- Same Store Occupancy: 80.8%, an increase of 2.8% over the prior year quarter.
- Same Store Skilled Service Revenue: Increased by 6.8%.
- Transitioning Skilled Service Revenue: Increased by 6.0%.
- Annual Earnings Guidance: Increased to between $5.38 to $5.50 per diluted share, up from $5.29 to $5.47 per diluted share.
- Annual Revenue Guidance: Raised to between $4.20 billion to $4.22 billion, up from $4.13 billion to $4.17 billion.
- New Operations Acquired: 15 new operations, totaling 1,326 new skilled nursing beds, 202 senior living units, and 43 new LTACH beds.
- Rental Revenue from Standard Bearer: $23.4 million for the quarter, with $19.2 million derived from Ensign affiliated operations.
- GAAP Diluted Earnings Per Share: $1.22, an increase of 8.9%.
- Adjusted Diluted Earnings Per Share: $1.32, an increase of 13.8%.
- Consolidated GAAP and Adjusted Revenues: $1 billion, an increase of 12.5%.
- GAAP Net Income: $71 million, an increase of 11%.
- Adjusted Net Income: $76.4 million, an increase of 15.3%.
- Cash and Cash Equivalents: $477.3 million.
- Cash Flow from Operations: $112.2 million.
- Quarterly Cash Dividend: $0.06 per common share.
- Lease Adjusted Net Debt to EBITDA Ratio: 1.99 times.
- Available Capacity Under Line of Credit: Approximately $573 million.
- Owned Assets by Standard Bearer: 115 properties, with 86 leased to Ensign affiliated operators and 30 to third-party operators.
- FFO for the Quarter: $14.5 million.
- EBITDAR to Rent Coverage Ratio: 2.4 times.
Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ensign Group Inc (ENSG, Financial) reported another record quarter with significant growth in occupancy and skilled mix days.
- Same store occupancy reached 80.8%, a 2.8% increase over the prior year quarter.
- The company saw a 6.8% increase in same store skilled service revenue and a 6.0% increase in transitioning skilled service revenue.
- Ensign Group Inc (ENSG) raised its annual 2024 earnings guidance to between $5.38 to $5.50 per diluted share, up from $5.29 to $5.47 per diluted share.
- The company added 10 new operations and six real estate assets during the quarter, bringing the total number of operations acquired during the year to 15.
Negative Points
- Despite improvements, Ensign Group Inc (ENSG) is not yet back to pre-COVID nurse agency utilization levels.
- The company faces challenges with newly acquired operations, which often come with significant agency staffing issues.
- There is ongoing uncertainty regarding the CMS minimum staffing rule, although the recent Chevron ruling has increased confidence.
- Ensign Group Inc (ENSG) must continue to manage and integrate newly acquired operations, which can be resource-intensive.
- The company is still navigating the impact of inflationary pressures on wage trends and overall cost management.
Q & A Highlights
Q: My first question is on occupancy momentum and upside. Last quarter Ensign's occupancies have surpassed pre-pandemic levels. You had another 200 basis point-plus occupancy growth this quarter, which is above pre-pandemic averages. Can you share your thoughts on current momentum, the amount of time it typically takes to unlock the upside, and the key hurdles you need to clear to get there?
A: We've been seeing steady occupancy growth for a long time now, through the recovery period of the pandemic and even since. The demand is strong, and it's getting back to pre-pandemic occupancy levels. We haven't seen a sharper decline in occupancy, which is another indicator that demand is strong and will continue to be strong throughout the rest of this year. (Barry Port, CEO)
Q: Could you update us on the current pipeline in terms of volume, pricing, and breakdown between stable versus turnaround opportunities, portfolio versus individual transactions, and leased versus owned deals?
A: The pipeline is very healthy. We anticipate more announcements coming up soon. The deals are all over the board, from small mom-and-pop operations to regional portfolios. We are growing in multiple markets, which is healthy for us because our local approach to transitioning is scalable. (Chad Keetch, EVP, CIO, Secretary)
Q: Could you comment on the latest thinking on the minimum staffing standards and any other regulations that the SNF industry could contest in the future? And also, given the current election cycle, your expectation on the future regulatory landscape?
A: Our confidence has increased since the Chevron ruling. Our case was strong before that ruling, and it's even stronger now. We feel good about the legislative options on the table and the direction we're headed. (Barry Port, CEO)
Q: Could you talk about what you're seeing on the demand side at this point, particularly around the acuity dynamic and whether you're seeing a trend towards more high-acuity patients?
A: We are seeing an increase in the acuity profile across all payer groups, including Medicaid. Managed Care and Medicare Advantage are significant payers for us, and we've seen solid growth in our patient population and payer mix as we partner closely with them. Demand is strong, and our occupancy continues to show solid improvement. (Barry Port, CEO)
Q: Can you provide an update on where your agency utilization was relative to peak and what you're expecting for wage trends for the full year?
A: Wage trends are very positive, with a massive moderation from the wage inflation we saw over the last couple of years. Turnover has been solidly improving, as has our use of nursing agency. We're not back to pre-COVID nurse agency utilization levels, but we've made massive strides on a same-store basis. (Barry Port, CEO)
Q: Can you give us an idea of the critical mass necessary in a new market to get the cluster model rolling and realize the same synergies and efficiencies?
A: Three to four buildings is an ideal cluster size. As we look at new states and new markets, the cluster is very important. We also consider market strategy and the need for unique resources to the state and geography. Tennessee, for example, is a very attractive market for us, and we expect to continue growing there. (Chad Keetch, EVP, CIO, Secretary)
Q: What are your thoughts on the implications of the Chevron ruling for rate setting and the future regulatory landscape?
A: We don't anticipate any changes in how rate-setting will move forward. We have good visibility into where rates are headed on a state-by-state basis, which gives us confidence about stability in rates overall. (Barry Port, CEO)
Q: Can you provide more detail on the company's financial performance and guidance?
A: GAAP diluted earnings per share was $1.22, an increase of 8.9%. Adjusted diluted earnings per share was $1.32, an increase of 13.8%. Consolidated GAAP revenues and adjusted revenues were both $1 billion, an increase of 12.5%. We are increasing and narrowing our annual 2024 earnings guidance to between $5.38 to $5.50 per diluted share. (Suzanne Snapper, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
