The Ensign Group, Inc. Q3 FY2025 earnings call

• Clinically driven culture is crucial, with same-store Ensign affiliated facilities outperforming peers in CMS data. - Same-store and transitioning occupancy reached all-time highs of 83% and 84.4% respectively. - Skilled days increased for both same-store and transitioning operations. Medicare and managed care revenue grew. - Since 2024, 73 new operations have been acquired, adding 1,857 skilled nursing beds and 109 senior living units across 6 states. - Standard Bearer generated rental revenue of $32.6 million for the quarter, with $27.6 million from Ensign affiliated operations. Standard Bearer reported $19.3 million in FFO and had an EBITDAR to rent coverage ratio of 2.5x as of the end of the quarter. - Examples like Beacon Harbor Healthcare & Rehabilitation and River Park Post Acute demonstrated growth and improvement through clinical excellence and operational efforts.

GAAP diluted earnings per share was $1.42, an increase of 6%. Adjusted diluted earnings per share was $1.64, an increase of 18%. Consolidated GAAP revenue and adjusted revenues were both $1.3 billion, an increase of 19.8%. GAAP net income was $83.8 million, an increase of 6.9%. Adjusted net income was $96.5 million, an increase of 18.9%. As of September 30, 2025, cash and cash equivalents were $443.7 million and cash flows from operations were $381 million. During the 9 months ended September 30, 2025, over $240 million was spent to execute the strategic growth plan. The lease adjusted net debt-to-EBITDA ratio was 1.86x. There was approximately $593 million of available capacity under the line of credit. The company owns 155 assets, with 149 held by Standard Bearer and 131 being debt-free. The company paid a quarterly cash dividend of $0.0625 per share for common stock.

• Raised 2025 earnings guidance to between $6.48 to $6.54 per diluted share, up from the previously raised range of $6.34 to $6.46 per diluted share. - Increased annual revenue guidance to $5.05 billion to $5.07 billion, up from $4.99 billion to $5.02 billion. This is driven by the strength in occupancy and skilled mix, as well as new acquisitions performing well ahead of schedule.

• The deal market is subject to fluctuations. There have been periods when capital has flooded the industry, temporarily driving prices to irrational levels. Some areas have seen overpriced deals that may not be supportive of the operations' fundamentals.

Q: How should we think about the room to run on the skilled mix side, specifically in the same-store portfolio?

A: Barry Port mentioned steady and consistent growth is expected, Spencer Burton said Beacon has potential to continue ramping up skilled mix, and Suzanne Snapper noted only 31.7% of same-store days are from skilled, indicating a large opportunity for growth.

Q: Comment on the managed care contracting environment in newer markets like Alabama?

A: Suzanne Snapper stated it is a process that takes time to get contracts in place and build clinical care sets.

Q: Thoughts on deal activity and pricing environment?

A: Chad Keetch said deals like those in Utah and California were driven by legacy considerations, and Texas has overpriced deals, with a focus on remaining disciplined.

Q: Update on behavioral health discussions?

A: Barry Port said there is lots of traction, with behavior units being added in several facilities and long-standing relationships with county programs.

Q: Market share gain from higher acuity and skill mix?

A: Barry Port said it is more due to the increasing demand for higher acuity patients and the need to adapt to add complex services.

Q: Organic growth potential and market share in mature markets?

A: Barry Port said there is a long-standing evolution with massive upside, with examples like Beacon showing continued gains.

Q: Common themes behind new facilities contributing to results and Southeast expansion?

A: Suzanne Snapper said the recently acquired bucket contributes significantly, and Barry Port and Spencer Burton talked about an operations-driven acquisition process and positive transitions in the Southeast.

Q: Labor metrics and efforts?

A: Spencer Burton said minimal contract labor is used, wage inflation is at low to mid-single digits, and turnover has been declining for the fourth year.