# Pennant Group, Inc. (PNTG) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Pennant Group, Inc.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1766400/000176640022000044/pntg-20211231.htm
Accession: 0001766400-22-000044
Filing date: 2022-02-28
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/PNTG/
All MD&A years: /company/PNTG/mda/
Next year: /company/PNTG/mda/fy2022/ (FY 2022)

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated and combined financial statements and accompanying notes, which appear elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report. See Item 1A., Risk Factors and Cautionary Note Regarding Forward-Looking Statements.

Overview

We are a leading provider of high-quality healthcare services to patients and residents of all ages, including the growing senior population, in the United States. We strive to be the provider of choice in the communities we serve through our innovative operating model. We operate in multiple lines of businesses including home health, hospice and senior living services across Arizona, California, Colorado, Idaho, Iowa, Montana, Nevada, Oklahoma, Oregon, Texas, Utah, Washington, Wisconsin and Wyoming. As of December 31, 2021, our home health and hospice business provided home health, hospice and home care services from 88 agencies operating across 14 states, and our senior living business operated 54 senior living communities throughout seven states.

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The following table summarizes our affiliated home health and hospice agencies and senior living communities as of:

[[GREPCENT_TABLE]]
[["","December 31,"],["","2013","","2014","","2015","","2016","","2017","","2018","","2019","","2020","","2021"],["Home health and hospice agencies","16","","","25","","","32","","","39","","","46","","","54","","","63","","","76","","","88"],["Senior living communities","12","","","15","","","36","","","36","","","43","","","50","","","52","","","54","","","54"],["Senior living units","1,256","","","1,587","","","3,184","","","3,184","","","3,434","","","3,820","","","3,963","","","4,127","","","4,127"],["Total number of home health, hospice, and senior living operations","28","","","40","","","68","","","75","","","89","","","104","","","115","","","130","","","142"]]
[[/GREPCENT_TABLE]]

COVID-19

We have been, and we expect to continue to be, impacted by several factors related to the viral disease known as COVID-19 that may cause actual results to differ from our historical results or current expectations. Due to the COVID-19 pandemic, the results presented in this report are not necessarily indicative of future operating results. The situation surrounding COVID-19 remains fluid. We are actively managing our response in collaboration with government officials, team members and business partners, and we are assessing potential impacts to our financial position and operating results, as well as adverse developments in our business.

Home Health and Hospice

During the year ended December 31, 2021, the labor challenges experienced throughout the COVID-19 pandemic were exacerbated as cases rose sharply, leading to further wage pressure, increased overtime and greater use of agency and registry staffing resulting in challenges to properly staff referrals. Home health admissions during the second half of the year were impacted as more staff entered the quarantine protocol and by a significant decline in elective procedures, particularly in a few key markets and states that re-imposed temporary halts on such procedures.

Senior Living

COVID-19 continues to impact all aspects of our senior living business and geographies, including impacts on our residents, team members, vendors and business partners. We experienced a decline in occupancy during the first quarter of the year followed by several months of increased occupancy that began in the second quarter and continued into the third quarter. Our occupancy began to decline in the latter part of September and our overall senior living occupancy has decreased since the onset of the COVID-19 pandemic due to a greater number of move outs net of move ins. We cannot be sure if or when the occupancy levels in our senior living communities will improve over multiple measurement periods or return to pre-pandemic levels.

Labor

We have experienced and expect to continue to see increased labor costs due to greater competition for skilled workers, worker burnout, increased wage rates, increased overtime and premium pay, and the increased need for temporary labor to supplement our existing staffing. We are monitoring the ongoing impact of our COVID-19 response actions on our revenue and expenses, including labor acquisition and turnover costs that may be imposed by existing and anticipated state and federal vaccination mandates imposed for workers in home health agencies, senior living communities and other health care service providers. However, the extent to which COVID-19 will continue to impact our operations will depend on future developments, which remain uncertain and cannot be predicted with confidence, including the pace of spread and impact of other potential variant strains, and the actions taken to contain COVID-19 or treat its impact, among others.

Recent Activities

Acquisitions. During 2021, we expanded our operations with the addition of five home health agencies, four hospice agencies and two home care agencies. We entered into a separate operations transfer agreement with the prior operator as part of each transaction. The aggregate value for these acquisitions was $14.1 million. For further discussion of our acquisitions, see Note 7, Acquisitions, in the Notes to the consolidated and combined financial statements.

Amended Credit Facility. On February 23, 2021, we amended our existing revolving credit facility to increase our aggregate principal amount available from $75.0 million to $150.0 million.

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Subsequent Transaction. On January 27, 2022, certain of our affiliates entered into operations transfer agreements (collectively, the “Transfer Agreements”) with affiliates of Ensign, providing for the transfer of the operations of certain senior living communities (the “Transaction”). The Transfer Agreements require one of the transferors to place in escrow $6.5 million to cover post-closing capital expenditures and operating losses related to one of the communities. The closing of the Transaction is anticipated to occur in the first half of 2022, subject to receipt of applicable regulatory approvals and satisfaction of other customary closing conditions set forth in the Transfer Agreements. For further details about the impact of the transaction see Note 16, Subsequent Event.

Trends

Since the pandemic began and until the first quarter of 2021, we experienced a steady decline in senior living occupancy as move-ins declined relative to move-outs due to the pandemic. Beginning in the second quarter of 2021, and continuing into the third quarter, we experienced a slight increase in our senior living occupancy; however with the emergence of the “Omicron” variant strain of COVID-19 in the fourth quarter we experienced a slight decrease in occupancy during the year ended December 31, 2021. We cannot be sure when the occupancy levels in our senior living communities will return to pre-pandemic levels. As uncertainty regarding the COVID-19 pandemic persists and with the resurgence in cases due to variant strains aggressively emerging, we could see a more prolonged recovery.

When we acquire turnaround or start-up operations, we expect that our combined metrics may be impacted. We expect these metrics to vary from period to period based upon the maturity of the operations within our portfolio. We have generally experienced lower occupancy rates at our senior living communities and lower census at our home health and hospice agencies for recently acquired operations; as a result, we generally anticipate lower consolidated and segment margins during years of high acquisition growth. We established three start-up hospice agencies in Arizona, Texas and Washington, and one home care agency in Arizona during the year ended December 31, 2021.

Regulation

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 in the United States and subsequent regulatory actions. The CARES Act contained provisions for accelerated or advance Medicare payments (“AAP”) to provide supporting cash flow to providers and suppliers combating the effects of the COVID-19 pandemic. We applied for and received $28.0 million in 2020. These funds are subject to automatic recoupment through offsets to new claims beginning one year after payment were issued. In April, 2021, CMS began to automatically recoup 25% of Medicare payments from individual agencies, which will continue for 11 months. At the end of the 11 months assuming full repayment has not occurred, recoupment will increase to 50% for another six months. Any balance outstanding after these two recoupment periods will be subject to repayment at a 4% interest rate. As of the year ended December 31, 2021, the Company had repaid $21.8 million of the AAP funds, with the remaining balance of $6.2 million recorded in other accrued liabilities on the consolidated balance sheets. We anticipate completing repayment of the AAP within the allotted recoupment periods.

The CARES Act temporarily suspended the 2% sequestration payment adjustment on Medicare fee-for-service payment beginning May 1, 2020 and was extended through December 31, 2021. We recognized $3.6 million and $2.8 million in revenue related to the suspension of sequestration for the years ended December 31, 2021 and 2020, respectively, exclusive of our start-up operations. Further, the CARES Act payroll tax deferral program allowed employers to defer the deposit and payment of the employer’s portion of social security taxes that otherwise would be due between March 27, 2020, and December 31, 2020. The CARES Act permits employers to deposit half of these deferred payments by the end of 2021 and the other half by the end of 2022. We deferred approximately $7.8 million of employer-paid portion of social security tax. In the fourth quarter of the current year, we repaid $3.7 million and approximately $4.1 million of the balance remains deferred and is recorded in accrued wages and related liabilities on the consolidated balance sheets.

The American Rescue Plan Act of 2021 (the “ARP Act”) was enacted on March 11, 2021 in the United States. The ARP Act was designed to assist the country with the effects of the COVID-19 pandemic and included a number of tax components. The ARP Act’s primary tax impact on us is a new revenue raising provision that requires us to include the next five highest paid employees to the list of covered officers already subject to the IRC Section 162(m) wage limitation beginning in the 2027 tax year.

Segments

We have two reportable segments: (1) home health and hospice services, which includes our home health, home care and hospice businesses; and (2) senior living services, which includes the operation of assisted living, independent living and

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memory care communities. Our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), reviews financial information at the operating segment level using segment adjusted EBITDAR from operations. We also report an “all other” category that includes general and administrative expense from our Service Center.

Key Performance Indicators

We manage the fiscal aspects of our business by monitoring key performance indicators that affect our financial performance. These indicators and their definitions include the following:

Home Health and Hospice Services

•Total home health admissions. The total admissions of home health patients, including new acquisitions, new admissions and readmissions.

•Total Medicare home health admissions. Total admissions of home health patients, who are receiving care under Medicare reimbursement programs, including new acquisitions, new admissions and readmissions.

•Average Medicare revenue per completed 60-day home health episode. The average amount of revenue for each completed 60-day home health episode generated from patients who are receiving care under Medicare reimbursement programs.

•Total hospice admissions. Total admissions of hospice patients, including new acquisitions, new admissions and recertifications.

•Average hospice daily census. The average number of patients who are receiving hospice care during any measurement period divided by the number of days during such measurement period.

•Hospice Medicare revenue per day. The average daily Medicare revenue recorded during any measurement period for services provided to hospice patients.

The following table summarizes our overall home health and hospice statistics for the periods indicated:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020"],["Home health services:"],["Total home health admissions","37,366","","","26,670"],["Total Medicare home health admissions","17,356","","","12,974"],["Average Medicare revenue per 60-day completed episode(a)","$","3,405","","","$","3,290"],["Hospice services:"],["Total hospice admissions","8,613","","","8,186"],["Average hospice daily census","2,291","","","2,083"],["Hospice Medicare revenue per day","$","174","","","$","166"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(a)","","The year to date average for Medicare revenue per 60-day completed episode includes post period claim adjustments for prior periods."]]
[[/GREPCENT_TABLE]]

Senior Living Services

•Occupancy. The ratio of actual number of days our units are occupied during any measurement period to the number of units available for occupancy during such measurement period.

•Average monthly revenue per occupied unit. The revenue for senior living services during any measurement period divided by actual occupied senior living units for such measurement period divided by the number of months for such measurement period.

The following table summarizes our senior living statistics for the periods indicated:

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[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020"],["Occupancy","72.7","%","","77.7","%"],["Average monthly revenue per occupied unit","$","3,207","","","$","3,188"]]
[[/GREPCENT_TABLE]]

Revenue Sources

Home Health and Hospice Services

Home Health. We derive the majority of our home health revenue from Medicare and managed care. The Medicare payment is adjusted for differences between estimated and actual payment amounts, an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk. For Medicare episodes that began prior to January 1, 2020, home health agencies were reimbursed under the Medicare HH PPS, while Medicare periods of care that began on or after that date are reimbursed under the PDGM methodology. Under PDGM, Medicare provides agencies with payments for each 30-day period of care provided to beneficiaries. If a beneficiary is still eligible for care after the end of the first 30-day payment period, a second 30-day payment period can begin. There are no limits to the number of periods of care a beneficiary who remains eligible for the home health benefit can receive. While payment for each 30-day period of care is adjusted to reflect the beneficiary’s health condition and needs, a special outlier provision exists to ensure appropriate payment for those beneficiaries that have the most expensive care needs. The payment under the Medicare program is also adjusted for certain variables including, but not limited to: (a) a low utilization payment adjustment if the number of visits is below an established threshold that varies based on the diagnosis of a beneficiary; (b) a partial payment if the patient transferred to another provider or the Company received a patient from another provider before completing the period of care; (c) adjustment to the admission source of claim if it is determined that the patient had a qualifying stay in a post-acute care setting within 14 days prior to the start of a 30-day payment period; (d) the timing of the 30-day payment period provided to a patient in relation to the admission date, regardless of whether the same home health provider provided care for the entire series of episodes; (e) changes to the acuity of the patient during the previous 30-day period of care; (f) changes in the base payments established by the Medicare program; (g) adjustments to the base payments for case mix and geographic wages; and (h) recoveries of overpayments.

Hospice. We derive the majority of our hospice business revenue from Medicare reimbursement. The estimated payment rates are calculated as daily rates for each of the levels of care we deliver. Rates are set based on specific levels of care, are adjusted by a wage index to reflect healthcare labor costs across the country and are established annually through federal legislation. The following are the four levels of care provided under the hospice benefit:

•Routine Home Care (“RHC”). Care that is not classified under any of the other levels of care, such as the work of nurses, social workers or home health aides.

•General Inpatient Care. Pain control or acute or chronic symptom management that cannot be managed in a setting other than an inpatient Medicare-certified facility, such as a hospital, skilled nursing facility or hospice inpatient facility.

•Continuous Home Care. Care for patients experiencing a medical crisis that requires nursing services to achieve palliation and symptom control, if the agency provides a minimum of eight hours of care within a 24-hour period.

•Inpatient Respite Care. Short-term, inpatient care to give temporary relief to the caregiver who regularly provides care to the patient.

CMS has established a two-tiered payment system for RHC. Hospices are reimbursed at a higher rate for RHC services provided from days of service 1 through 60 and a lower rate for all subsequent days of service. CMS also provided for a Service Intensity Add-On, which increases payments for certain RHC services provided by registered nurses and social workers to hospice patients during the final seven days of life.

Medicare reimbursement is adjusted for an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk. Additionally, as Medicare hospice revenue is subject to an inpatient cap limit and an overall payment cap, we monitor our provider numbers and based upon empirical experience estimate amounts due back to Medicare to the extent that the cap has been exceeded.

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Senior Living Services. Within our senior living operations, we generate revenue primarily from private pay sources, with a portion earned from Medicaid or other state-specific programs.

Primary Components of Expense

Cost of Services (excluding rent, general and administrative expense and depreciation and amortization). Our cost of services represents the costs of operating our independent operating subsidiaries, which primarily consists of employee wages and related benefits, supplies, purchased services, and ancillary expenses such as the cost of pharmacy and therapy services provided to patients or residents. Cost of services also includes the cost of general and professional liability insurance and other general cost of services specifically attributable to our operations.

Rent—Cost of Services. Rent—cost of services consists solely of base minimum rent amounts payable under lease agreements to our landlords. Our subsidiaries lease and operate but do not own the underlying real estate at our operations, and these amounts do not include taxes, insurance, impounds, capital reserves or other charges payable under the applicable lease agreements.

General and Administrative Expense. General and administrative expense consists primarily of payroll and related benefits and travel expenses for our Service Center personnel in providing training and other operational support. General and administrative expense also includes professional fees (such as accounting and legal fees), costs relating to our information systems, share-based compensation and rent for our Service Center offices.

Depreciation and Amortization. Property and equipment are recorded at their original historical cost. Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable assets (ranging from three to 15 years). Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the remaining lease term.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated and combined financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements and related disclosures requires us to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis we review our judgments and estimates, including but not limited to those related to revenue, cost allocations, leases, intangible assets, goodwill, and income taxes. We base our estimates and judgments upon our historical experience, knowledge of current conditions and our belief of what could occur in the future considering available information, including assumptions that we believe to be reasonable under the circumstances. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty, and actual results could differ materially from the amounts reported. While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information available when the estimate was made. Refer to Note 2, Basis of Presentation and Summary of Significant Accounting Policies, within the Consolidated and Combined Financial Statements for further information on our critical accounting estimates and policies, which are as follows:

•Self-insurance reserves - The valuation methods and assumptions used in estimating costs up to retention amounts to settle open claims of insureds and an estimate of the cost of insured claims up to retention amounts that have been incurred but not reported;

•Revenue recognition - The amounts owed by private pay individuals for services and estimate of variable considerations to arrive at the transaction price, including methods and assumptions, used to determine settlements with Medicare and Medicaid adjustments due to audits and reviews;

•Cost allocation - The Consolidated and Combined Financial Statements include allocations of costs for certain shared services provided to the Company by Ensign subsidiaries prior to the spin-off on October 1, 2019. These costs were allocated to the Company on a basis of revenue, location, employee count, or other measures;

•Leases - We use our estimated incremental borrowing rate based on the information available at lease commencement date in determining the present value of future lease payments;

•Acquisition accounting - The assumptions used to allocate the purchase price paid for assets acquired and liabilities assumed in connection with our acquisitions; and

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•Income taxes - The estimation of valuation allowance or the need for and magnitude of liabilities for uncertain tax position.

Recent Accounting Pronouncements

    Information concerning recently issued accounting pronouncements which are not yet effective is included in Note 2, Basis of Presentation and Summary of Significant Accounting Policies in the Consolidated and Combined Financial Statements. As of December 31, 2021, there were no recently issued accounting pronouncements that were expected to have an impact on the Company.

Results of Operations

The following table sets forth details of our expenses and earnings as a percentage of total revenue for the periods indicated:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020","","2019"],["Total revenue","100.0","%","","100.0","%","","100.0","%"],["Expense:"],["Cost of services","80.3","","","75.9","","","76.5"],["Rent\u2014cost of services","9.3","","","10.1","","","10.3"],["General and administrative expense","8.2","","","8.0","","","10.4"],["Depreciation and amortization","1.1","","","1.2","","","1.1"],["Total expenses","98.9","","","95.2","","","98.3"],["Income from operations","1.1","","","4.8","","","1.7"],["Other income (expense):"],["Other income","\u2014","","","0.1","","","\u2014"],["Interest expense, net","(0.5)","","","(0.3)","","","(0.1)"],["Other income (expense), net","(0.5)","","","(0.2)","","","(0.1)"],["Income before provision for income taxes","0.6","","","4.6","","","1.6"],["Provision for income taxes","0.1","","","0.6","","","0.6"],["Net income","0.5","","","4.0","","","1.0"],["Less: net income/ (loss) attributable to noncontrolling interest(a)","(0.1)","","","\u2014","","","0.2"],["Net income attributable to Pennant","0.6","%","","4.0","%","","0.8","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(a)","","Net loss attributable to noncontrolling interest for the year ended December 31, 2020 was less than 0.1% and thus not meaningful as a percentage of total revenue."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020","","2019"],["","(In thousands)"],["Consolidated and Combined GAAP Financial Measures:"],["Total revenue","$","439,694","","","$","390,953","","","$","338,531"],["Total expenses","$","434,999","","","$","372,036","","","$","332,861"],["Income from operations","$","4,695","","","$","18,917","","","$","5,670"]]
[[/GREPCENT_TABLE]]

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The following table presents certain financial information regarding our reportable segments. General and administrative expenses are not allocated to the reportable segments and are included in “All Other”:

[[GREPCENT_TABLE]]
[["","","Home Health and Hospice Services","","Senior Living Services","","All Other","","Total"],["","","(In thousands)"],["Segment GAAP Financial Measures:"],["Year Ended December 31, 2021"],["Revenue","","$","309,570","","","$","130,124","","","$","\u2014","","","$","439,694"],["Segment Adjusted EBITDAR from Operations","","$","55,565","","","$","37,517","","","$","(26,208)","","","$","66,874"],["Year Ended December 31, 2020"],["Revenue","","$","253,659","","","$","137,294","","","$","\u2014","","","$","390,953"],["Segment Adjusted EBITDAR from Operations","","$","49,501","","","$","48,309","","","$","(22,762)","","","$","75,048"],["Year Ended December 31, 2019"],["Revenue","","$","206,624","","","$","131,907","","","$","\u2014","","","$","338,531"],["Segment Adjusted EBITDAR from Operations","","$","33,354","","","$","47,344","","","$","(18,591)","","","$","62,107"]]
[[/GREPCENT_TABLE]]

The table below provides a reconciliation of Segment Adjusted EBITDAR from Operations above to income from operations:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020","","2019"],["","(In thousands)"],["Segment Adjusted EBITDAR from Operations(a)","$","66,874","","","$","75,048","","","$","62,107"],["Less: Depreciation and amortization","4,784","","","4,675","","","3,810"],["Rent\u2014cost of services","40,863","","","39,191","","","34,975"],["Other (expense)/ income","(24)","","","225","","","\u2014"],["Adjustments to Segment EBITDAR from Operations:"],["Less: Costs at start-up operations(b)","1,045","","","1,787","","","483"],["Share-based compensation expense(c)","10,040","","","8,335","","","3,382"],["Acquisition related costs(d)","80","","","99","","","665"],["Spin-Off related transaction costs(e)","\u2014","","","\u2014","","","13,219"],["Transition services costs(f)","2,008","","","1,181","","","532"],["COVID-19 related costs and supplies(g)","\u2014","","","447","","","\u2014"],["Impairment of long-lived assets(h)","2,835","","","\u2014","","","\u2014"],["Add: Net income/ (loss) attributable to noncontrolling interest","(548)","","","(191)","","","629"],["Income from operations","$","4,695","","","$","18,917","","","$","5,670"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["(a)","","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, (4) Spin-Off transaction costs, (5) redundant and nonrecurring costs associated with the transition services agreement, (6) net income/ (loss) attributable to noncontrolling interest, (7) net COVID-19 related costs and (8) impairment of long-lived assets. General and administrative expenses are not allocated to the reportable segments, and are included as \u201cAll Other\u201d, 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."],["(b)","","Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations."],["(c)","","Share-based compensation expense incurred which is included in cost of services and general and administrative expense."],["(d)","","Acquisition related costs that are not capitalizable."],["(e)","","Costs incurred related to the Spin-Off are included in general and administrative expense."],["(f)","","A portion of the costs incurred under the Transition Services Agreement identified as redundant or nonrecurring that are included in general and administrative expense. Fees incurred under the Transition Services Agreement, net of the Company\u2019s payroll reimbursement, were $3,124, $5,536, and $2,982, for the years ended December 31, 2021, 2020 and 2019, respectively."],["(g)","","Beginning in the first quarter of fiscal year 2021, we updated our definition of Segment Adjusted EBITDAR to no longer include an adjustment for COVID-19 expenses offset by the amount of sequestration relief. COVID-19 expenses continue to be part of daily operations for which less specific identification is visible. Furthermore, the sequestration relief was extended through December 31, 2021. Sequestration relief was $3,555 for the year ended December 31, 2021. The 2020 amount represents incremental costs incurred as part of the Company's response to COVID-19 including direct medical supplies, labor, and other expenses, net of $2,765 in increased revenue related to the 2% payment increase in Medicare reimbursements for sequestration relief for the year ended December 31, 2020."],["(h)","","On January 27, 2022, affiliates of the Company, entered into certain operations transfer agreements (collectively, the \u201cTransfer Agreements\u201d) with affiliates of Ensign, providing for the transfer of the operations of certain senior living communities (the \u201cTransaction\u201d). The closing of the Transaction is anticipated to occur in the first half of 2022. The Company impaired certain leasehold improvements included in property and equipment primarily related to the operations included in the transaction with Ensign."]]
[[/GREPCENT_TABLE]]

Performance and Valuation Measures:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020","","2019"],["","(In thousands)"],["Consolidated and Combined Non-GAAP Financial Measures:"],["Performance Metrics"],["Consolidated and Combined EBITDA","$","10,003","","","$","24,008","","","$","8,851"],["Consolidated and Combined Adjusted EBITDA","$","26,407","","","$","36,080","","","$","27,157"],["Valuation Metric"],["Consolidated and Combined Adjusted EBITDAR","$","66,874"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020","","2019"],["","(In thousands)"],["Segment Non-GAAP Measures:(a)"],["Segment Adjusted EBITDA from Operations"],["Home health and hospice services","$","51,045","","","$","46,015","","","$","30,415"],["Senior living services","$","1,570","","","$","12,827","","","$","15,333"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(a)","","General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss."]]
[[/GREPCENT_TABLE]]

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The table below reconciles Consolidated and Combined Net Income to Consolidated and Combined EBITDA, Consolidated and Combined Adjusted EBITDA and Consolidated and Combined Adjusted EBITDAR for the periods presented:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020","","2019"],["","(In thousands)"],["Consolidated and Combined Net income","$","2,148","","","$","15,553","","","$","3,175"],["Less: Net (loss) income attributable to noncontrolling interest","(548)","","","(191)","","","629"],["Add: Provision for income taxes (benefit)","582","","","2,350","","","2,085"],["Net interest expense","1,941","","","1,239","","","410"],["Depreciation and amortization","4,784","","","4,675","","","3,810"],["Consolidated and Combined EBITDA","10,003","","","24,008","","","8,851"],["Adjustments to Consolidated and Combined EBITDA"],["Add: Costs at start-up operations(a)","1,045","","","1,787","","","483"],["Share-based compensation expense(b)","10,040","","","8,335","","","3,382"],["Acquisition related costs(c)","80","","","99","","","665"],["Spin-Off related transaction costs(d)","\u2014","","","\u2014","","","13,219"],["Transition services costs(e)","2,008","","","1,181","","","532"],["Net COVID-19 related costs(f)","\u2014","","","447","","","\u2014"],["Impairment of long-lived assets(g)","2,835","","","\u2014","","","\u2014"],["Rent related to items (a) above","396","","","223","","","25"],["Consolidated and Combined Adjusted EBITDA","26,407","","","36,080","","","27,157"],["Rent\u2014cost of services","40,863","","","39,191","","","34,975"],["Rent related to items (a) above","(396)","","","(223)","","","(25)"],["Adjusted rent\u2014cost of services","40,467","","","38,968","","","34,950"],["Consolidated and Combined Adjusted EBITDAR","$","66,874"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(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 incurred which is included in cost of services and general and administrative expense."],["(c)","","Acquisition related costs that are not capitalizable."],["(d)","","Costs incurred related to the Spin-Off are included in general and administrative expense."],["(e)","","A portion of the costs incurred under the Transition Services Agreement identified as redundant or nonrecurring that are included in general and administrative expense. Fees incurred under the Transition Services Agreement, net of the Company\u2019s payroll reimbursement, were $3,124, $5,536, and $2,982, for the years ended December 31, 2021, 2020 and 2019, respectively."],["(f)","","Beginning in the first quarter of fiscal year 2021, we updated our definition of Segment Adjusted EBITDAR to no longer include an adjustment for COVID-19 expenses offset by the amount of sequestration relief. COVID-19 expenses continue to be part of daily operations for which less specific identification is visible. Furthermore, the sequestration relief was extended through December 31, 2021. Sequestration relief was $3,555 for the year ended December 31, 2021. The 2020 amount represents incremental costs incurred as part of the Company's response to COVID-19 including direct medical supplies, labor, and other expenses, net of $2,765 in increased revenue related to the 2% payment increase in Medicare reimbursements for sequestration relief for the year ended December 31, 2020."],["(g)","","On January 27, 2022, affiliates of the Company, entered into certain operations transfer agreements (collectively, the \u201cTransfer Agreements\u201d) with affiliates of Ensign, providing for the transfer of the operations of certain senior living communities (the \u201cTransaction\u201d). The closing of the Transaction is anticipated to occur in the first half of 2022. The Company impaired certain leasehold improvements included in property and equipment primarily related to the operations included in the transaction with Ensign."]]
[[/GREPCENT_TABLE]]

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The table below reconciles Segment Adjusted EBITDAR from Operations to Segment Adjusted EBITDA from Operations for the periods presented:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","Home Health and Hospice","","Senior Living"],["","2021","","2020","","2019","","2021","","2020","","2019"],["","(In thousands)"],["Segment Adjusted EBITDAR from Operations","$","55,565","","","$","49,501","","","$","33,354","","","$","37,517","","","$","48,309","","","$","47,344"],["Less: Rent\u2014cost of services","4,906","","","3,629","","","2,964","","","35,957","","","35,562","","","32,011"],["Rent related to start-up operations","(386)","","","(143)","","","(25)","","","(10)","","","(80)","","","\u2014"],["Segment Adjusted EBITDA from Operations","$","51,045","","","$","46,015","","","$","30,415","","","$","1,570","","","$","12,827","","","$","15,333"]]
[[/GREPCENT_TABLE]]

The following discussion includes references to certain performance and valuation measures, which are non-GAAP financial measures, including Consolidated and Combined EBITDA, Consolidated and Combined Adjusted EBITDA, Segment Adjusted EBITDA from Operations, and Consolidated Adjusted EBITDAR (collectively, “Non-GAAP Financial Measures”). Non-GAAP Financial Measures are used in addition to, and in conjunction with, results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. Non-GAAP Financial Measures reflect an additional way of viewing aspects of our operations and company that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, we believe can provide a more comprehensive understanding of factors and trends affecting our business.

We believe these Non-GAAP Financial Measures are useful to investors and other external users of our financial statements regarding our results of operations because:

•they are widely used by investors and analysts in our industry as a supplemental measure to evaluate the overall performance of companies in our industry without regard to items such as interest expense, rent expense and depreciation and amortization, which can vary substantially from company to company depending on the book value of assets, the length of the lease to which the asset applies, the method by which assets were acquired, and differences in capital structures;

•they help investors evaluate and compare the results of our operations from period to period by removing the impact of our asset base and capital structure from our operating results; and

•Consolidated and Combined Adjusted EBITDAR is used by investors and analysts in our industry to value the companies in our industry without regard to capital structures.

We use Non-GAAP Financial Measures:

•as measurements of our operating performance to assist us in comparing our operating performance on a consistent basis from period to period;

•to allocate resources to enhance the financial performance of our business;

•to assess the value of a potential acquisition;

•to assess the value of a transformed operation’s performance;

•to evaluate the effectiveness of our operational strategies; and

•to compare our operating performance to that of our competitors.

We typically use Non-GAAP Financial Measures to compare the operating performance of each operation from period to period. We find that Non-GAAP Financial Measures are useful for this purpose because they do not include such costs as interest expense, income taxes, depreciation and amortization expense, which may vary from period-to-period depending upon various factors, including the method used to finance operations, the date of acquisition of a community or business, and the tax law of the state in which a business unit operates.

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Non-GAAP Financial Measures have no standardized meaning defined by GAAP. Therefore, our Non-GAAP Financial Measures have limitations as analytical tools, and they should not be considered in isolation, or as a substitute for analysis of our results as reported in accordance with GAAP. Some of these limitations are:

•they do not reflect our current or future cash requirements for capital expenditures or contractual commitments;

•they do not reflect changes in, or cash requirements for, our working capital needs;

•they do not reflect the net interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

•in the case of Consolidated and Combined Adjusted EBITDAR, it does not reflect rent expenses, which are normal and recurring operating expenses that are necessary to operate our leased operations;

•they do not reflect any income tax payments we may be required to make;

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and these non-cash charges do not reflect any cash requirements for such replacements; and

•other companies in our industry may calculate the same Non-GAAP Financial Measures differently than we do, which may limit their usefulness as comparative measures.

We compensate for these limitations by using Non-GAAP Financial Measures only to supplement net income on a basis prepared in accordance with GAAP in order to provide a more complete understanding of the factors and trends affecting our business.

We strongly encourage investors to review our Consolidated and Combined Financial Statements, included in this report in their entirety and to not rely on any single financial measure. Because these Non-GAAP Financial Measures are not standardized, it may not be possible to compare these financial measures with other companies’ Non-GAAP financial measures having the same or similar names. These Non-GAAP Financial Measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP. We strongly urge you to review the reconciliation of income from operations to the Non-GAAP Financial Measures in the table presented above, along with our Financial Statements and related notes included elsewhere in this report.

We believe the following Non-GAAP Financial Measures are useful to investors as key operating performance measures and valuation measures:

Performance Measures:

Consolidated and Combined EBITDA

We believe Consolidated and Combined EBITDA is useful to investors in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of our asset base (depreciation and amortization expense) from our operating results.

We calculate Consolidated and Combined EBITDA as net income, adjusted for net income/ (loss) attributable to noncontrolling interest, before (a) interest expense (b) provision for income taxes and (c) depreciation and amortization.

Consolidated and Combined Adjusted EBITDA

We adjust Consolidated and Combined EBITDA when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance. We believe that the presentation of Consolidated and Combined Adjusted EBITDA, when considered with Consolidated and Combined EBITDA and GAAP net income is beneficial to an investor’s complete understanding of our operating performance. 

We calculate Consolidated and Combined Adjusted EBITDA by adjusting Consolidated and Combined EBITDA to exclude the effects of non-core business items, which for the reported periods includes, to the extent applicable:

•costs at start-up operations;

•share-based compensation expense;

•acquisition related costs;

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•Spin-Off related transaction costs;

•redundant or nonrecurring costs incurred as part of the Transition Services Agreement (as defined in Note 3, Related Party Transactions and Net Parent Investment);

•COVID-19 related costs and supplies; and

•impairment of long-lived assets.

Segment Adjusted EBITDA from Operations

We calculate Segment Adjusted EBITDA from Operations by adjusting Segment Adjusted EBITDAR from Operations to include rent-cost of services. We believe that the inclusion of rent-cost of services provides useful supplemental information to investors regarding our ongoing operating performance for each segment.

Valuation Measure:

Consolidated and Combined Adjusted EBITDAR

We use Consolidated and Combined Adjusted EBITDAR as one measure in determining the value of prospective acquisitions. It is also a measure commonly used by us, research analysts and investors to compare the enterprise value of different companies in the healthcare industry, without regard to differences in capital structures. Additionally, we believe the use of Consolidated and Combined Adjusted EBITDAR allows us, research analysts and investors to compare operational results of companies without regard to operating or financed leases. A significant portion of financed lease expenditures are recorded in interest, whereas operating lease expenditures are recorded in rent expense.

This measure is not displayed as a performance measure as it excludes rent expense, which is a normal and recurring operating expense and, as such, does not reflect our cash requirements for leasing commitments. Our presentation of Consolidated and Combined Adjusted EBITDAR should not be construed as a financial performance measure.

The adjustments made and previously described in the computation of Consolidated and Combined Adjusted EBITDA are also made when computing Consolidated and Combined Adjusted EBITDAR. We calculate Consolidated and Combined Adjusted EBITDAR by excluding rent-cost of services and rent related to start up operations from Consolidated and Combined Adjusted EBITDA.

Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

Revenue

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020"],["","Revenue Dollars","","Revenue Percentage","","Revenue Dollars","","Revenue Percentage"],["","(In thousands)"],["Home health and hospice services"],["Home health","$","136,505","","","31.0","%","","$","98,267","","","25.1","%"],["Hospice","151,612","","","34.5","","","134,075","","","34.3"],["Home care and other(a)","21,453","","","4.9","","","21,317","","","5.5"],["Total home health and hospice services","309,570","","","70.4","","","253,659","","","64.9"],["Senior living services","130,124","","","29.6","","","137,294","","","35.1"],["Total revenue","$","439,694","","","100.0","%","","$","390,953","","","100.0","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(a)","","Home care and other revenue is included with home health revenue in other disclosures in this report."]]
[[/GREPCENT_TABLE]]

Our consolidated and combined revenue increased $48.7 million, or 12.5% driven by the net organic growth of existing operations across all segments of $36.8 million or 9.4% as well as increased revenue from acquired operations of $11.9 million or 3.1% during the year ended December 31, 2021.

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Home Health and Hospice Services

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020","","Change","","% Change"],["","(In thousands)"],["Home health and hospice revenue"],["Home health services","$","136,505","","","$","98,267","","","$","38,238","","","38.9","%"],["Hospice services","151,612","","","134,075","","","17,537","","","13.1"],["Home care and other","21,453","","","21,317","","","136","","","0.6"],["Total home health and hospice revenue","$","309,570","","","$","253,659","","","$","55,911","","","22.0","%"],["","Year Ended December 31,"],["","2021","","2020","","Change","","% Change"],["Home health services:"],["Total home health admissions","37,366","","","26,670","","","10,696","","","40.1","%"],["Total Medicare home health admissions","17,356","","","12,974","","","4,382","","","33.8"],["Average Medicare revenue per 60-day completed episode(a)","$","3,405","","","$","3,290","","","$","115","","","3.5"],["Hospice services:"],["Total hospice admissions","8,613","","","8,186","","","427","","","5.2"],["Average daily census","2,291","","","2,083","","","208","","","10.0"],["Hospice Medicare revenue per day","$","174","","","$","166","","","$","8","","","4.8"],["Number of home health and hospice agencies at period end","88","","","76","","","12","","","15.8","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(a)","","The year to date average for Medicare revenue per 60-day completed episode includes post period claim adjustments for prior periods."]]
[[/GREPCENT_TABLE]]

Home health and hospice revenue increased $55.9 million, or 22.0%. Revenue grew due to an increase in all key performance indicators including an increase in total home health admissions of 40.1%, an increase in Medicare home health admissions of 33.8%, an increase in average Medicare revenue per 60-day completed episode of 3.5%, an increase of 5.2% in total hospice admissions, and an increase of 10.0% in hospice average daily census. The improvement in these metrics resulted in organic revenue growth of $44.0 million for the year ended December 31, 2021. Growth was also driven by the acquisition of 11 home health, hospice and home care operations, between December 31, 2020 and December 31, 2021, resulting in an increase in revenue of $11.9 million or 4.7% overall. Revenue attributable to sequestration suspension accounted for $3.6 million in the current year.

Senior Living Services

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020","","Change","","% Change"],["Revenue (in thousands)","$","130,124","","","$","137,294","","","$","(7,170)","","","(5.2)","%"],["Number of communities at period end","54","","","54","","","\u2014","","","\u2014","%"],["Occupancy","72.7","%","","77.7","%","","(5.0)","%"],["Average monthly revenue per occupied unit","$","3,207","","","$","3,188","","","$","19","","","0.6","%"]]
[[/GREPCENT_TABLE]]

Senior living revenue decreased $7.2 million, or 5.2%, for the year ended December 31, 2021 when compared to the same period in the prior year primarily due to a 5.0% decrease in occupancy related to the COVID-19 pandemic between December 31, 2020 and December 31, 2021.

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Cost of Services

The following table sets forth total cost of services by each of our reportable segments for the periods indicated:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020","","Change","","% Change"],["","(In thousands)"],["Home Health and Hospice","$","257,251","","","$","206,094","","","$","51,157","","","24.8","%"],["Senior Living","95,842","","","90,780","","","5,062","","","5.6"],["Total cost of services","$","353,093","","","$","296,874","","","$","56,219","","","18.9","%"]]
[[/GREPCENT_TABLE]]

Consolidated and combined cost of services increased $56.2 million or 18.9% for the year ended December 31, 2021 when compared to the year ended December 31, 2020. Cost of services as a percentage of revenue increased by 4.4% from 75.9% to 80.3% over the same time period. The increase in cost of services was driven by the increase in revenue, new acquisitions in the current year, an increase in wages and benefits, and additional costs related to the impact of the COVID-19 pandemic.

Home Health and Hospice Services

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020","","Change","","% Change"],["","(In thousands)"],["Cost of service","$","257,251","","","$","206,094","","","$","51,157","","","24.8","%"],["Cost of services as a percentage of revenue","83.1","%","","81.2","%","","1.9","%"]]
[[/GREPCENT_TABLE]]

Cost of services related to our home health and hospice services segment increased $51.2 million, or 24.8%, primarily due to increased volume of services provided. Cost of services as a percentage of revenue for the year ended December 31, 2021 increased 1.9% compared to the year ended December 31, 2020, primarily due to wage costs increased over the prior year in per hour wages, increase in overtime, and reduced staff availability due to the impact of COVID-19 on the staffing environment, resulting in higher overtime and per hour wages.

Senior Living Services

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020","","Change","","% Change"],["","(In thousands)"],["Cost of service","$","95,842","","","$","90,780","","","$","5,062","","","5.6","%"],["Cost of services as a percentage of revenue","73.7","%","","66.1","%","","7.6","%"]]
[[/GREPCENT_TABLE]]

Cost of services related to our senior living services segment increased $5.1 million, or 5.6% for the year ended December 31, 2021 when compared to the year ended December 31, 2020. As a percentage of revenue, costs of service increased by 7.6% as a result of a decrease in occupancy while wage costs increased.

Rent—Cost of Services. Rent increased 4.3% from $39.2 million to $40.9 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily as a result of acquisitions and CPI adjustments. Rent as a percentage of total revenue decreased from 10.1% to 9.3% in the year ended December 31, 2021, as the growth in revenue outpaced the increase in rent expense.

General and Administrative Expense. Our general and administrative expense increased $5.0 million or 15.9% from $31.3 million to $36.3 million and as a percent of revenue from 8.0% to 8.2% for the year ended December 31, 2021 compared to the year ended December 31, 2020. The increase in general and administrative costs was primarily driven by an increase of $4.8 million in wages and benefits, of which stock-based compensation accounted for $0.7 million, during the year ended December 31, 2021.

Depreciation and Amortization. Depreciation and amortization expense decreased slightly as a percentage of total revenue.

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Provision for Income Taxes. Our effective tax rate for the year ended December 31, 2021 was 21.3% of earnings before income taxes compared with an effective tax rate of 13.1% for the year ended December 31, 2020. The increase in the effective tax rate was due to an increase in non-deductible expenses. See Note 14, Income Taxes, to the Consolidated and Combined Financial Statements included elsewhere in this report filed on Form 10-K for further discussion.

Comparison of Prior Year Information

For a comparison of our results of operations of the fiscal year ended December 31, 2020 as compared to the year ended December 31, 2019 refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation on Form 10-K filed with the SEC on February 24, 2021.

Liquidity and Capital Resources

Our primary sources of liquidity are cash generated through operating activities and borrowings under our revolving credit facility.

Revolving Credit Facility    

On February 23, 2021, Pennant entered into an amendment to its existing credit agreement (as amended, the “Credit Agreement”), which provides for an increased revolving credit facility with a syndicate of banks with a borrowing capacity of $150.0 million (the “Revolving Credit Facility”). The Revolving Credit Facility is not subject to interim amortization and the Company will not be required to repay any loans under the Revolving Credit Facility prior to maturity in 2026. The Company is permitted to prepay all or any portion of the loans under the Revolving Credit Facility prior to maturity without premium or penalty, subject to reimbursement of any LIBOR breakage costs of the lenders.

The Credit Agreement contains customary covenants that, among other things, restrict, subject to certain exceptions, the ability of the Company and its independent operating subsidiaries to grant liens on their assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations, amend certain material agreements and pay certain dividends and other restricted payments. Financial covenants require compliance with certain levels of leverage ratios that impact the amount of interest. As of December 31, 2021, we were in compliance with all covenants.

As of December 31, 2021 we had $5.2 million of cash and $92.3 million of available borrowing capacity on our Revolving Credit Facility.

We believe that our existing cash, cash generated through operations and our access to financing facilities, together with funding through third-party sources such as commercial banks, will be sufficient to fund our operating activities and growth needs, and provide adequate liquidity for the next twelve months.

The following table presents selected data from our combined statement of cash flows for the periods presented:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2021","","2020"],["","(In thousands)"],["Net cash (used in) provided by operating activities","$","(18,223)","","","$","50,204"],["Net cash used in investing activities","(20,120)","","","(41,616)"],["Net cash provided by (used in) financing activities","43,490","","","(8,947)"],["Net change in cash","5,147","","","(359)"],["Cash at beginning of year","43","","","402"],["Cash at end of year","$","5,190","","","$","43"]]
[[/GREPCENT_TABLE]]

Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

Our net cash from operating activities for the year ended December 31, 2021 decreased by $68.4 million when compared to the year ended December 31, 2020 . The decrease was primarily related to the repayment of $21.8 in the current year related to AAP from the CARES Act resulting in a change of $49.8 million in operating cash flow. Exclusive of the repayment of AAP, our net cash flow from operations would have been $3.6 million positive for the year ended December 31,

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2021. Other factors that contributed to the net cash used in operating activities was a decrease in net income of $13.4 million when compared to the year ended December 31, 2021.

Our net cash used in investing activities for the year ended December 31, 2021 decreased by $21.5 million compared to the year ended December 31, 2020. The decrease in funds used for investing activities was primarily due to a decrease of $19.6 million in cash paid for acquisitions during the year ended December 31, 2021.

    Our net cash provided by financing activities increased by approximately $52.4 million for the year ended December 31, 2021 when compared to the year ended December 31, 2020 primarily due to an increase in borrowing on our revolving credit facility, partially offset by payments on our deferred financing costs related to the refinance of our credit facility in the first quarter 2021.