DEF 14A of Pennant Group, Inc., Apr 11, 2024

DEF 14A of Pennant Group, Inc.

Filed Apr 11, 2024 · FY20230001766400-24-000036

Open on EDGAR

  1. Nominees for Election to the Board of Directors (Class II Directors)

    Nominees for Election to the Board of Directors (Class II Directors) Scott E. Lamb served as the Treasurer and Chief Financial Officer of ICU Medical, Inc. (“ICU Medical”) (NASDAQ: ICUI), a publicly traded company that develops, manufactures, and sells medical technologies used in vascular therapy, oncology, and critical care applications, from February 2008 to March 2020. From 2003 to February 2008, Mr. Lamb served as ICU Medical’s Controller. From 2000 to 2003, Mr. Lamb served as Senior Director of Finance for Vitalcom, Inc. Prior to that, Mr. Lamb held various finance and accounting roles at other start-up and manufacturing companies. Mr. Lamb’s experience as the Chief Financial Officer of a public company for over a decade supports the conclusion that he should serve as one of our directors. Gregory K. Morris, MD is a partner since 2012 in MorrisHuml LLC—a consultancy that supports Fortune 1000 firms across industry sectors— where his areas of focus include strategy implementation, strategic alignment, prospective risk mitigation and shaping culture through action learning. Prior to MorrisHuml, he was a partner at Morris & Gunter Associates, LLC. From 2002 until 2004, he was senior vice president for strategy and business development for Advocate Health Care, and from 1995 until 2001, he worked at Cap Gemini Ernst & Young as Vice President as well as Senior Partner. His insurance experience includes serving as senior vice president health care delivery and corporate medical director for Blue Cross and Blue Shield National Capital Area, Eastern Region Medical Director for MetLife and Medical Director for CIGNA Healthcare of Georgia. He achieved the rank of Major with the Army National Guard/U.S. Army and was awarded the Bronze Star. Mr. Morris graduated from Morehouse College and received his MD from Emory University School of Medicine. We believe Dr. Morris’s extensive leadership development expertise in healthcare and in other industries, his clinical background and experience practicing in healthcare organizations and his valuable strategic and other management insights support the conclusion that he should serve as one of our directors. Barry M. Smith served as Chairman and Chief Executive Officer of Magellan Health, Inc., the nation’s largest provider of behavioral health services and a leading national provider of radiology benefit management services, specialty pharmacy and prescription benefit management services, from 2013 until 2019. He founded and served as Chairman, President and Chief Executive Officer of VistaCare, Inc., a national provider of hospice services, from 1996 to 2002, and he served as Chairman of VistaCare in 2003. From 1990 through 1995, Mr. Smith served as Chairman and Chief Executive Officer of Value Rx, Inc., which was then one of the country’s largest pharmacy benefit management companies and, prior to that, served as vice president of operations for PCS Health Systems, also a pharmacy benefit management firm. Mr. Smith has served as a member of the board of directors of Ensign since 2014. We believe Mr. Smith’s extensive experience as a proven and experienced leader in numerous healthcare businesses that are closely related to our businesses and his valuable strategic and other management insights support the conclusion that he should serve as one of our directors.

  2. Class III Directors

    Class III Directors Stephen M. R. Covey has served as the Chief Executive Officer of CoveyLink Worldwide, LLC, since 2004, and is the co-founder of FranklinCovey’s Speed of Trust Practice, where he has taught trust and leadership in 55 countries to business, government, and nonprofit organizations. Mr. Covey is the former President and Chief Executive Officer of the Covey Leadership Center, where he grew the company to become one of the largest leadership development firms in the world. He is the former Executive Vice President of the Franklin Covey Co., where he also served as President of the Education & Training business unit. Mr. Covey is The New York Times and Wall Street Journal bestselling author of The Speed of Trust and Trust & Inspire: How Truly Great Leaders Inspire Greatness in Others. Mr. Covey received his MBA from Harvard Business School. Mr. Covey serves on the Government Leadership Advisory Council, and he has been recognized with the Lifetime Achievement Award for “Top Thought Leaders in Trust” from the advocacy group, Trust Across America/Trust Around the World. We believe that Mr. Covey’s extensive experience in both culture and leadership development, as well as his proven track record of educating and helping business leaders achieve their organization goals, supports the conclusion he should serve as one of our directors. JoAnne Stringfield is a member of the Board of Directors of Blue Cross of Idaho and was the Chair from 2015 to 2023. Blue Cross of Idaho is a not-for-profit mutual heath insurance company and Idaho’s largest private health insurer with approximately 600,000 members. Ms. Stringfield has served on the Blue Cross of Idaho board of directors since 2002. From 2008 until 2016, Ms. Stringfield was an operations executive with Marlin Equity Partners, a global investment firm. From 2001 until 2007, Ms. Stringfield was Vice President of Human Resources of Micron Technology, Inc. a global leader in memory and storage solutions. From 1996 until 2001, Ms. Stringfield served as Vice President of Administration and Corporate Secretary of Micron Electronics, Inc., a publicly traded subsidiary of Micron Technology. Ms. Stringfield joined Micron in 1984 and held various finance and administrative positions. Ms. Stringfield worked for Boise Cascade as an internal auditor prior to joining Micron. Ms. Stringfield received a Bachelor of Science degree in Accounting from the University of Idaho. We believe that Ms. Stringfield’s experience serving on the board of a mutual health insurance company and other business experience supports the conclusion that she should serve as one of our directors.

  3. Class I Directors

    Class I Directors Christopher R. Christensen currently serves as the Executive Chairman of the Ensign Group, Inc. (“Ensign”). Mr. Christensen served as Ensign’s President from 1999, and its Chief Executive Officer from April 2006, in each case until May 2019. Mr. Christensen has served as a member of Ensign’s board of directors since Ensign’s formation in 1999 and has overseen Ensign and its growth since its inception. Prior to the formation of Ensign, Mr. Christensen served as acting Chief Operating Officer of Covenant Care, Inc., a California-based provider of long-term care. In addition, Mr. Christensen served on the board of directors of CareTrust REIT from June 2014 to April 2015. We believe that Mr. Christensen’s important role in the history and management of Ensign and our company and his leadership and business skills support the conclusion that he should serve as one of our directors. John G. Nackel, Ph.D. served as a member of the board of directors of Ensign from June 2008 through December 2019. He is currently the Chairman and Chief Executive Officer of Three-Sixty Advisory Group, LLC (“Three-Sixty”) and Founder and General Partner of Wavemaker Three-Sixty Health, LP (“Wavemaker 360”) venture fund. Founded in 2007 by Dr. Nackel, Three-Sixty consults with leading health systems, payers, physicians, medical technology companies, and other providers. Founded in 2018, Wavemaker 360 invests in early-stage health care companies in the value-based payment space. Dr. Nackel is a 25-year veteran of Ernst & Young where he advised health care companies in his role as a Global Managing Director of Health Care. Dr. Nackel also served as Chief Executive Officer of Ingenix Consulting (now Optum), a division of United Healthcare. In addition, Dr. Nackel served as a director of Mercury General Corporation (NYSE: MCY) from 2016 until 2018. During his career, Dr. Nackel has also served as a board member or chairman of several privately held start-ups and emerging companies, including Visual Health Solutions, Vitalacy, HealthTask, ConnectedHealth, NetStrike, and Sertan, Inc. He earned his bachelor’s degree at Tufts University, master’s degrees in public health and industrial engineering at the University of Missouri, and a Ph.D. in industrial engineering (health systems design) at the University of Missouri. He is a fellow of the American College of Healthcare Executives and the Healthcare Information and Management Systems Society. He is a senior member of the Institute of Industrial Engineers. We believe that Dr. Nackel’s extensive experience as a consultant and an advisor to healthcare companies, his extensive board and management experience and his valuable leadership and management insights support the conclusion that he should serve as one of our directors. Brent J. Guerisoli was appointed Chief Executive Officer of the Company effective August 1, 2022. He previously served as the President of the Company from January 2021 until his appointment as CEO. He has served as a member of the Company’s board of directors since February 2023. Prior to his appointment as President of Pennant, Mr. Guerisoli served as President of Cornerstone Healthcare, Pennant’s home health and hospice segment, helping lead the segment through a period of transformational growth, breakout financial performance and enhanced clinical excellence. Since joining the Company in 2012, Mr. Guerisoli has made significant contributions to the financial, clinical, and cultural achievements of Cornerstone and has played a key role in the organization’s overall leadership recruiting and training. Throughout his tenure at Pennant, Mr. Guerisoli has developed dozens of leaders and directed the organization’s growth efforts across several states. Mr. Guerisoli received his Master of Business Administration from the Walter A. Haas School of Business at the University of California, Berkeley. Prior to joining Pennant, Mr. Guerisoli completed the executive training program and later served as a business manager at AT&T. Mr. Guerisoli’s extensive knowledge of our operations and industry and his proven leadership skills support the conclusion that he should serve as one of our directors. Mr. Guerisoli’s service on the Board creates a critical link between management and the Board of Directors.

  4. Director Compensation

    Director Compensation We provide cash and stock compensation to directors for their services as directors or members of Board Committees. We also reimburse our non-employee directors for their reasonable expenses incurred in attending meetings of our Board of Directors and Board Committees. In fiscal year 2023, each of our non-employee directors received an annual retainer of $30,000, with the exception of Chairman Barry M. Smith, whose retainer is described below. In addition, each member of the Board Committees received the following annual retainers:

  5. Director Compensation

    | Committees | Chair Retainer | Member Retainer | | Audit | $30,000 | $12,000 | | Quality Assurance and Compliance | 30,000 | 12,000 | | Nominating and Corporate Governance | 15,000 | 7,500 | | Compensation | 22,500 | 10,000 |

  6. Director Compensation

    In lieu of a separate member retainer and committee or chair retainers, our Board Chairman, Barry M. Smith, receives a single aggregate retainer of $80,000. We do not compensate our non-employee directors other than for their service on our Board of Directors or the Board Committees. Historically, we have compensated our non-employee Board members based upon what we considered to be fair compensation. Compensation for Board of Directors and Board Committee service is partially based upon relevant market data that we obtain by reviewing director compensation by public companies in the home health, hospice, senior living and other related healthcare industries. To establish compensation of the Board of Directors, we have reviewed the published director compensation information of other healthcare services companies, including The Ensign Group, Inc., National Healthcare Corp., Encompass Health Corporation, Amedisys, Inc., Addus Healthcare Inc., and Brookdale Senior Living Inc. In the fourth quarter of 2022 we retained independent compensation consultants to review our director and executive compensation in comparison to peer companies. These experts analyzed the target total compensation, including cash compensation and equity compensation, paid to our directors, executives, and certain key leaders. Informed by this review process, our Compensation Committee set the amount of annual retainers for non-employee directors and retainers for the chairpersons of each Board Committee at levels that the Compensation Committee believes are comparable to the cash compensation paid to directors of peer group companies. Our 2019 Omnibus Incentive Plan contains an automatic stock grant program for our directors. Each non-employee director receives an automatic grant of 1,500 shares of restricted stock on the 15th day of the month following each quarter end, which shares vest over a three-year period beginning with the first anniversary of the grant date (the “Automatic Stock Grant Program”). Directors elected to fill less than a three-year term will receive a pro rata stock award. In addition to their automatic quarterly grants of 1,500 shares per quarter, in 2023 each director received an additional one-time grant of 3,000 shares of restricted stock on January 17, 2023 with a fair value of $10.80 per share subject to ordinary vesting requirements. Unvested restricted stock grants will become fully vested on the date each non-employee director ceases serving on the Board of Directors unless such director is removed for cause. Pursuant to the Automatic Stock Grant Program, each Board member who receives stock grants must maintain ownership of a minimum of thirty-three percent (33%) of the cumulative shares granted to him or her. Our Board of Directors and Compensation Committee considered the total compensation paid to directors of the foregoing peer group companies in deciding to grant these automatic stock awards. However, our Board of Directors and Compensation Committee determined the amount of stock awards based on what they considered to be an appropriate incentive for board service to the Company, and they did not attempt to base this number on the amount awarded to directors of the other companies named above. Our Board of Directors has also determined that it may be necessary to provide additional incentives to prospective directors in order to recruit talented leaders to serve on the Board of Directors. None of our directors or director nominees has any agreement or arrangement with any third party that relates to compensation or other payment in connection with that person’s candidacy or service as a director of our company. The following table sets forth the compensation awarded to, earned by, or paid to our non-employee directors for the year ended December 31, 2023. In recognition of his significant time investment and contribution to the Company, in 2023, our Board Chairman, Barry M. Smith, received a one-time grant of 30,000 options on July 17, 2023 with a strike price of $11.35 and a three-year vesting schedule, in addition to his normal quarterly grants. Each of the directors included in the table served for the full-year 2023.

  7. Director Compensation

    | Name | Fees Earned ($) | Stock Awards ($)(1) | Total($) | | Christopher R. Christensen | 42,000 | 101,820 | 143,820 | | John G. Nackel, Ph.D | 64,500 | 101,820 | 166,320 | | Stephen M. R. Covey | 47,500 | 101,820 | 149,320 | | JoAnne Stringfield | 75,000 | 101,820 | 176,820 | | Scott E. Lamb | 67,500 | 101,820 | 169,320 | | Gregory K. Morris | 46,000 | 101,820 | 147,820 | | Barry M. Smith(2) | 68,500 | 266,925 | 335,425 |

  8. Director Compensation

    | (1) This column reflects the total dollar amount recognized for financial statement reporting purposes with respect to the fair value of the restricted stock awards granted to each of the Directors in accordance with Accounting Standard Codification (ASC) 718, Stock Compensation. Mr. Christopher R. Christensen, Dr. John G. Nackel, Mr. Stephen M. R. Covey, Ms. JoAnne Stringfield, Mr. Scott E. Lamb, Mr. Barry M. Smith, and Dr. Gregory K. Morris each received grants of 1,500 shares of restricted stock in the first month of each quarter for the full-year 2023 and an additional 3,000 RSA on January 17, 2023 with a fair value of $10.80 per share subject to ordinary vesting schedule. Compensation expense for stock awards granted to Board of Directors were recognized in full on the date these awards were granted. | | (2) Mr. Smith's annual retainer (paid in monthly increments) was increased to $80,000 by Board approval in June 2024, and became effective with the July monthly payment. |

  9. Principal Economic Elements of Executive Compensation

    Principal Economic Elements of Executive Compensation Base Salary. We believe it is important to pay our executives salaries within a competitive market range in order to attract and retain highly talented executives. Although historically we have not set executive salaries based upon any particular benchmarks, we may from time to time generally review relevant market data to assist us in our compensation decision process. We believe that the base salaries and the total compensation of our executives are comparable to or below the median total compensation of executives with similar positions at comparable companies. Each of our executives’ base salary is generally determined based upon job responsibilities, individual experience and the value the executive provides to our Company. The Compensation Committee considered each of these factors in determining the compensation each executive would be paid in 2023. We may elect to change this practice in future years. The decision, if any, to materially increase or decrease an executive's base salary in subsequent years will likely be based upon these same factors and others recommended by a compensation consultant, if any. Our compensation committee makes decisions regarding base salary at the time the executive is hired, and makes decisions regarding any changes to base salary on an annual basis. Annual Cash Bonuses. We establish an executive incentive program each year, pursuant to which certain executives may earn annual bonuses based upon our performance under the criteria set forth in our executive compensation plan. Historically, in the first quarter of each year, our compensation committee identifies the plan's participants for the year and establishes an objective formula by which the amount, if any, of the plan's bonus pool will be determined. The committee also has the discretion to allocate the bonus pool among the individual executives prior to the end of the year and any such early allocation will remain subject to further adjustments upon the final determination of the bonus pool calculations during the first quarter of each year. The bonus pool is also adjusted to include clinical and governance performance that can increase or decrease the bonus pool based on the achievement of a pre-established target. Our compensation committee established the following formula for the 2023 bonus pool:

  10. Principal Economic Elements of Executive Compensation

    | Adjusted Annual Earnings Before Taxes1 (“AEBT”) in 2023 | Bonus Pool | | For AEBT up to $13.6 million | $— | | For AEBT greater than $13.6 million, but less than $14.1 million | AEBT between $13.6 million and $14.1 million * 5.0% | | For AEBT greater than $14.1 million, but less than $14.6 million | $0.025 million + (amount of AEBT between $14.1 million and $14.6 million * 7.5%) | | For AEBT greater than $14.6 million, but less than $15.4 million | $0.038 million + (amount of AEBT between $14.6 million and $15.4 million * 10.0%) | | For AEBT greater than $15.4 million, but less than $16.4 million | $0.075 million + (amount of AEBT between $15.4 million and $16.4 million * 12.5%) | | For AEBT greater than $16.4 million | $0.125 million + (amount of AEBT over $16.4 million * 15.0%) |

  11. Principal Economic Elements of Executive Compensation

    | (1) The 2023 bonus pool was based on non-GAAP AEBT. AEBT is defined as net income before (a) costs incurred for start-up operations, including rent and excluding depreciation, (b) share-based compensation expense, (c) non-capitalizable acquisition related costs and credit allowances, (d) redundant or non-recurring transition services costs, (e) loss related to senior living operations transferred to Ensign, (f) usual or non-recurring charges, and (g) net income attributable to noncontrolling interest. |

  12. Principal Economic Elements of Executive Compensation

    Except with respect to grants to our directors and other stock grants issued pursuant to the executive incentive plan, the stock options and restricted stock awards that we grant generally vest over five years (20% on each anniversary of the grant date). If a recipient’s employment with us terminates, then the stock options and restricted stock that remain unvested as of the date of the termination of the recipient’s employment will be forfeited without compensation. Until vested, the stock options and restricted stock may not be transferred, and vested options and shares shall be subject to our insider trading policy. Stock options generally have a maximum term of ten years. The grant dates of our stock options and restricted stock awards are generally the date our Board of Directors or Compensation Committee meets to approve such stock option grants or restricted stock awards. Our Board of Directors or Compensation Committee historically has approved stock-based awards at regularly scheduled meetings. Our Board of Directors and Compensation Committee intend to continue this practice of approving the majority of stock-based awards at regularly scheduled meetings on a quarterly basis, unless earlier approval is required for a new-hire inducement or position change grant; regardless of whether or not our Board of Directors or Compensation Committee knows material non-public information on such date. The exercise price of our stock options is the fair market value of our common stock on the date of grant as determined by the closing price of our common stock on the NASDAQ Stock Market on the date of grant. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares of common stock underlying the option, including voting rights and the right to receive dividends or dividend equivalents. However, the recipients of restricted stock will have the right to vote and to receive any dividends or other distributions paid with respect to their shares of restricted stock, whether vested or unvested. Our Chief Executive Officer historically has made recommendations to our Compensation Committee and Board of Directors regarding the amount of stock options and other compensation to grant to our other executives based upon his assessment of their performance, and may continue to do so in the future. Our executive officers, however, do not have any role in determining the timing of our stock option grants. Although we do not have any formal policy for determining the amount of stock-based awards or the timing of our stock-based awards, we have historically granted stock options or restricted stock to high-performing employees (i) in recognition of their individual achievements and contributions to our company, and (ii) in anticipation of their future service and achievements. We may in the future introduce a more formal plan. Other Compensation. Our executives are eligible to receive the same benefits that are available to all employees, including the premiums paid to provide life insurance equal to each executive's annual salary and the premiums to provide accidental death and dismemberment insurance. Certain of our executives also receive allowances for automobiles and third-party tax services.

  13. Summary Compensation Table

    Summary Compensation Table The following table sets forth certain information with respect to compensation for the years ended December 31, 2021, 2022 and 2023, earned by, awarded to or paid to our NEOs.

  14. Summary Compensation Table

    | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($)(1) | Stock Awards ($) | All Other Compensation ($) | Total ($) | | Brent J. Guerisoli Chief Executive Officer | 2023 | 362,500 | 1,000,000 | 497,136 | — | 8,884 | 1,868,520 | | | 2022 | 295,834 | 500,000 | 150,650 | 604,350 | 8,447 | 1,559,281 | | | 2021 | 268,092 | 300,000 | 186,880 | — | 4,820 | 759,792 | | Lynette B. Walbom(2) Chief Financial Officer | 2023 | 206,250 | 350,000 | 183,542 | — | 75,400 | 815,192 | | Jennifer L. Freeman(2) Former Chief Financial Officer | 2023 | 278,000 | — | 72,529 | — | 8,354 | 358,883 | | | 2022 | 276,666 | 136,000 | 90,390 | 268,600 | 7,823 | 779,479 | | | 2021 | 267,917 | 175,000 | 155,733 | — | 7,798 | 606,448 | | John J. Gochnour President and Chief Operating Officer | 2023 | 316,668 | 800,000 | 369,754 | — | 8,713 | 1,495,135 | | | 2022 | 273,541 | 458,702 | 60,260 | 537,200 | 9,941 | 1,339,644 | | | 2021 | 265,500 | 135,750 | 186,880 | — | 10,775 | 598,905 | | Kirk Cheney General Counsel and Corporate Secretary | 2023 | 250,000 | 250,512 | 212,304 | — | 238 | 713,054 | | | 2022 | 213,031 | 90,000 | 24,095 | 188,020 | 188 | 515,334 | | | 2021 | 195,000 | 60,000 | 91,841 | — | 170 | 347,011 | | Jason P. Steik Chief Clinical Officer | 2023 | 257,726 | 250,000 | 212,304 | — | 966 | 720,996 | | | 2022 | 236,667 | 82,500 | 12,052 | 188,020 | 919 | 520,158 | | | 2021 | 212,292 | 60,000 | 91,845 | — | 887 | 365,024 |

  15. Summary Compensation Table

    | (1) The annual amounts shown are the amounts of total compensation cost which will be recognized over the five year vesting period related to options to purchase common stock which were granted during the year ended December 31, 2023, as a result of the adoption of ASC 718. These awards are not immediately exercisable and vest over five years. For a discussion of valuation and forfeiture assumptions, see Note 12, Options and Awards, in our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. | | (2) Jennifer L. Freemen stepped down from her role as interim Chief Financial Officer on May 22, 2023 and Lynette B Walbom took over the role of Chief Financial Officer on the same date. |

  16. Pay Versus Performance

    Pay Versus Performance The following table sets forth certain information required by Item 402(v) of Regulation S-K (“PvP Rules”). For a better understanding of how our Compensation Committee evaluates and sets executive compensation, please see the “Compensation Discussion and Analysis” (CD&A) above. Pursuant to the PvP Rules, the pay versus performance table (“PvP Table”) (set forth below) is required to include, for each year, the compensation actually paid (“CAP”) for the principal executive officer (“PEO”) and the average CAP for non-PEO NEOs. CAP represents a new calculation of compensation that differs significantly from the Summary Compensation Table ("SCT") calculation of compensation presented in the CD&A, as well as from the way in which the Compensation Committee makes annual compensation decisions, as discussed in the CD&A. For example, the CAP calculation for a given year includes the change in fair value of multiple years of equity grants that are outstanding and unvested during the year, whereas the Summary Compensation Table calculation includes only the grant date fair value of equity awards that are granted during the year. These differences result in a CAP calculation that may be higher or lower than the corresponding Summary Compensation Table calculation, and that also may be more significantly impacted by changes in stock price. Outstanding equity awards may be represented in more than one year of the PvP Table.

  17. Pay Versus Performance Table

    Pay Versus Performance Table The following table sets forth additional compensation information for our PEO and our other Named Executive Officers (non-PEO NEOs) (averaged) along with total shareholder return, net income, and Adjusted net income performance results for fiscal 2023, 2022, 2021 and 2020.

  18. Pay Versus Performance Table

    | Year | Summary Comp. Table Total for Daniel H. Walker | Summary Comp. Table Total for Brent J. Guerisoli | Comp. Actually Paid to Daniel H. Walker | Comp. Actually Paid to Brent J. Guerisoli | Average Summary Comp. Table Total for Non-PEO NEOs | Average Comp. Actually Paid to Non-PEO NEOs | Year-end value of $100 invested on 12/31/2019 in: | | Net Income (in millions) | Adjusted Net Income (in millions) | | | | | | | | | Pennant Group | Industry Peer Group | | | | | ($)(1) | ($)(1) | ($)(1)(2) | ($)(1)(2) | ($)(1) | ($)(1)(2) | ($)(3) | ($)(3) | ($) | ($) | | 2023 | N/A | 1,868,520 | N/A | 2,388,485 | 820,652 | 1,018,223 | 42 | 106 | 13 | 22 | | 2022 | (3,296,796) | 1,559,281 | (14,325,297) | 700,092 | 828,145 | 145,181 | 33 | 95 | 7 | 17 | | 2021 | 348,668 | N/A | (41,376,946) | N/A | 601,733 | (2,359,016) | 69 | 108 | 3 | 14 | | 2020 | 1,082,194 | N/A | 30,882,515 | N/A | 1,327,738(5) | 3,644,011(5) | 176 | 127 | 16 | 23 |

  19. Pay Versus Performance Table

    | (1) For 2023, the PEO was Brent J. Guerisoli (“Current PEO”) and the Non-PEO NEOs were Jennifer L. Freeman, John J. Gochnour, Lynette Walbom, Jason Steik, and Kirk Cheney. For 2022, the PEO was Daniel H. Walker (“Prior PEO”) until August 1, 2022, at which point Brent J. Guerisoli became PEO. Non-PEO NEOs were Jennifer L. Freeman, John J. Gochnour, and Derek J. Bunker. For 2021, the PEO was Daniel H. Walker and the Non-PEO NEOs were Jennifer L. Freeman, John J. Gochnour, and Derek J. Bunker. For 2020, the PEO was Daniel H. Walker and the Non-PEO NEOs were Jennifer L. Freeman, John J. Gochnour, and Derek J. Bunker. |

  20. Pay Versus Performance Table

    | (2) For 2023, CAP was determined by making the following adjustments for equity awards: |

  21. Pay Versus Performance Table

    | | | Summary Compensation Table (“SCT”) Total | Equity Deductions from SCT Total | Year End Fair Value of Current Year Equity Awards | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards | Year over Year Change in Fair Value of Equity Awards Granted in Prior Year that Vested in the Year | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year | CAP | | | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | | Brent J. Guerisoli | 2023 | 1,868,520 | (497,136) | 633,786 | 336,595 | 46,721 | — | 2,388,486 | | Non-PEO NEOs | 2023 | 820,652 | (210,087) | 273,102 | 117,794 | 16,762 | — | 1,018,223 |

  22. Pay Versus Performance Table

    | (a) Summary Compensation Table amounts reflect the grant date fair values of equity awards. For CAP calculation purposes, adjustments have been made to reflect fair values as of each measurement date. The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (iv) and for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant, with the exception of the current share price used in the valuations. For a reconciliation of adjustments to Summary Compensation Table amounts for 2020, 2021, and 2022 for CAP calculation purposes, see the proxy statement filed with the Commission on April 13, 2023. |

  23. Pay Versus Performance Table

    | (3) Company and peer group total shareholder return (“TSR”) for each year reflects what the cumulative value of $100 would be, including reinvestment of dividends, if such amount were invested on December 31, 2019. For purposes of the table, the Company’s peer group is an “industry peer group”, as reflected in our stock performance graph in our Annual Report on Form 10-K, which was filed with the Commission on February 28, 2024. When comparing the Company’s Total Shareholder Return (TSR) to its peer group, it is important to recognize that, although each peer group company is part of the post-acute health care industry, Pennant and its peers have different business lines, geographies, business models, and acuity mixes. For example, The Ensign Group, one of the key contributors to the peer group TSR, primarily operates skilled nursing facilities. Encompass Health is a large operator of inpatient rehabilitation hospitals, a business line that Pennant does not have. The Company has provided the peer group TSR comparison to comply with SEC rules, but notes that the peer group comparison is imperfect. The peer group total shareholder returns for 2020, 2021, and 2022 have been re-stated from those reported in the prior year due to the acquisition of LHC Group, Inc. in February 2023. |

  24. Pay Versus Performance Table

    | (4) Adjusted net income is defined as net income before (i) costs incurred for start-up operations, including rent and excluding depreciation, (ii) share-based compensation expense, (iii) non-capitalizable acquisition related costs and credit allowances, (iv) redundant or non-recurring transition services costs, (v) loss related to senior living operations transferred to Ensign, (vi) usual or non-recurring charges, (vii) net income attributable to noncontrolling interest, and (viii) the tax impact of the adjustments to GAAP net income. | | (5) The amounts for Average Summary Comp. Table Total for Non-PEO NEOs and the Comp. Actually Paid for Non-PEO NEOs for 2020 were revised from the corresponding amounts reported in the prior year’s proxy statement, which were inadvertently overstated. The corrected amounts are reflected in the table above and the graphical comparisons shown below. |

  25. Grants of Plan-Based Awards

    Grants of Plan-Based Awards The following table summarizes grants of plan-based awards made to our NEOs in 2023.

  26. Grants of Plan-Based Awards

    | Name | Grant Date | All Other Stock Awards: Number of Shares or Stock Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Options and Stock Awards ($) | | Brent J. Guerisoli | 2/28/2023 | — | 60,000 | 15.02 | 435,174 | | | 8/22/2023 | — | 10,000 | 12.52 | 61,963 | | Lynette B. Walbom | 5/25/2023 | — | 25,000 | 11.60 | 140,168 | | | 8/22/2023 | — | 7,000 | 12.52 | 43,374 | | Jennifer L. Freeman | 2/28/2023 | — | 10,000 | 15.02 | 72,529 | | John J. Gochnour | 2/28/2023 | — | 45,000 | 15.02 | 326,380 | | | 8/22/2023 | — | 7,000 | 12.52 | 43,374 | | Kirk Cheney | 2/28/2023 | — | 25,000 | 15.02 | 181,322 | | | 8/22/2023 | — | 5,000 | 12.52 | 30,981 | | Jason P. Steik | 2/28/2023 | — | 25,000 | 15.02 | 181,322 | | | 8/22/2023 | — | 5,000 | 12.52 | 30,981 |

  27. Outstanding Equity Awards at Fiscal Year End

    Outstanding Equity Awards at Fiscal Year End The following table sets forth certain information with respect to outstanding equity awards of our NEOs as of December 31, 2023. The market value of the shares in the following table is the fair value of such shares at December 31, 2023.

  28. Outstanding Equity Awards at Fiscal Year End

    | Name | | Option awards | | | | | Stock awards | | | | Grant Date | Number of Securities underlying unexercised options exercisable (#)(1) | Number of securities underlying unexercised options unexercisable (#)(1) | Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) | Option exercise price ($) | Option expiration date | Number of shares or units of stock that have not vested (#) | Market value of shares of units of stock that have not vested ($)(2) | | Brent J. Guerisoli | 8/22/23 | — | 10,000 | — | 12.52 | 8/22/33 | — | — | | | 2/28/23 | — | 60,000 | — | 15.02 | 2/28/33 | — | — | | | 7/25/22 | — | — | — | — | — | 36,000 | 501,120 | | | 2/21/22 | 5,000 | 20,000 | — | 14.13 | 2/21/32 | — | — | | | 5/25/21 | 6,000 | 9,000 | — | 31.54 | 5/25/31 | — | — | | | 10/28/20 | 24,000 | 16,000 | — | 38.88 | 10/28/30 | — | — | | | 8/15/20 | 3,600 | 2,400 | — | 37.98 | 8/15/30 | — | — | | | 5/27/20 | 12,000 | 8,000 | — | 27.56 | 5/27/30 | — | — | | | 10/1/19 | 52,000 | 13,000 | — | 15.09 | 10/1/29 | — | — | | | 5/31/18 | 14,282 | — | — | 6.16 | 5/31/28 | — | — | | | 5/25/17 | 12,497 | — | — | 4.54 | 5/25/27 | — | — | | | 5/26/16 | 8,926 | — | — | 3.84 | 5/26/26 | — | — | | | 5/27/15 | 2,515 | — | — | 7.42 | 5/27/25 | — | — | | | 8/5/14 | 2,514 | — | — | 5.31 | 8/5/24 | — | — | | Jennifer L. Freeman | 2/28/23 | — | 10,000 | — | 15.02 | 2/28/33 | — | — | | | 7/25/22 | — | — | — | — | — | 16,000 | 222,720 | | | 2/21/22 | 3,000 | 12,000 | — | 14.13 | 2/21/32 | — | — | | | 5/25/21 | 5,000 | 7,500 | — | 31.54 | 5/25/31 | — | — | | | 10/28/20 | 12,000 | 8,000 | — | 38.88 | 10/28/30 | — | — | | | 8/15/20 | 2,400 | 1,600 | — | 37.98 | 8/15/30 | — | — | | | 5/27/20 | 24,000 | 16,000 | — | 27.56 | 5/27/30 | 4,000 | 55,680 | | | 10/28/19 | 5,600 | 1,400 | — | 18.09 | 10/28/29 | — | — | | | 10/1/19 | 9,600 | 2,400 | — | 15.09 | 10/1/29 | — | — | | Lynette B. Walbom | 8/22/23 | — | 7,000 | — | 12.52 | 8/22/33 | — | — | | | 5/25/23 | — | 25,000 | — | 11.60 | 5/25/33 | — | — | | John J. Gochnour | 8/22/23 | — | 7,000 | — | 12.52 | 8/22/33 | — | — | | | 2/28/23 | — | 45,000 | — | 15.02 | 2/28/33 | — | — | | | 7/25/22 | — | — | — | — | — | 32,000 | 445,440 | | | 2/21/22 | 2,000 | 8,000 | — | 14.13 | 2/21/32 | — | — | | | 5/25/21 | 6,000 | 9,000 | — | 31.54 | 5/25/31 | — | — | | | 10/28/20 | 9,000 | 6,000 | — | 38.88 | 10/28/30 | — | — | | | 8/15/20 | 3,600 | 2,400 | — | 37.98 | 8/15/30 | — | — | | | 5/27/20 | 9,000 | 6,000 | — | 27.56 | 5/27/30 | — | — | | | 10/1/19 | 61,600 | 15,400 | — | 15.09 | 10/1/29 | — | — | | | 5/31/18 | 17,853 | — | — | 6.16 | 5/31/28 | — | — | | | 5/25/17 | 8,926 | — | — | 4.54 | 5/25/27 | — | — | | | 10/26/16 | 12,572 | — | — | 6.10 | 10/26/26 | — | — | | | 5/26/16 | 8,926 | — | — | 3.84 | 5/26/26 | — | — |

  29. Outstanding Equity Awards at Fiscal Year End

    | | 5/27/15 | 6,286 | — | — | 7.42 | 5/27/25 | — | — | | | 8/5/14 | 15,715 | — | — | 5.31 | 8/5/24 | — | — | | | 2/7/14 | 34,568 | — | — | 3.36 | 2/7/24 | — | — | | Jason P. Steik | 8/22/23 | — | 5,000 | — | 12.52 | 8/22/33 | — | — | | | 2/28/23 | — | 25,000 | — | 15.02 | 2/28/33 | — | — | | | 7/25/22 | — | — | — | — | — | 11,200 | 155,904 | | | 2/21/22 | 400 | 1,600 | — | 14.13 | 2/21/32 | — | — | | | 10/26/21 | 1,200 | 1,800 | — | 24.04 | 10/26/31 | — | — | | | 5/25/21 | 2,000 | 3,000 | — | 31.54 | 5/25/31 | — | — | | | 10/28/20 | 3,000 | 2,000 | — | 38.88 | 10/28/30 | — | — | | | 8/25/20 | 1,500 | 1,000 | — | 37.70 | 8/25/30 | — | — | | Kirk Cheney | 8/22/23 | — | 5,000 | — | 12.52 | 8/22/33 | — | — | | | 2/28/23 | — | 25,000 | — | 15.02 | 2/28/33 | — | — | | | 7/25/22 | — | — | — | — | — | 11,200 | 155,904 | | | 6/1/22 | 600 | 2,400 | — | 18.03 | 6/1/32 | — | — | | | 10/26/21 | 1,200 | 1,800 | — | 24.04 | 10/26/31 | — | — | | | 5/25/21 | 2,000 | 3,000 | — | 31.54 | 5/25/31 | — | — | | | 10/28/20 | 3,000 | 2,000 | — | 38.88 | 10/28/30 | — | — | | | 8/15/20 | 2,400 | 1,600 | — | 37.98 | 8/15/30 | — | — | | | 5/27/20 | 3,000 | 2,000 | — | 27.56 | 5/27/30 | — | — | | | 10/1/19 | 6,400 | 1,600 | — | 15.09 | 10/1/29 | — | — |

  30. Outstanding Equity Awards at Fiscal Year End

    | (1) Options granted to employees of the subsidiaries of Pennant generally vest over five years at 20% per year on the anniversary of the grant date. Options expire ten years after the date of grant. | | (2) The market value of these shares at December 31, 2023 was $13.92 per share. |

  31. Option Exercises and Stock Vested

    Option Exercises and Stock Vested The following table provides information for our NEOs about options that were exercised and restricted stock that vested in 2023.

  32. Option Exercises and Stock Vested

    | | Option Awards | | Stock Awards | | | Name | Number of shares acquired on exercise (#) | Value realized on exercise ($)(1) | Number of shares acquired on vesting (#) | Value realized on vesting ($)(2) | | Brent J. Guerisoli | — | — | 9,000 | 89,920 | | Jennifer L. Freeman | — | — | 6,000 | 68,260 | | John J. Gochnour | — | — | 8,000 | 101,160 | | Jason P. Steik | — | — | 2,800 | 31,472 | | Kirk Cheney | — | — | 2,800 | 31,472 |

  33. Option Exercises and Stock Vested

    | (1) The value realized on the exercise of stock options is equal to the number of shares acquired multiplied by the difference between the exercise price and the market price of our common stock. The market price is the closing price of our common stock on the date of exercise. | | (2) The value realized on the vesting of restricted stock awards is equal to the number of shares vested multiplied by the market price of our common stock. The market price is the closing price of our common stock on the vesting date. |

  34. Pension Benefits

    Pension Benefits None of our named executive officers participates in or has account balances in qualified or non-qualified defined benefit plans sponsored by us. The Compensation Committee may elect to adopt qualified or non-qualified defined benefit plans in the future if it determines that doing so is in our best interests.

  35. Non-Qualified Deferred Compensation

    Non-Qualified Deferred Compensation During fiscal year 2021, the Company implemented a non-qualified deferred compensation plan (the “DCP”) for executive, other highly compensated employees, independent contractors and non-employee directors which went into effect on June 1, 2021, effective for compensation to be paid in 2022 and thereafter. The independent contractors and non-employee directors are otherwise ineligible for participation in the Company's 401(k) plan. The DCP allows participating employees to defer the receipt of a portion of their base compensation and certain employees up to 80% of their base salary and bonus compensation, or director fees. At the participant’s election, payments can be deferred until a specific date at least one year after the year of deferral or until termination of employment and can be paid in a lump sum or in up to ten annual installments. Separate deferral elections can be made for each year, and in limited circumstances, existing payment elections may be changed. The amounts deferred are credited with earnings and losses based upon the actual performance of the deemed investments selected by the participant. The rate of return for each participant varies depending on the specific investment elections made by the participant. Additionally, the plan allows for the employee deferrals to be deposited into a rabbi trust and the funds are generally invested in individual variable life insurance contracts owned by us that are specifically designed to informally fund savings plans of this nature. The following table shows contributions and earnings during fiscal year 2023 and the account balances as of December 31, 2023, for our named executive officers who have contributed to the deferred compensation plan. All of the contributions that are reported in the table below were already included in the Summary Compensation Table.

  36. Non-Qualified Deferred Compensation

    | Name | Aggregate Balance at December 31, 2022 ($) | Executive Contributions in 2023 ($) | Company Contributions in 2023 ($) | Aggregate Earnings in 2023 ($) | Aggregate Withdrawals/Distributions ($) | Aggregate Balance at December 31, 2023 ($) | | Jennifer L. Freeman | 25,607 | 65,395 | | 19,504 | — | 110,506 | | Brent J. Guerisoli | 28,106 | 50,000 | — | 6,346 | — | 84,452 | | John J. Gochnour | 62,374 | — | — | 10,069 | — | 72,443 |

  37. Pay Ratio Disclosure

    Pay Ratio Disclosure In accordance with Item 402(u) of Regulation S-K, we determined the ratio of the annual total 2023 compensation of Mr. Brent J. Guerisoli, our Chief Executive Officer, relative to the annual total 2023 compensation of our median employee. For 2023, the ratio of the total annual compensation of Mr. Guerisoli as reported in the “total” column of the Summary Compensation Table to the median of the annual total compensation of all of our other employees was 58:1. The median of the annual total compensation of our employees other than Mr. Guerisoli, including part-time employees and those who served a partial year, was $31,970 for 2023. We identified the median employee using our employee population of approximately 5,679 employees as of December 31, 2023, 31.5% of whom are part-time. In accordance with SEC rules for calculating the ratio, we did not make any full-time equivalent adjustments to the compensation of our part-time employees, any annualized adjustments for employees who served the partial year, or any adjustments to Mr. Guerisoli’s compensation to reflect amounts actually earned during 2023 or to reflect amounts unearned for 2023 performance. Since the foregoing pay ratio includes the impact of our part-time employees and those who served a partial year, we believe it is appropriate to provide a supplemental calculation to reflect the pay ratio of Mr. Guerisoli to the median annual total compensation of our employees who served the whole year and were full-time as of December 31, 2023. The ratio of Mr. Guerisoli’s total annual compensation as reported in the “total” column of the Summary Compensation Table to the median annual total compensation of only our employees who served the whole year and were full-time as of December 31, 2023 was 29:1 for 2023. The median of the total annual compensation of such employees, other than Mr. Guerisoli, was $65,293 for 2023. We identified such median employee using our employee population of approximately 2,391 employees who served the whole year and were full-time as of December 31, 2023. To identify the median employees, we used amounts reported in box 5 of wage statements on Form W-2 issued for compensation earned in 2023 as our consistently applied compensation measure. We then calculated the annual total compensation for the identified median employees in accordance with the requirements of the Summary Compensation Table.

  38. Pay Ratio Disclosure

    | PROPOSAL 3: ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION |

  39. Pay Ratio Disclosure

    | ✓ | OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE “SAY ON PAY” PROPOSAL |