The Ensign Group, Inc. (ENSG) 26 Oct 232023 Q3 Earnings call transcript

Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ensign Q3 Earnings Call. [Operator Instructions].

I would now like to turn the call over to Chad Keetch, Chief Investment Officer. ahead. go Please

this as and XX, XXXX. Friday, want release operator, Investor We to our X:XX replay all filed section be on be and Thank replay website a to call our have We and welcome, it nor press until remind of ensigngroup.net. A at that yesterday, our may Pacific not October call. the will XX, will subsequent is of earnings statements the of also of these statements available on you, p.m. are website be everyone. call November made listening available Relations XXXX, to any listeners today, this been that today's updated on

management's Also, the any our materially subject could on current those business about actual in and environment to call. that expressed to or forward-looking These and our beliefs risks statements assumptions made statements on cause we results based expectations, operate. which uncertainties are today's from and today differ implied are

statements publicly should of laws, update on as arise any securities affiliates review reason. events, undue for required of results. federal and as undertake that other information, a for could statements do reliance any complete factors changing forward-looking more Ensign future and result not where new Except forward-looking or its to changes place revise a circumstances or SEC filings to impact our by encouraged our are Listeners not discussion

risk contractual a other other Certain provide and direct to such subsidiaries, our operating payroll, independent In service assets, addition, wholly the with Ensign revenues. as subsidiaries. technology, services subsidiaries resources, a information accounting, referred with Inc. Group, of center to through legal, human collectively operating company relationships management is employees or holding no owned

refer the workers' well companies our to professional addition, wholly captive, we insurance general certain claims-made subsidiary, liabilities. to for compensation as as owned captive insurance for operating coverage provides as our and which In insurance liability

Bearer enters company, REIT, in a Ensign Group, captive the the Ensign, are us Standard The our and and Inc. estate that certain Healthcare, owns investment lease third-party well as Inc., independent that refer of is tenants into with real consolidated Ensign words Group. also Ensign properties invests we, unaffiliated with trust and subsidiaries. agreements care to its as which health subsidiaries Ensign

All of our are Service captive Standard wholly and operated owned and insurance Center, operating independent employees by separate subsidiaries, have that Healthcare Bearer the companies own the management, assets. their REIT

terms should we, nor the and the as and revenue operated by and our construed herein has Group it of similar consolidated or or the imply use be any employees direct the meaning today as are meant not subsidiaries that us, company that assets its we operating activities Group. assets, are as of use Ensign Ensign well References may words to the to

is supplement non-GAAP and A release GAAP the And in turn that, on Form with of business, we relied that reporting provide results, to available I'll GAAP viewed with can to over our they is reconciliation GAAP Port, be our of yesterday's reports. available exclusion Also, a non-GAAP we the Barry? believe metrics. CEO. upon these complete GAAP Barry understanding When more not our our to our press XX-Q. together should with call but measures

for Chad, Thanks, us you and all thank today. joining

been have financial quarter across our clinical improve another strong to are results proud and able our pleased to to report and continue are We that we portfolio.

support who which for consistently teams commitment one efforts grateful endlessly achieve. and our the for patient outcomes another, caregivers love to are and work high-quality and and the they We allows of leaders

occupancy over were of impressive points XX revenues, second return given and quarter is labor of sequentially typical we More in particularly which over in by improvement care by to which occupancies During seasonality. the year XX.X%, basis more prior see market grew and specifically, the the quarter, we XXX persistent basis saw the quarter. same-store points the continued managed pressures pleased

Given on a eventually move pre-COVID XX.X% to upward our and through exceed higher winter. the trend into fall path in are at that are months we same-store same-store occupancy reach we the and of as occupancy quarter, we mission confident

strong stronger We capabilities coordination our also care, continue due to of build managed relationships care increased partners with to better outcomes. and clinical

the and volume result, year. quarter respectively, census combined increased over care XX.X%, same-store the managed increased which by managed revenue, we our and a care saw transitioning X.X% and As prior in during

saw As a to expected, we decrease seasonal the quarter. during mix skilled

continuing continued we skilled growth and for mix care post-acute elevated local pre-COVID the within our skilled in compared of are including However, operators clinical to skilled mix to strong sustainable demand managed when our patients. services, see due context demonstrates increasing to This reputations, levels. the

We center as to practices respond best share are very our see excited they field and the local apply service and persistent labor challenges. partners market to

each lower the month will into in December see seen of usage of XX% we to for reduction nursing our peak less and Likewise, ninth operation, seeing As also of instill we turnover. a they agency of row which as a usage have continue representing second again improved culture since are XXXX. in third-party its in customers agencies, September

to wage talent see down also new slow inflation are recruit and growth. ability We successfully encouraged to our

to $X.XX XXXX Due annual our strength the by quarter, hires results. our XX% new continued of increased results XX% higher and of are and of of the we we as solid our increasing is $X.XX increase over guidance share earnings the as our of than from our earnings quarter, to per saw an share. represents $X.XX March. XXXX of our This XX.X% $X.XX guidance recent the end diluted a XXXX well acquisitions, results new to XXXX between up As diluted end since from midpoint number per during

performance top experienced this last performance guidance We years. perspective, the annual between billion, previous the annual This comes with single rate also on of billion of the To and spun raising growth is in instead growth billion. guidance to transaction, adjusted from XX%. since consistent EPS put comes XXXX, following the proven due transformative Group are but or from compound result $X.XX we in our quarter guidance by we Pennant performance billion some quarter after our $X.XX have principles. growth This is that few events out up we $X.XX to $X.XX revenue of grow not enormous large seen of to increased and a in XXX% Ensign

are that are improve the fundamentals, and we results, of lingering acquisitions. certain to the operational In our on the opportunities front. and confident will our new partners operations the through are on impressive many in manage number continue existing upcoming spite all excited innovate labor both We that to about year there growing also and recognize challenges of

organic and skilled see we portfolio ever operations. we we to drive our our before. As and portfolio, recently us growth continue than potential to There are occupancy transition so improve evaluate of existing front expanding within mix in labor acquired many more successfully opportunities of as dozens

decades. by we acquire again also opportunities of see We mix applying combined and in unique that way horizon, far find, X and showcase serves operations performing developed opportunities enormous to very ability with over near acquisition underperforming and proven a skilled each on transition to best our we Ensign a that principles poised number attractive healthcare growth and are the see market. When

continue here, performance. are we relentlessly consistently that got clinical confident protect fundamentals will produce us the and As follow and to we we that cultural world-class financial

growth. Next, to ask I'll recent additional some regarding insights Chad add our Chad?

Thank you, Barry.

X newly number As to and bringing X totaling the operations quarter estate real the we our are Carolina, operational operation additional operations added X about operations in we in operations Washington, to new very of operations our an we include XXX continue bucket in excited acquired during the and since new These skilled to expected, add X X XX. Kansas, and in Colorado growing portfolio operation assets nursing beds. and in X South

in are by mature some excited to grow hospital. Washington and operation a our an to most formerly in We was that Colorado and operated of to including Kansas add states, continue

Washington to of lease on a portfolio real are Bearer where and thrilled close able portion a also transaction We third-party was the the to estate acquire a in tenant. Standard to

seen are missed have the in in to likely presented this us strategy we new We one transactions Washington that this prior to many and utilize out deals closed the on would have to to we more to similar anxious approach. do past been have implementing

carefully additions amongst the enormous many these had of of these potential selected were operation. we each because the chosen All in financial each and clinical opportunities of were and

off continue pay been and look new operations to seeing forward as discipline to have these We our patient improve.

for in a the service for newly of operations XX.X% skilled and expansion respectively, XXXX, skilled acquired XX.X%, was bucket occupancy skilled As the quarter. so in nursing days result the mix the far and

a is build. been very which starting have us following that will those years point for this note, from to impressive For

each days occupancy they to when of these respectively, is XX.X% and upside into mix compared same-store XX.X% However, transform in operations continue there of operations. same-store to caliber our as skilled and enormous

growth results, our cases, our optimistic in new of We many the are very to within existing are portfolio contributing as acquisitions potential already about our ahead organic schedule.

have fall more of ahead Looking busy and us forward, another even XXXX. in we winter growth are and for preparing

beginning at rates on to steady real financial a estate markets. with pipeline reasonable and opportunities pricing coming due to new to higher continue prices to the We market effects are of opportunities see interest of more tighter see

will And be as operators a to of opportunities lots continue arise. many that also there result, we We see evidence expect struggling. will still that are

and right. remain always place However, to arbitrary have true our remind is as disciplined leaders when the you, only we we acquisition right not set the growth pricing in will we and growing do goals, strategy

driven dozens model, locally our operating of to of lots grow we markets. With bandwidth have across operational

the generated Also of in additional are to skilled and operations to from senior $XX.X to and end of Group, which to owned tenant had subject unaffiliated for living the ratio quarter Pennant to as revenue affiliated of rent properties lease X and these for an Ensign derived campus operation of Inc. produced Standard operations. quarter, long-term now continue Each was properties by and to leased living affiliated XX XXX is quarter, million is that senior a operations, coverage the comprised $XX provide the company Bearer, the We of the and Standard $XX an of disclosure nursing rental of XX leased which X.Xx. triple-net on million million FFO EBITDAR Bearer

with our over grow dry to a Looking poised We call have future nursing, of current operations, our $X constantly And footprint opportunities recruiting forward, in Spencer, preparing lead. to look and more for CEOs for future and CEOs COO, struggling are over and acquire local more actively that around opportunity both that our leaders are skilled importantly, a are I'll operations. turn to billion But with senior deep to healthcare-related the powder new training their color bench Spencer? investments. forward and we we eagerly living to our well-performing businesses in in in other to states. estate real lease seeking few our add to and of

Chad, and everyone. you, Thank hello,

As acquired operations. Barry growth care well have some highlighted, trends our as we in continued recently exciting in cost progress as containment occupancy, seen managed and

I'd For the ongoing X leaders headwinds. next are how these of spite few illustrate to facilities share in local minutes, highlights like to improvements from driving

The comes first example from California. Santa Rosa,

facilities to California ever the providing the the sister while organization first outcomes Since Northern strength year consistently achieved has we One Center year in Summerfield joining in after XXXX, acquired. the year, strong facilities Healthcare area. of also

to to and However, the La occupancy X.X%, by and increased days Cruz CEO, Cason Medicare Director De Enedina prior next improvement by and over XX.X% COO year, Summerfield's in meaningful Compared performance have of Bush past and with care year skilled managed level. quarter, both increased have overall has Nursing, payers. taken the the

EBIT goes the Star beyond overall. But top-notch improved while revenue XX%, of net while facility. performance their and Summerfield As impact all CMS maintaining total ratings quality a satisfaction the measures by of has X has in result, XXX%, by soared customer and far

their leaders embrace For North Cason Summerfield's rigor the occurred facilities as and followed. transition of example, X transition have to countless acquired partners since when new these and model. in of cluster time the given have and new culture cluster. help the the joined the to acclimatize Enedina and American support cluster hours Leading newly February, to Results up of

facilities, acquired example, For is the entire agency now having free. initially high and cluster newly despite agency some of the

consistently time, results strengthened, same and increased have the has systems At financial clinical skilled mix improved. have

of building highlight great led spite COO, The many Washington. challenges. into team, located and their emerged excellence demonstrates achieving pandemic of longtime in Redmond COVID-XX X-star that financial And Redmond, leaders strongest Debbie team is our found turn XXXX. first the competent story This highly years the early of far way facilities past Dumandan Rehabilitation second Washington of similar crucible few results a when Care clinical, cultural Nate by in a Holmes to CEO, in the one a affiliates, confront like were pre-pandemic the performance. and Redmond amazing of and the in to exceeds

infection national hospitals in turn, result in which trust hospitalization CMS some X-star other exceptional For prioritizing intense state. in recruit consistently referrals. turnover These such a to example, the increased able their continuum with state averages, been recruiting, Greater Strong and of combined and in some during by has, rates staffing relationships the focusing of to employees' outcomes, below of have in clinical turn with top area clinical prevention led on and shortages. talent rates time and they well-being, the a providers, lowest far outcomes of develop healthcare enhance rating the Seattle and as

they decrease impressive led rewarding staffing. in which increasing services grew by continues results soared to of employees skilled And would expect, far care on X% money overall and and formula of costs Redmond's nor you Care's to and occupancy. and by own employee-first clinical onboarding expensive of to QX For a recruiting to staff benefits nearly XXXX. XX%. just Redmond in example, invest actually incurring wasting revenues emphasis have improved days cost agency competency, facility taking perpetually. the reputation occupancy aren't has on high-priced the the of extend compared clinical as Redmond continue The will allow their XX% Instead, by beyond because

we'll Summerfield the as With there still Suzanne is that that, opportunity operations. so questions. Redmond examples recognize us company's turn over to to then is time for up financial in open confidence guidance, more true to applying and our the it our tried disciplined like future and Suzanne? bright. our principles, performance And detail improve provide much and are having I'll on gives We we in and

morning, quarter everyone. Thanks, yesterday. and Spencer, in good contained for XX-Q our and are filed the Detailed press release financials

of GAAP income share $XXX.X $X.XX, million, for highlights of of an increase XX.X%. adjusted million, income net GAAP the following: additional XX.X%. was diluted diluted Some of both earnings and revenues per share the $XX and increase were Adjusted earnings XX.X%. was increase an XX.X% revenues increase an XX.X%. Consolidated $XX.X adjusted was net include quarter $X.XX, increase an of GAAP was an million, per

September million XX, Currently, and with investments. in include Other over $XXX.X cash combined line capacity from for give us operations key $XXX.X dry available flow balance of revolving under of of cash metrics as $X and sheet, of we the which, cash of XXXX, our our equivalents future credit, cash million. have billion powder $XXX million on

to value debt-free held own adding growth. We are are XXX also future significant and more XXX by Standard of completely owned assets Bearer XX and gaining over which time, us liquidity with even help

cash quarterly a paid of we quarter, the dividend per $X.XXXX During share.

X.XXx, over given the which year. of debt-to-EBITDA have we also of taken ratio growth We the lease to particularly our last is amount achieving a delever net portfolio, adjusted continued noteworthy

proposed you a of CMS rule. many know, minimum federal As staffing issued

now in the the will CMS has received of rule. are continue thousands comments and and to We period receive on comment

However, we impact if XXXX. a rule not rule final do the in XXXX us is expect to implemented, or

We and other are for encouraged Medicare strong the payers. reimbursement by environment

Medicare As X%. of healthy net receive October will we increase X, rate of a

adjusted already the their of in ended public most some reimbursement operate the of May. states have that reimbursement addition, in linked the to offset In emergency we to health

costs, slowing this the key the year. states in we continue some rate and announced of add The increases of operational have of our rates. to inflation Washington momentum environment to labor, example, we'll Colorado gained like For encouraging biggest including combination and the the to

mentioned, to increasing Barry diluted earnings we our between to XXXX to annual up share, $X.XX from guidance $X.XX per As share. $X.XX $X.XX diluted are per

and We are $X.XX revenue annual to raising our guidance billion also $X.XX billion. between

as additional can strong and have in well confident managed based we We skilled we care strength and and multiple the a meet momentum that occupancy strength this mix seen on programs, our some positive Medicaid have guidance. and scenarios in are performance we as evaluated in the

million, average common the approximately with for provider of exclusion tax certain coming from defense. acquisitions and XXXX, the and on of XXXX expenses rate expectations compensation inclusion legal to of is of closed XX.X inclusion weighted outstanding shares XX%, Medicare of in the Medicaid reimbursement rates tax, based Our guidance stock-based diluted net a primary management's related

Additionally, other the turn on of skilled over mix, factors durations include in insurance And delays that seasonality occupancy I'll staffing, it the Barry? Barry. in economy state general to and accruals with variations and census could performance acquisition reimbursement impact and budgets, that, and quarterly in activities, impact in systems, other of influence back factors. short-term changes

Suzanne. Thanks,

resiliency wrap team and can't emphasize leaders, we work another grateful we center lives facility our I the partners, cease impressive own, on our resources, amazing including honored about behind our supporting by and up, Their the and of amazed results. alongside many, blessed future in service innovative we're and be these incredibly never so has these they enough ways. are commitment clinical to that new record-setting as of one our focus As how partners. field are because We to excited

the have we'll and you complete culture them please built. our portion With Q&A can We the of that, turn instruct have over it to call. faith Bailey, they in Q&A the the now procedure? audience collectively on

Hendrix [Operator Instructions] Your the from line with first RBC comes question of Markets. Capital Ben

rate current commentary perspective? there's I considerations to wanted items to and the kind And environment? or for regard gating on allocation get an I've kind thoughts capital with from the but strategy any the changes amid but financing and on development of -- question, on I any acquisitions of that get calls, -- past this to any if M&A, to wanted M&A-related asked I update quick A leadership appreciate think I being, price

for Ben. that. Thanks Great Yes. question,

in mentioned $X we of have in call, the powder. A dry good cash. is portion As over billion that we

has a to So just it's totally cash us. available lot we've of completely got then our revolver -- and been

So of a debt cost very, very think puts many that us of what kind blend are financial And usually, it's sort we spot I spread capital some overall frankly, and buyers, is and low. It's that is in extremely of particular. competitive a do our amongst levels is with to between it enviable the is, two attractive. in SOFR-based our certainly

to fund that's we own that unlevered we So the to use pretty and well. revolver lot Obviously, excited That's about in cash completely estate with of a we financing something have past. that real doing our ability the both as is have mortgage we've it. done

Given current near not rates, term. horizon that's in probably though, on at the least the

Fidel next Scott comes from Stephens. Your question of line with the

I M&A about to on just opportunity capital as the the talked just given wanted follow actually same available you. up topic, extensive with to the just Ben and

of if when portfolio interested to could Just of looking with XXXX you about into you available that America this I course North the thinking guess, you may during more drill with the some may maybe did profile to targeted the as And do look year. also be the year. compared often out pipeline of of the of the deals portfolio that other deals opportunities larger like deal sort

question, Great Scott. Yes.

of of the the have all, those -- there's lots built first Ensign, deals them. So really are onesie, twosies,

typical there. It's last our an couple number that. in that the to So I But are mix. and that's kind of we terms an uptick guess, interesting expect of larger deals, and the months, follow even we of just seen, portfolio have out in of, pattern, deals

where to to real us real a estate we attractive can, we leases as payment. heavy. prefer as cash lease for are way shown, we've well. would more grow Others that great include an really And estate require are the buy but Some actual

sizable portfolios situation. year. last much I a American bit that distressed very for one all is North we having was would in than biggest waiting is turnaround say in different unique it to the really seen the that the terms in and are our the it's That But little and was those factor leaders for the earlier, leadership we've a sure of California-based. deal ones that all occupancy, That opportunities. as alluded pipeline are said, did

all relationships to stay simply in is them, of and obviously, that. important of We as first managed sort the there's we're markets. in states same is of And We lot in scale the geography there's of benefit a well. and building a priority with hospital in care in lot having know because payers systems our want benefit and

first and the grow our in is in are some of states these that's So very priority states in -- in. we're our first opportunities to we're

into not The end close the in, of -- next. few ]? go next horizon one missed, there But either take of this state. are lot a on something the potentially new by. that or And We but [ new well. would those be very Anna states happen year states It's early Anything a to so seriously. that's definitely that a could at Bailey work as are we're that that I

to rule. And summer approaching be the and think Great. it if I proposal same would till And you're changes staffing or I disruptive think a Okay. just versus we meaningful to operational the will everyone final it for of, the seems wanted rule, there see question, not I question went to follow-up guess, perspective, how next even the be over time, how this so. but some in that a then from pivot made that forward, at the may realistic recognizes advocacy this industry sort about the just asked guess

considering So your I'm effect? types operational also focusing that into this would at a are just looking over frame curious, are largely pursue of efforts side? time starting go this any sort the point, on you just Or to you out multiyear advocacy rule adjustments, of

and got than as other making Scott. keeping are that we're in sure we Operationally, just our things really how we've staff the great sure low that we It's need on, celebrate can the don't that a I every efficient our have focused input and as and turnover do people, we the like think employer market, getting making staff feel on on their we as by we to incentivize always communication we're on with very much to of staffing treat really, and Yes. how choice and sure sure making focused why well. in how we're certain that practices we're a there's way, question, adjust we amazing which making we're around that

ensuring is has the a where quite our been So to because That people is focus our aren't staff some the If that Government a really to there where workplace time, building-by-building place challenging. want that systems should and some ought and our for to when agency really adjustment how more removing they people Federal we basis. decides on if is be. be, then that focus becomes

sure are rally to around continue being a noise efforts best this our cry the to making so is our it employees. lining operationally And be. employer be So we best around in we of making on rule with partners whole the we're sure us this of silver that gives that kind the that absolute focus impetus proposed -- can at great

is of a kind organizationally, what doing to grassroot much very relates really it it focus. we're As

November in X. we're right heavy a So ends comment period now,

produced X,XXX XX,XXX send a comments. Our that well just had nearly comments. recently they've people produced Congress over XXX organization The signed. letter -- has over Congress industry has

even getting this. influence as really our an and offices that of lawmakers the and over on legislators making in sure focused we're from industry, have So can front that in now are efforts we're comments

budget, way the isn't legislation there that's proposed. there and goal see is really an to the And And situation. some potentially make shaping our a the outside that that's a you an on window legislation been But this somehow chance. really, resolution its voting ultimate have into fight at around given the although it, rule focus point. continuing opportunity necessarily is to Really,

There effort it to would too White futile it to around is completely much for far getting and it's so possibility. because too there's just be support struck House union real a down. energy a essentially think driven, rally be I really much that

to we and make focus goal that something less live with that But focus And on than you something all to with up deal road. for and our then it our down make potentially sense it productive. is legal set after that's the and shape can anything and fact. it is challenge trying a some shaping the So again, rather that really again, our do

just more If you. for those could I appreciate slip one in, I comments. question too,

know Medicaid that's I process underway. a Just there's rebasing

for us if I looking of and sort California, on you would underway? maybe what is exactly process just going you'd think out in to what of that up of on appreciate bring could sort speed there be

question, regards Scott. Definitely to of that the both in Medicaid things associations, our will rate. with shaping happening a California very active look We're in Yes. ultimately lot Great what in the very, like. lobbyists and Department with very, California

part be active be And very in continue and to discussion. so we that a this of

patient redetermined That getting As asked separate Medicaid from far far in there's that of a that as being what a before states, not our creating really is I Medicaid terms approved. population that threat it's as don't some know we process about in the population is patients and you of overarching are and is about. facilities to any something piece just Suzanne you've which what more on slowdown questions rebasing, Medicaid we're we too, to any threat redetermination that are really feel it's there seeing than asked our like serve, other in community-based some about patients too much as the

are There to you. back at this no time. I Port, the call further questions turn will Mr. over

appreciate, Okay. and We everyone, joining finish your to support Thanks, obviously, Bailey, today. a for us the year. strong forward thanks, to and look

today's This call. concludes conference

disconnect. may You now