain robust, with senior living now a margin lever instead of a drag.
- Integration Challenge: The Southeast expansion is a step-change in scale, with leadership depth and local autonomy critical to success.
- Regulatory Watch: CMS’s final home health rule will be a swing factor for 2026 earnings, with advocacy and operational flexibility as mitigants.
Conclusion
Pennant Group’s Q2 results highlight a disciplined, diversified operator poised for transformative growth. The company’s core strengths—local leadership, margin discipline, and a diversified revenue base—will be put to the test as it integrates its largest acquisition to date and navigates regulatory uncertainty. Investors should watch execution in the Southeast and regulatory developments as primary catalysts for future performance.
Industry Read-Through
Pennant’s results offer a clear signal for the post-pandemic healthcare services landscape: diversified operators with strong local leadership and margin discipline can outperform even as reimbursement risk rises. The company’s ability to grow home health and hospice in a flat-rate environment suggests that scale and integration capability are becoming table stakes for success. The Southeast expansion highlights that regulatory-driven M&A will reshape industry maps, and that operators with balance sheet flexibility and proven playbooks will be best positioned to capitalize. For senior living peers, Pennant’s margin turnaround underscores the importance of revenue quality and occupancy management as pandemic-era supports fade.