The Ensign Group, Inc. Q2 FY2025 earnings call

• Local teams achieved strong quarter with upward trends in occupancy and skilled mix, setting second quarter records for same-store and transitioning occupancy (82.1% and 84% respectively, up from prior year) and skilled census (7.4% and 13.5% respectively, up from prior year).
• Regulatory win with skilled nursing population carved out of provider tax reduction in reconciliation bill.
• Raised 2025 earnings guidance to $6.34-$6.46 per diluted share and revenue guidance to $4.99 billion-$5.02 billion.
• Added 8 new operations including 3 real estate assets, 710 skilled nursing beds, and 68 senior living units.
• Standard Bearer added 5 new assets, now has 140 owned properties with 106 leased to Ensign affiliated operators and 35 to third-party operators.
• Examples of transformed operations: Sedona Trace Health & Wellness improved from losing money to having 5-star CMS rating and increased occupancy/revenues; Valley of the Moon Post Acute turned around underperformance to 5-star CMS rating and increased census.

The Ensign Group is a holding company with no direct operating assets, employees, or revenues. Certain independent subsidiaries, such as the Service Center (providing accounting, payroll, etc.), the insurance captive (providing insurance coverage), and Standard Bearer Healthcare REIT (investing in healthcare properties), are involved. However, detailed absolute financial performance and revenue contribution percentages for specific product segments are not prominently detailed in the transcript as the company is structured around subsidiaries with distinct functions rather than traditional product segments with clear revenue breakdowns.

• Raised 2025 earnings guidance to $6.34-$6.46 per diluted share, up from prior $6.22-$6.38, with new midpoint up 16.4% from 2024 results.
• Raised annual revenue guidance to $4.99 billion-$5.02 billion, up from $4.89 billion-$4.94 billion, due to current quarter performance and anticipated acquisitions.
• Confidence in achieving guidance based on strong occupancy, skilled mix, acquisition progress, and disciplined growth.

• Forward-looking statements subject to risks and uncertainties such as variations in reimbursement systems, delays and changes in state budgets, seasonality in occupancy and skilled mix, influence of general economy on census and staffing, short-term impact of acquisition activities, and variations in insurance accruals.

Q: Discussion on larger multistate portfolio deals, pipeline, and competitive advantage A: Chad A. Keetch mentioned that they've done portfolio deals, see a pipeline for such deals, and use a local approach, splitting larger deals into smaller digestible pieces, emphasizing disciplined growth and scalability Q: Thoughts on OBBB and indirect risks A: Barry R. Port stated that skilled nursing was carved out of direct impacts, legislators protect funding for seniors, and they have good relationships with state legislators to advocate for proper funding Q: Valuation trends and acquisition evaluation A: Chad A. Keetch said valuations are moderately increasing, locally driven, with local teams helping decide appropriate prices based on DAR fundamentals and staying disciplined on pricing Q: Medicaid reimbursement in California and skilled mix A: Suzanne D. Snapper discussed California quality programs interacting with base rates, working with states on program changes, and value-based care discussions with managed care participants Q: Deal performance and rate updates A: Spencer W. Burton talked about improved deal performance due to higher density, stronger clusters, talent development, and learning from acquisitions; Chad A. Keetch noted steady pipeline despite OBBB chatter, and Suzanne D. Snapper mentioned active rate discussions at state level with no immediate impact on composite rates yet