BUSINESS SEGMENTS |
BUSINESS SEGMENTS The Company classifies its operations into the following reportable operating segments: (1) home health and hospice services, which includes the Company’s home health, hospice and home care businesses; and (2) senior living services, which includes the operation of assisted living, independent living and memory care communities. The reporting segments are business units that offer different services and are managed separately to provide greater visibility into those operations. The Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker (“CODM”), reviews financial information at the operating segment level. The Company also reports an “all other” category that includes general and administrative expense from the Company’s Service Center.
As of September 30, 2023, the Company provided services through 103 affiliated home health, hospice and home care agencies, and 51 affiliated senior living operations. The Company evaluates performance and allocates capital resources to each segment based on an operating model that is designed to maximize the quality of care provided and profitability. The Company’s Service Center provides various services to all lines of business. The Company does not review assets by segment and therefore assets by segment are not disclosed below.
The CODM uses Segment Adjusted EBITDAR from Operations as the primary measure of profit and loss for the Company's reportable segments and to compare the performance of its operations with those of its competitors. Segment Adjusted EBITDAR from Operations is net income (loss) attributable to the Company's reportable segments excluding interest expense, provision for income taxes, depreciation and amortization expense, rent, and, in order to view the operations performance on a comparable basis from period to period, certain adjustments including: (1) costs at start-up operations, (2) share-based compensation, (3) acquisition related costs and credit allowances, (4) the costs associated with transitioning operations, (5) unusual, non-recurring or redundant charges, and (6) net income attributable to noncontrolling interest. General and administrative expenses are not allocated to the reportable segments, and are included as “All Other”, accordingly the segment earnings measure reported is before allocation of corporate general and administrative expenses. The Company's segment measures may be different from the calculation methods used by other companies and, therefore, comparability may be limited. The following tables present certain financial information regarding the Company’s reportable segments, general and administrative expenses are not allocated to the reportable segments and are included in “All Other” for the three and nine months ended September 30, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home Health and Hospice Services | | Senior Living Services | | All Other | | Total | Three Months Ended September 30, 2023 | | | | | | | | | Revenue | | $ | 101,474 | | | $ | 38,718 | | | $ | — | | | $ | 140,192 | | Segment Adjusted EBITDAR from Operations | | $ | 17,271 | | | $ | 11,473 | | | $ | (8,097) | | | $ | 20,647 | | Three Months Ended September 30, 2022 | | | | | | | | | Revenue | | $ | 85,779 | | | $ | 32,571 | | | $ | — | | | $ | 118,350 | | Segment Adjusted EBITDAR from Operations | | $ | 15,380 | | | $ | 9,370 | | | $ | (7,779) | | | $ | 16,971 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home Health and Hospice Services | | Senior Living Services | | All Other | | Total | Nine Months Ended September 30, 2023 | | | | | | | | | Revenue | | $ | 287,573 | | | $ | 111,364 | | | $ | — | | | $ | 398,937 | | Segment Adjusted EBITDAR from Operations | | $ | 47,364 | | | $ | 33,394 | | | $ | (23,496) | | | $ | 57,262 | | Nine Months Ended September 30, 2022 | | | | | | | | | Revenue | | $ | 251,598 | | | $ | 96,978 | | | $ | — | | | $ | 348,576 | | Segment Adjusted EBITDAR from Operations | | $ | 45,056 | | | $ | 27,573 | | | $ | (23,795) | | | $ | 48,834 | |
The following table provides a reconciliation of Segment Adjusted EBITDAR from Operations to income from operations:
| | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | 2023 | | 2022 | | 2023 | | 2022 | Segment Adjusted EBITDAR from Operations | $ | 20,647 | | | $ | 16,971 | | | $ | 57,262 | | | $ | 48,834 | | Less: Depreciation and amortization | 1,323 | | | 1,251 | | | 3,817 | | | 3,677 | | Rent—cost of services | 10,006 | | | 9,391 | | | 29,439 | | | 28,520 | | Other (expense) income | (37) | | | (18) | | | 28 | | | (50) | | Adjustments to Segment EBITDAR from Operations: | | | | | | | | Less: Costs at start-up operations(a) | (108) | | | 430 | | | 160 | | | 938 | | Share-based compensation expense and related taxes(b) | 1,391 | | | (2,501) | | | 4,164 | | | 2,319 | | Acquisition related costs and credit allowances(c) | 71 | | | 1,000 | | | 175 | | | 1,014 | | | | | | | | | | Costs associated with transitioning operations(d) | 10 | | | 144 | | | 595 | | | 6,078 | | Unusual, non-recurring or redundant charges(e) | 1,009 | | | 293 | | | 1,633 | | | 370 | | Add: Net income attributable to noncontrolling interest | 79 | | | 163 | | | 351 | | | 387 | | Condensed Consolidated Income from Operations | $ | 7,061 | | | $ | 7,144 | | | $ | 17,602 | | | $ | 6,355 | |
| | | | | | | | | (a) | | Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations. |
| | | | | | | | | (b) | | Share-based compensation expense and related payroll taxes incurred. Share-based compensation expense and related payroll taxes are included in cost of services and general and administrative expense. | (c) | | Non-capitalizable costs associated with acquisitions, credit allowances, and write offs for amounts in dispute with the prior owners of certain acquired operations. | | | | (d) | | During the nine months ended September 30, 2023, an affiliate of the Company placed its memory care units into transition and is actively seeking to sublease the units to an unrelated third party. The amount above represents the net operating impact attributable to the units in transition. The amounts reported exclude rent and depreciation and amortization expense related to such operations and include legal settlement costs associated with one of the entities transitioned to Ensign.
During January 2022, affiliates of the Company entered into Transfer Agreements with affiliates of Ensign, providing for the transfer of the operations of certain senior living communities (the “Transaction”) from affiliates of the Company to affiliates of Ensign. The closing of the Transaction was completed in two phases with the transfer of two operations on March 1, 2022 and the remainder transferred on April 1, 2022. The amount above represents the net impact on revenue and cost of service attributable to all of the transferred entities. The amounts reported exclude rent and depreciation and amortization expense related to such operations. | (e) | | Represents unusual or non-recurring charges for legal services, implementation costs, integration costs, and consulting fees in general and administrative and cost of services expenses. The amounts reported for the nine months ended September 30, 2022 include certain costs identified as redundant or non-recurring incurred by the Company for services provided by Ensign under the Transition Services Agreement, and were included in general and administrative expense. |
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