PNTG - NASDAQ

Good day, and thank you for standing by. Welcome to The Pennant Group Third Quarter 2025 Earnings Call. [Operator Instructions]. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kirk Cheney, Executive Vice President. Please go ahead.

Thank you, [ Kevin ]. Welcome, everyone, and thank you for joining us today. Here with me today, I have Brent Guerisoli, our CEO; John Gochnour, our President and COO; and Lynette Walbom, our CFO. Before we begin, I have a few housekeeping matters. We filed our earnings press release and 10-Q yesterday. This announcement is available on the Investor Relations section of our website. A replay of this call will also be available on our website until 5:00 p.m. Mountain Time on November 5, 2026. All statements are made as of today, November 6, 2025, and these statements will not be updated after today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and operating environment. These statements are subject to risks and uncertainties that could cause our actual results to materially differ. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Pennant and its affiliates do not publicly update or revise any forward-looking statements where changes arise from new information, future events or for any other reason. In addition, The Pennant Group, Inc. is a holding company with no direct operating assets, employees or revenues. Certain of our independent operating subsidiaries, collectively referred to as the service center, provide administrative services to the other operating subsidiaries through contractual relationships with such subsidiaries. The words Pennant, company, we, our and us refer to The Pennant Group, Inc. and its consolidated subsidiaries. All of our operating subsidiaries and the service center are operated by separate independent companies that have their own management, employees and assets. References herein to the consolidated company and its assets and activities as well as use of the terms we, us, our and similar terms do not imply that The Pennant Group, Inc. has direct operating assets, employees or revenue or that any of the subsidiaries are operated by The Pennant Group. Also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our 10-K. And with that, I will turn the call over to Brent Guerisoli, our CEO. Brent?

Thanks, Kirk, and welcome, everyone, to our third quarter 2025 earnings call. We are pleased to report another successful quarter with strong results across our business. The third quarter brought new highs in revenue, census, occupancy and earnings even as we prepared for the largest transaction in our history. In Q3, we reported revenues of $229 million, an increase of $48.4 million or 26.8% adjusted EBITDA of $17.3 million, an increase of $2.2 million or 14.5% and adjusted EPS of $0.30, an increase of $0.04 or 15.4% each over the prior year quarter. We closed on the UnitedHealth Amedisys transaction on October 1. We are excited to add these operations to Pennant. The United Amedisys process created a unique opportunity to add high-quality assets in desirable markets at an attractive valuation, rarely seen on larger deals with sophisticated operators. As we've closed the transaction and divided into the -- and dived into the businesses, our excitement has only grown. We have met many incredible leaders and team members who are deeply committed to their local communities. In the near term, we are heavily engaged in the complex integration matters that accompany such acquisitions, which we expect to create some lumpiness in results through the transition. But in the longer term, we see immense potential in these operations. Our recent Signature transition gives us a model. Only a year ago, Signature was the largest transaction in our history, completed in 2 tranches from August 2024 to January 2025 with locations across 3 states, the Signature acquisition was similar in many respects to this most recent deal. Signature enjoyed a deserved reputation as a quality operator, and we saw that we could build on their legacy through The Pennant model. Signature's transition has been a tremendous success. We have seen former Signature leaders enthusiastically embrace The Pennant model and culture and lift their operations to new heights. They have expressed how they now feel unlocked, capable of owning their operations and empowered to grow. Thanks to the efforts of these leaders, along with new leaders developed in our training program, the acquired Signature operations have outpaced our financial expectations while maintaining or improving their clinical and quality metrics. In much the same way, we expect that over time, these new operations we've acquired in the Southeast will demonstrate that The Pennant model adds value not only to turnaround situations, but to stable, solidly performing operations. Over the past several years, our focus has been on recruiting and developing great leaders and continuously improving our transitions. As a result, we have delivered increasingly strong performance in our recent acquisitions, and we now see this powerful flywheel continuing to accelerate. Across senior living, hospice and home health, our local leaders have consistently stepped up to the operating challenges in their communities by directly controlling outcomes and relentlessly driving improvement. At present, the uncertainty surrounding the 2026 home health rule has cast a pall over the industry, but Pennant is not a passive index tied to home health reimbursement rates with less than 20% of our revenue arising from Medicare home health fee-for-service reimbursement. We are a diversified post-acute provider with strength across hospice, senior living and home health. And more importantly, we are a locally driven leadership company that empowers leaders to adapt proactively to external challenges. We will continue to advocate against the rule -- the proposed rule as bad for patients, providers and taxpayers. Ultimately, we will respond operationally to the outcome of the final rule, and we believe that home health care will continue to play a vital role in the post-acute continuum for many years to come. We are positioned to be at the forefront of that care and remain invested in driving growth in home health, along with the growth we foresee in our hospice and senior living operations. Based on the sustained momentum in our businesses and the addition of the operations in the Southeast, we are again raising annual earnings guidance. We anticipate full year revenue of $911.4 million to $948.6 million, adjusted EBITDA of $70.9 million to $73.8 million and adjusted earnings per share of $1.14 to $1.18. The earnings per share midpoint of $1.16 represents a 23.4% increase over our 2024 earnings per share. With that, I'll turn the call over to John to provide more detail on our third quarter operational results.

Thank you, Brent, and good morning, everyone. Q3 brought strong performance in both operating segments. Our Home Health and Hospice segment continued to drive record-breaking clinical and financial results. Segment revenue of $173.6 million increased $37.9 million or 27.9% and segment adjusted EBITDA of $26.8 million increased $5 million or 22.7% each over the prior year quarter. This was fueled by continued robust organic growth, coupled with continued execution on successful transitions. Our local leaders continue to demonstrate their ability to operate successfully through dynamic markets and conditions. As we have consistently said, our clinical results are the foundation of strong and lasting financial performance. In Q3, we saw an average CMS reported star rating of 4.1 compared with the industry average of 3 stars. Potentially preventable hospitalizations decreased to 8.4%, well below the national average of 9.9%. CMS reported hospice quality composite score improved to 97%, well above the national average of 92%. In short, our unique model of empowering local clinical leaders to make key decisions and support their teams based on local community needs continues to drive clinical outperformance. The impact of this clinical excellence continues to be demonstrated in our strong growth. Total home health admissions of 20,426 represent an increase of 36.2%. Same-store admissions increased 7% and revenue per episode increased 2.9% each over the prior year quarter. Our hospice business generated similar momentum as average daily census increased 17.4%. Hospice admissions increased 16.6% same-store average daily census increased 6.1% and average revenue per day increased 3.3%, each over the prior year quarter. We see significant opportunity for growth in our existing operations and an ability to add hospices to the many home health agencies we have recently acquired that currently lack an overlapping hospice operation. The momentum in our senior living business is significant as the multiyear growth story in this segment continues to unfold. Senior Living segment revenue of $55.5 million is up 23.2% over the prior year quarter and 3.7% sequentially. Adjusted EBITDA of $5.6 million has increased 26.2% over the prior year and 8.4% sequentially. Segment adjusted EBITDA margin increased 50 basis points over the prior year quarter, reaching a new post-pandemic high of 10.3% and continuing its path toward our target segment margin of 15%. Same-store occupancy reached a new high of 81.8% and all-store occupancy also passed the 80% mark at 80.9%. This record occupancy represents a major milestone, especially because it was achieved alongside 7.4% year-over-year rate growth, following several years of high single-digit or low double-digit increases. Notwithstanding all of this progress, we're far from satisfied. As we continue to drive occupancy with high revenue quality, having covered the fixed costs in our communities, the opportunity for incremental margin expands dramatically. The latent upside in this segment remains significant. Just as we continuously invest in future operational leaders to fuel our growth, throughout the year, we have invested significantly in our service center. We recognize that we must have the right people and technology to execute well on our critical transitions and that attracting talented individuals to join us is an essential component of our future success. The return on these investments becomes clear when you look at the accretive results of our recent acquisitions, along with our strong organic growth. We expect G&A expense to remain slightly elevated during this period of transition. But as the revenue and earnings from the latest acquisitions come online, we expect to see economies of scale on these front-loaded investments in people and technology and return back to historical levels. On the regulatory front, we will experience positive revenue adjustment of approximately 2.6% related to the hospice final rule beginning on October 1, 2025. The home health final rule has not been issued. We expect it to arrive in the coming weeks. We cannot predict whether the delay is a positive sign, signaling that CMS went back to the drawing board to make much needed changes or whether it is solely related to the government shutdown, but we can say this with certainty. During this rule-making cycle, policymakers, including CMS, legislators and others have become more aware of the harmful and self-defeating impacts that the proposed rule would have on the American health care continuum. If implemented, the proposed rule would undermine the lowest cost setting most preferred by patients. It would force agency closures and consolidation. It would increase hospital visits and aggregate Medicare spend. In short, it would be bad policy. We are hopeful that the final rule will recognize this in some fashion. But if not, we have worked with industry partners to craft contingency plans and will continue to advocate assertively for a legislative solution. Regardless, our focus remains intently on controlling the things we can control, and each of our operators has prepared plans at the local level to adapt to the cuts and take advantage of the opportunities created by reimbursement down cycles. They are reacting nimbly and will continue to drive improvement and growth as they have through the last 3 years of weak reimbursement and rising costs. Health care reimbursement is cyclical, and we have unshaken faith in the long-term value of home health services. The long-term trend is toward more care in the home. That's what patients want and what makes the most sense for our nation. Over time, we believe rates will reflect that. Turning to growth. It's been a busy and productive quarter. In addition to the GranCare acquisition in Southern California, which closed on July 1 and which we discussed in our Q2 earnings call. In September, we closed on a single-site agency in Gillette, Wyoming called Healing Hearts Home Health and Healing Hearts Outpatient Therapy. After quarter end, we completed 2 senior living transactions, each of which included the acquisition of the associated real estate. On November 1, we acquired -- two Rivers Senior Living in Lewiston, Idaho, which adds an exciting opportunity near our well-established home health and hospice agencies. On November 4, we purchased Honey Creek Heights Senior Living in West Dallas, Wisconsin. This was an underperforming building with serious issues impacting the license and the continued viability of the operations. We stepped in under a management agreement, collaborated with the state, cleared up the outstanding issues and most importantly, restored dignity and joy to the residents. We've now formally purchased the operation and the related real estate and look forward to providing a quality home for residents in West Dllas for many years to come. Much of the quarter was spent preparing for the October 1 closing of the United Amedisys acquisition in Tennessee, Georgia and Alabama. This purchase includes 54 locations with combined trailing 12-month revenues of $189.3 million for a purchase price of $146.5 million. The trailing 12-month EBITDA reflects a purchase price multiple comfortably within our target range of 4x to 7x for home health acquisitions. which we view as attractive for a large and well-operated platform comprised of roughly 70% home health and 30% hospice revenues, primarily in certificate of need states. As we've shared many times previously, we typically expect acquisitions to be optimized within 9 quarters, and we anticipate some variability of results during that interim. That said, our transition efforts are well underway, and we are excited by the quality of leaders, team members and operations. Much like our signature transition, we will build on the local strength, community ties and long history of success of these operations in the region. These new operations have already joined clusters with seasoned and successful tenant operators to help implement the unique tenant model. We are bullish on the long-term potential of these operations and the additional expansion they will enable in the Southeastern United States for years to come. Market forces and our own reputation as a quality buyer continue to drive a very robust pipeline of acquisition opportunities in all of our segments. As I just discussed, our focus is on successfully integrating our recent acquisitions. We will maintain discipline, and we will not compromise the priority of those efforts, but remain open to additional hospice and home health opportunities. We also see many potential transactions in the senior living space that fit our acquisition criteria and our senior living leaders will continue to prudently pursue growth in that segment. With that, I'll hand it over to Lynette for a review of the financials. Lynette?

Thank you, John, and good morning, everyone. Detailed financial results for the 3 months ended September 30, 2025, are contained in our 10-Q and press release filed yesterday. For the quarter ended September 30, 2025, we reported total GAAP revenue of $229 million, adjusted EBITDA of $17.3 million, GAAP diluted earnings per share of $0.17 and adjusted diluted earnings per share of $0.30. This week, we closed on an amendment that added a $100 million term loan to our credit facility. We consider this prudent balance sheet management. As described in more detail in the 8-K and press release we issued yesterday, this amendment frees up additional capacity under our revolver and provides dry powder to deploy when appropriate. Key metrics for the 3 months ended September 30, 2025, include $30.2 million drawn on our revolving line of credit and $2.3 million in cash on hand at quarter end. 0.38x net debt to adjusted EBITDA and cash flows provided from operations of $27.3 million year-to-date, including $13.9 million in Q3. Our year-to-date results and the impact of our purchase of United Amedisys assets merit an increase in our full year guidance. Accordingly, we are revising and raising our full year 2025 guidance as follows: Full year total revenue is anticipated to be between $911.4 million and $948.6 million, full year adjusted earnings per diluted share between $1.14 and $1.18 and full year adjusted EBITDA between $70.9 million and $73.8 million. This updated guidance incorporates current operations and organic growth, diluted weighted average shares outstanding of approximately 35.7 million and a 26% effective tax rate. It anticipates continued strong operating performance through the end of the year, hospice reimbursement rate adjustments, increased interest expense and contributions from announced acquisitions that excludes unannounced acquisitions, start-ups, share-based compensation, acquisition-related costs, onetime implementation and unusual costs and noncontrolling interest income. I would like to spotlight a few of our leaders in our organization who have achieved exceptional results. Their stories demonstrate the remarkable progress that can occur when local leaders build strong culture and develop high-performing teams of C-level leaders in their operations.

Thanks, Lynette. As we conclude, I'd like to thank all the operators and clinicians who, like those highlighted above, dedicate themselves daily to providing life-changing service to our patients and residents. You are truly making a difference in the lives and communities we serve, and it is an honor to work alongside you. With that, we'll open it up for questions. Kevin, can you please instruct the --

[Operator Instructions] Our first question comes from Brian Tanquilut with Jefferies.

This is [ Megan Holz ] on for Brian Tanquilut. Congratulations on closing the Amedisys transaction and starting there. Now that you're a month in, what are some of your top priorities for integration, including the JV with the University of Tennessee? And then how should we be thinking about these assets contributing to earnings in 2026?

Yes, Megan, thanks for the question. We're really, really excited about what we've found as we've gotten a chance to get into the operations and work closely with the teams out there. There's an amazing group of talented leaders, clinicians and staff, and it's been fun for our teams. And we've got folks from across the organization, owners who are anxious to help those agencies implement the payment model successfully. Our focus right now is, first, identifying and elevating leaders into our model where we've got an Executive Director and a clinical director in each local community able to meet the needs of that community. And so that's sort of our first in the order of operations. Our second, of course, we're focused on ensuring that these agencies receive exceptional support. So we are building a shared services organization that can ensure that the services they historically have received from Amedisys and from United through LHC that they experience no diminishment in those services. The third thing I'd highlight, and you called it out, the University of Tennessee joint venture. It's a really exciting joint venture with a lot of potential. We just had our first Board meeting out there, and there's a strong sense of support from the University of Tennessee, there's strong engagement in both hospice and home health. And so we're excited to add that to our JVs in California and our relationship with Hartford in Connecticut to allow us to continue to innovate clinically, to continue to produce outstanding financial results and to drive improvement in the legacy of what they've already created. So that's always sort of where we start is with leadership and then, of course, implementing our systems and processes. The transition, we expect it to be completed by the end of Q3 next year. And so we've got a transition services agreement in place for that period. And then we are gradually pulling each of those locations off of their systems and on to ours. As far as contribution, initially, we anticipate relatively light contribution in the fourth quarter. That's simply because we continue to have elevated costs associated with the transition and then bringing those businesses on and having a full picture of their performance will help us provide better guidance. In 2026, as we look forward, those businesses are currently performing about a 12.5% margin. We anticipate a modest decline as we go through a brand change as we go through a Homecare Homebase reimplementation into our tenant and as we gradually wean off of the transition services agreement. So we anticipate them performing between 9.5% and 11% in 2026. So that gives you a little bit of an idea. We're not guiding yet because we expect to have more clarity as we spend more time with the business and go through several month-end closes through the fourth quarter. But that's the way we're thinking about it right now.

Okay. And then for my follow-up, looking at the senior housing, you've seen strong momentum and occupancy approaches levels where operating leverage becomes more pronounced. I guess how should we be thinking about the trajectory of margins going forward in that business?

Yes. Great question. Really, it's just a matter of -- as we add occupancy, we think that there's going to be more that's going to move to the bottom line. So really, over the last several years, the focus has been building the foundation, getting to -- back to the levels of occupancy that we were at pre-pandemic. And so we're pretty excited about the margin opportunity there. I mean we've had some pressures this past year just because some of the ARPA funding has gone away. So normally, we probably would have seen a little bit more elevated margin. But because of some of those pressures and other labor-related pressures, it hasn't moved quite as much. But from an incremental improvement standpoint, as we see additional occupancy rise, we should see incremental improvement on the bottom line margin as well.

Our next question comes from Stephen Baxter with Wells Fargo.

This is [ Mitchell ] on for Steve. Just on the margin guidance, your previous guide assumed EBITDA margins would improve year-over-year in the second half, but the new guidance looks closer to flat. I know you mentioned G&A, but just want to understand if there are any other dynamics to consider there, specifically on the core business.

Yes. When we look at that, the other piece that needs to be factored in is NCI. We continue to have the NCI growth as we add this JV. And so because we back out NCI or it backed out in this guidance, that's also another piece that is impacting that EBITDA margin. So when you consider the NCI through the third quarter was $2.4 million, and we're anticipating about $1.9 million in NCI in Q4 impacting that EBITDA margin. And so I think that's the piece that's missing and maybe you look at it.

Got it. Very helpful. And then maybe just one more on same-store hospice length of stay. It appears to have increased year-over-year in each of the past 3 quarters. Is there anything you'd call out that's driving that? And just how are you thinking about that going forward?

Yes. I appreciate the question, Mitchell. And really, what I would point out is we continue to return closer and closer to pre-pandemic levels. And this really is about where is the location of our patients who are receiving services. Historically, we had a very good mix between assisted living communities, senior skilled nursing facilities. And then, of course, most of our care is delivered in the home. We've seen a small tick up in the percent of care that's delivered in assisted living. We're really excited about where we sit from a length of stay standpoint. It reflects continued work to identify patients that are appropriate earlier in the process and allowing them to receive the benefits of hospice for a longer time. And that's why you can see the strength of our ADC on top of our strong admission momentum, both organically and with our new transitions. But that's really what's driving it is just a very modest uptick in the percent of our hospice patients that are housed in senior living communities.

Our next question comes from David MacDonald with Truist.

A couple of quick questions. One, just coming back to the Amedisys deal. That deal obviously took kind of a uniquely long time to close. I'm just curious if you could talk a little bit about the employees, what you're seeing in terms of just excitement that they now have visibility in terms of where those assets have landed. Just anything that you can talk about in terms of the reception that you're getting internally in terms of the assets that you picked up?

Yes. I appreciate that question, David. It's been really remarkable to be a part of -- we went out at the end of September just before the close and had operators from across our organization and key resources from across Pennant who went to every location and met with the teams in town halls and took the opportunity to listen and to hear what their experience had been through the history and also through the transition period and also answer questions about who we are. Our web and media team did a remarkable job of putting together a website to consistently deliver information, both in video form as well as constantly updating frequently asked questions. And our goal has been throughout this process, like it is in any transition process to be as transparent as we can, and to be as responsive as we can to employees because we believe that in the long run, if we create a world-class employee experience that we're going to get the best talent and keep the best talent and be able to grow our business and impact the community we serve. And certainly, in this transition, we've seen a group of remarkable people, many of whom have been with these agencies for longer than 10 years, but certainly, a very strong contingent of clinicians who really believe in what they do and are committed to their communities and have embraced Pennant and our locally driven operating model and focus on how we can meet the needs of local referral sources and patients. And so that's been really exciting. And I think is part of the reason why we feel a sense of optimism that despite the challenges of offering new brands in the community, despite the fact that we've got to go through an HCHB transition, we haven't experienced material turnover at all. And I think we are doing our best to make sure people understand what life will be like at Pennant. And as a result, we're hopeful that we can keep these great teams together and build on the legacy that they've created.

Yes. I would just add one additional thought. One of the other things that has been really impressive about this group of leaders and these teams is even in the midst of all of this kind of chaos is obviously, this process has gone on for a long time. They've continued to perform at a high level with very little, if any, drop-off in census and financial performance, clinical performance. And that's really a credit to the teams that are there. They -- in many ways, they're like us, they love being in the communities they serve, and they reflect the people of their communities. And so they take a lot of pride in the work that they do. And so we've inherited a great group of operators that really want to make a difference. And so that's just another element of this that we might have expected to see a drop off, but it's actually -- they've continued to perform well.

Okay. And then just one other quick follow-up. If we look at the occupancy in senior living year-over-year, the growth in occupancy accelerated pretty nicely in the third quarter relative to the second quarter. Is there anything that you guys would call out in terms of stuff that you've been doing that is incrementally resonating? Or is that just kind of a little bit of just kind of ongoing growth? Just anything you would call out there just given the sequential improvement.

Yes. Well, I think it's been years of ongoing investment in multiple different ways. First and foremost, it's been the investment in the leaders. Really, occupancy moves the quickest when we've got a great group of leaders and team members that are driving it, creating the right experience for residents and really reaching out in the community. And so as we've invested in the local leaders, they've been the ones that have really turned the tide from an occupancy standpoint. The other thing just we've actually made significant CapEx investments in a lot of these buildings over the last 2 or 3 years to bring them up to the standards that we'd expect and create an ambience or an experience for our residents that is meaningful and really just a great place to live. And then the other thing that I would say is we've had this balance of driving rate in terms of our revenue per occupied unit with the occupancy. And so as we've tried to improve the revenue quality, there's -- I think that's part of the reason why the occupancy has been somewhat flat. And now that we've -- I don't want to say totally optimized, but for the most part, our revenue quality is at a really strong level. And so because of that, the focus can be less on really replacing the low poor revenue quality with better revenue quality and really driving occupancy improvement. So that's another element. And then the last thing, which is probably a really critical piece in all of this is our overall digital marketing efforts. We've made significant investments on improving the sophistication of our outreach into the communities. We basically overhauled all of the brand websites and created kind of a local needs brand experience that has resonated with the communities that's driving improvement there. And then our ability to just capture leads is, as I said before, much more sophisticated. We've increased our spend as well. And so it's improving the outreach, too. So we're just getting better all across the board in each of these areas. And so that's -- now you're starting to see kind of the momentum really hit, and that's why that flywheel has started to really drive.

Our next question comes from Raj Kumar with Stephens.

I appreciate the commentary on prudent growth within senior living. Maybe just kind of touching upon that. There seems to be kind of kind of increased activity amongst just market participants on the M&A front on that end. And Pennant has also made incremental investments throughout this year. So maybe just kind of any update on what you're kind of seeing from a market participant standpoint and a competitive standpoint on SO deals that you might be going after? And what's kind of the pricing environment looking like on that end and whether or not you're kind of seeing anything that's kind of outsized and beyond your comfort level and you're seeing any trends on that front?

Yes, Raj, I would just say there is a lot of activity right now in the senior living space in terms of acquisition opportunities. And the pricing is all over the map. So there are plenty of opportunities that are outside of our comfortable range, but there are also plenty of opportunities that are square in our target range. And so we're excited about the future -- what the future holds, the robust pipeline that we have right now. And obviously, we talked about this a lot. Our focus is really finding incredible leaders and getting them prepared to step into opportunities. And so that's the biggest limiting factor. There's going to be plenty of opportunities for us just in terms of availability. And we have as large a pipeline of CITs in -- both on the home health and hospice and on the senior living side. as we've ever had. And so from that standpoint, we're ready to go with these deals. And then just in terms of competition, yes, I mean, there is a little more noise, and there certainly are more players interested in this space. But at the same time, I think the amount of deals has increased as well. And so while there are -- there is competition in what we go out and try to get, at the same time, we have kind of a unique profile. And in a number of these deals, we have relationships with specific brokers or groups that have worked with us in the past that directly reach out to us and want us to participate. One of the things that we're seeing that's really critical right now, and we've seen it kind of over the last 5 years, COVID kind of bore out the fact that you've got to be a really good operator to be successful in senior living. And as we demonstrate our operating shops, these folks want to come to us because they have confidence in our ability to provide great care and build a really strong presence in those buildings. And so that has afforded us some privileges or opportunities that maybe others don't get because of the reputation that we're establishing. So we're excited about the pipeline. We certainly have a lot of opportunity in front of us and continue to work toward growing. The last thing I will say just on the real estate side, so this last deal, we acquired 2 of the real estate assets on the building. So that brings us to a total of 6. Roughly 10% of our buildings now we own. And we see that as a really important lever that we can pull going forward. As we've kind of slowly gone into this, just wanting to make sure that we can do this right and we can create the right value. And as that's proving out, we expect to continue to prudently invest in real estate as well and use that as an opportunity for growth.

Got it. And then maybe as my follow-up, just kind of focusing on the Amedisys assets. I know the profile of the deal has kind of changed throughout its inception. But maybe as we kind of look at what the identifiable synergies are from a baseline perspective, are you kind of willing to size that opportunity? And in terms of where you're seeing it is kind of on the cost front or the contracting front with payers? Just kind of any color on that would be great.

I think there's opportunities, Raj, in a lot of places. I think I'd group them into 3 areas. One of them is certainly improving their margins up to our target margin. And so we see some opportunity there. Like I telegraphed in the answer to Megan's question, we do expect through the transition, a little softer margin. But once we get through the transition, like we've seen with Signature, we believe that our model of transparently sharing data with local operators and building aligned incentive structures around that will create opportunities to drive margin improvement and acceleration. I think the second thing I would focus on is growth. Again, these communities have not had -- they don't have as many local solutions. They've got lots of big regional and national players, but we feel like there's an opportunity to really be the local solution of choice in each community and that, that can drive a bigger share of the market to our agencies. And so that's the second opportunity I'd highlight. And then I think the final thing that I would highlight is this is really a starting point or a jumping off point. We feel like throughout the Southeast, there's an opportunity to take the Pennant experience and The Pennant model and for that to improve outcomes throughout the states that we serve. As far as contracting goes, we are optimistic. We obviously have already begun conversations and communications with those payers. We do think there's -- there's opportunity on the contract front, but it's early in the process. And so I don't want to get too far ahead in projecting that we're going to be able to move those rates significantly. I do think our clinical quality gives us a unique opportunity, particularly the preventable hospitalization data that we shared today, that drives an overall lower cost to payers. And so we've got something unique to share in our clinical outcomes and in our ability to lower overall spend for managed care providers. And so we're confident going into those negotiations that we'll have success, but it's just early and too early to kind of project what that might look like.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Brent for any further remarks.

All right. Well, thank you, Kevin, and thank you, everyone, for joining us today.