Q3 2024 Ensign Group Inc Earnings Call

Operator: Greetings, and welcome to the Ensign Group Incorporated 3rd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

Greetings and welcome to the Ensign group incorporated third quarter 'twenty 'twenty four earnings conference call.

Speaker Change: This time, all participants are in a listen only mode.

Speaker Change: A question and answer session will follow the formal presentation. If you would like to ask a question during that time. Please press star followed by number one on your telephone keypad at this time I would like to turn the call over to Mr. Keetch.

Operator: If you would like to ask a question during that time, please press star followed by number one on your telephone keypad.

Chad Keetch: At this time, I would like to turn the call over to Ms. Thank you, operator, and welcome, everyone. We filed our earnings press release yesterday, and it is available on the investor relations section of our website at ensigngroup.com. A replay of this call will also be available on our website until 5 p.m. Pacific on Friday, November 29, 2024.

Mr. Keetch: Thank you operator and welcome everyone.

Mr. Keetch: Filed our earnings press release yesterday and is available on the Investor Relations section of our website at Ensign group Dot net a replay of this call will also be available on our website until five <unk> PM Pacific on Friday November 29 2024.

Chad Keetch: We want to remind anyone that may be listening to a replay of this call that all statements made are as of today, October 25, 2024, and these statements have not been or will be updated subsequent to today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions, and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results.

Mr. Keetch: We want to remind anyone that may be listening to a replay of this call that all statements made are as of today October 25, 2024, and these statements have not been nor will be updated subsequent to today's call also any forward looking statements made today are based on management's current expectations assumptions and beliefs about our business and the environment, which we operate.

Mr. Keetch: These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call.

Mr. Keetch: Listeners should not place undue reliance on forward looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results.

Chad Keetch: accept as required by federal security laws, Ensign and its independent subsidiaries do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances, or for any other reason.

Mr. Keetch: Except as required by federal Securities laws Ensign and its independent subsidiaries do not undertake to publicly update or revise any forward looking statements where changes arise as a result of new information future events changing circumstances or for any other reason. In addition, the Ensign Group, Inc. Is a holding company with no direct operating assets employees or revenues.

Chad Keetch: In addition, the Ensign Group Inc. is a holding company with no direct operating assets, employees, or revenue. Certain of our independent subsidiaries collectively referred to as a service center provide accounting, payroll, human resources, information technology, legal, risk management, and other services to the other independent subsidiaries through contractual relationships with such subsidiaries. In addition, our captive insurance subsidiary, which we refer to as the insurance captive, provides certain claims made coverage to our operating companies for general and professional liability, as well as for workers' compensation insurance liability. Ensign also owns Standard Bearer Healthcare REIT Inc., which is a captive real estate investment trust that invests in healthcare properties and enters into lease arrangement with certain independent subsidiaries of Ensign, as well as third-party tenants that are unaffiliated with the Ensign Group.

Certain of our independent subsidiaries collectively referred to as the service center provide accounting payroll human resources information technology legal risk management and other services to the other independent subsidiaries through contractual relationships with such subsidiaries. In addition, our captive insurance subsidiary, which we refer to as the insurance.

Mr. Keetch: Captive provides certain claims made coverage to our operating companies for general and professional liability as well as for workers' compensation insurance liabilities.

Mr. Keetch: And then also one standard barrier health care REIT, Inc, which is a captive real estate investment trust and invest in healthcare properties and enters into a lease arrangement with certain independent subsidiaries of enzyme as well as third party tenants that are unaffiliated with the enzyme <unk>.

Chad Keetch: The words Ensign, Company, We, Our, and Us refer to the Ensign Group Inc. and its consolidated subsidiaries. All of our independent subsidiaries, the Service Center, the Standard Berry Healthcare Reit, and the Insurance Captive are operated by separate, independent companies that have their own management employees and assets.

Mr. Keetch: The words enzyme company, we our and US refer to the Ensign Group, Inc, and its consolidated subsidiaries.

Mr. Keetch: All of our independent subsidiaries the service Center Standard-bearer healthcare REIT and the insurance captive are operated by separate independent companies that have their own management employees and assets references herein to the consolidated company and its assets and activities as well as the use of the words, we us our and similar terms are not meant to imply.

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

Mr. Keetch: <unk>, nor should it be construed as meaning that the Ensign group has direct operating assets employees or revenue or that any of the subsidiaries are operated by the enzyme <unk>.

Chad Keetch: Also, we supplement our GAAP reporting with non-GAAP metrics. When reviewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business. They should not be relied upon to the exclusion of GAAP reports.

Mr. Keetch: Also we supplement our GAAP reporting with non-GAAP metrics when reviewed together with our GAAP results. We believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports a GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our Form 10-Q.

Chad Keetch: The Gap to Non-Gap Reconciliation is available in yesterday's press release and is available in our Form 10-2.

Barry Port: And with that, I'll turn the call over to Barry Port, our CEO. Barry?

Speaker Change: That I will turn the call over to Barry Port our CEO Barry.

Barry Port: Thanks, Chad, and thank you, everyone, for joining us today. Our local leaders continue to consistently drive outstanding clinical and financial performance, and we are happy to report another record quarter. We're particularly impressed with these results given that we've added 53 new operations across several markets in our recently acquired bucket, and yet our leaders and resource teams have shown their strength by simultaneously integrating these new operations into their clusters.

Barry Port: Thanks, Chad and thank you everyone for joining us today.

Barry Port: Our local leaders continue to consistently drive outstanding clinical and financial performance and we are happy to report another record quarter for.

Were particularly impressed with these results given that we've added 53, new operations across several markets and our recently acquired bucket and yet our leaders and resource teams have shown their strength by simultaneously integrating these new operations into their clusters, while achieving outstanding results in their own operations.

Barry Port: while achieving outstanding results in their own operation. As those that have been following us for years know well, our model leans heavily on our local clusters and existing operations. take a lead on our decision making around acquisitions as well as provide the transition support for these newly acquired operations. As we continue to perfect and improve our deal underwriting and transition process, our new acquisitions, almost all of which are distressed at the time we acquire them, are beginning to contribute early. This allows our leaders to return their focus to our transitioning and same-store building sooner, leading to strong performance across all our operational More specifically, during the quarter, we saw same store occupancies grow to 81.7 percent, a 2.8 percent increase over the prior year quarter, establishing a new high watermark for same store occupancy.

Barry Port: As those that have been following us for years know well our model leans heavily on our local clusters in existing operations to take a lead on our decision making around acquisitions as well as provide the transition support for these newly acquired operations.

Barry Port: As we continue to perfect that improve our deal underwriting and transition process, our new acquisitions, almost all of which are distressed at the time, we acquired them are beginning to contribute earlier.

Barry Port: This allows our leaders to return their focus to our transitioning and same store building sooner leading to strong performance across all our operational buckets.

Barry Port: More specifically during the quarter, we saw same store occupancies grow to 81, 7%, a two 8% increase over the prior year quarter, establishing a new high watermark for same store occupancy.

Barry Port: This is especially noteworthy during a quarter where we historically have experienced seasonally softer occupations. We also saw skill days increase across all skilled payer sources in our same store operations. increased by 6.1% over the prior year quarter. All of which translated to a 7.3% revenue growth for our game store operations. We simultaneously grew our Medicare census by 9.1% and 23.2%. for our same store and transitioning operations, respectively, over the prior year quarter.

This is especially noteworthy during the quarter, where we historically have experienced these.

Barry Port: Italy softer occupancies.

We also saw skilled days increase across all skilled payer sources in our same store operations, which increased by six 1% over the prior year quarter.

Barry Port: All of which translated to seven 3% revenue growth for our same store operations.

Barry Port: We simultaneously grew our managed care census by nine 1% and 23, 2% for our same store and transitioning operations, respectively over the prior year quarter.

Barry Port: Managed care is a very important and growing part of our business, and the consistent occupancy Points of the Trust our leaders are continuing to gain by achieving high quality As we look ahead, we couldn't be more excited about the opportunities we have to unlock the enormous organic upside in our existing portfolio. One of the keys to our success over time has been to have multiple ways to achieve financial consistency. that do not depend entirely on new actors. In fact, even during a busy period of acquisitions, 46% of our increased revenue for the quarter was generated purely from organic growth.

Barry Port: Managed care is a very important and growing part of our business and the consistent occupancy increases points of the trust our leaders are continuing to gain by achieving high quality outcomes.

Barry Port: As we look ahead, we couldnt be more excited about the opportunities we have to unlock the enormous organic upside in our existing portfolio.

Barry Port: The key to our success over time has been to have multiple ways to achieve financial consistency that do not dependent entirely on new acquisitions in fact, even during a busy period of acquisitions, 46% of our increased revenue for the quarter was generated purely from organic growth.

Barry Port: Also, if you look back over time, you will see a very steady growth rate in both revenue and EBITDA growth, even though our discipline acquisition activity varies based on market. This is made possible by our local CEOs and COOs who are relentlessly working to improve and adapt to the needs of their market. As they do so, they continue to pull various levers to increase skilled mix and drive occupancies higher and closer to the occupancies achieved by dozens of our most mature same-store operations, most of which are well above our same-store average. At the same time, and as we demonstrated this quarter, we are prepared for and will continue to acquire lower occupancy operations at very attractive prices.

Barry Port: So if you look back over time, you will see a very steady growth rate in both revenue and EBITDAR growth, even though our disciplined acquisition activity varies based on market conditions.

Barry Port: This is made possible by our local Ceos, and Cfos, who are relentlessly working to improve and adapt to the needs of their markets as they do so they continue to pulled various levers to increase skilled mix and drive occupancies higher and closer to the occupancies achieved by dozens of our most mature same store operations most.

Barry Port: Of which are well above our same store average.

Barry Port: At the same time and as we demonstrated this quarter. We are prepared for and will continue to acquire lower occupancy operations at very attractive prices, which provides a significant long term ramp with years of upside.

Barry Port: provides a significant long-term ramp with years of up. Due to our solid skilled mix and occupancy growth in our existing operations.

Barry Port: Due to our solid skilled mix and occupancy growth in our existing operations as well as continued strength from our recent acquisitions, we are raising and narrowing our annual 2024 earnings guidance to between $5 46 to $5 52 per diluted share up from $5 38.

Barry Port: As well as continued strength from our recent acquisitions, we are raising and narrowing our annual 2024 earnings guidance to between $5.46 to $5.52 per diluted share, up from $5.38 to $5.50 per diluted share. The new midpoint of our 2024 earnings guidance represents an increase of more than 15.1% of our 2023 results and a 32.6% higher than our 2022 results. We're also increasing our annual revenue guidance to between $4.25 billion and $4.26 billion, up from our previous guidance of $4.2 billion, $4.22 billion to account for our current quarter growth and acquisitions we anticipate closing by the end of the year.

Barry Port: To $5 50 per diluted share.

Barry Port: The new midpoint of our 2024 earnings guidance represents an increase of more than 15, 1% of our 2023 results and is 32, 6% higher than our 2022 results were.

Barry Port: We are also increasing our annual revenue guidance to between $4 $2 5 billion and $4. Two 6 billion up from our previous guidance of $4 2 billion for $2 billion to account for our current quarter growth and acquisitions, we anticipate closing by the end of the year.

Barry Port: We're excited about the upcoming year and are confident that our partners will continue to manage and innovate while balancing the addition of newly acquired operations.

Barry Port: We're excited about the upcoming year and are confident that our partners will continue to manage and innovate while balancing. The addition of newly acquired operations next I'll ask Chad to add some additional insights regarding our recent growth Chad.

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

Chad Keetch: Chad?

Chad Keetch: Thank you, Barry. As we expected, we continue to grow our portfolio and are very excited about the 12 new operations and three real estate assets we added during the quarter and bringing the number of operations acquired during the year to 27. These new acquisitions include the following, nine in Colorado, one in Kansas, one in Iowa, and one in Nebraska. In total, we added 1,279 new skilled nursing beds and 20 senior living units in four of our 14 states. Of these new operations, three of them included the real estate assets that were required by Standard Bearer, at least to an Ensign-affiliated operator.

Thank you Barry as we expected we continue to grow our portfolio and are very excited about the 12, new operations in three real estate assets, we added during the quarter in <unk>.

Chad: Bringing the number of operations acquired during the year to 27.

These new acquisitions include the following nine in Colorado, one in Kansas, One in Iowa, and one in Nebraska.

Chad: In total we added 1279, new skilled nursing beds, and 20 senior living units and four of our 14 states.

Chad: These new operations three of them included the real estate assets are required by standard bear at least to an enzyme affiliated operator.

Chad Keetch: These additions were all carefully selected amongst the many opportunities available to us and were chosen because of the huge clinical and financial potential. We continue to see a very healthy pipeline of new acquisition opportunities and are making progress on several additions that we expect to close in the fourth quarter and into next year.

Chad: These additions were all carefully selected amongst the many opportunities available to us and were chosen because of the huge clinical and financial potential.

Chad: We continue to see a very healthy pipeline of new acquisition opportunities and are making progress on several additions that we expect to close in the fourth quarter and into next year.

Chad Keetch: We remain committed, especially in times when there are lots of opportunities in front of us, to remain disciplined and grow in a healthy way. Our scalable, decentralized growth model is not dependent on a few individuals in an office, but instead is driven by local leadership and supported by a dedicated team of researchers. In times like these when deal opportunities are abundant, we rely on a proven set of deal criteria including a deep local knowledge of their respective healthcare markets to ensure that those who are operationalizing the acquisitions have buy-in and specific plans to help them become facilities of choice in their markets.

Chad: Remain committed especially in times when there are lots of opportunities in front of us to remain disciplined and grow in a healthy way.

Chad: Our scalable decentralized growth model is not dependent on a few individuals and an office, but instead is driven by local leadership and supported by a dedicated team of resources.

Chad: In times like these when deal opportunities are abundant we rely on our proven set of deal criteria, including a deep local knowledge of their respective healthcare markets to ensure that those who are operationalized, meaning the acquisitions have buy in and specific plans to help them become facilities of choice in their markets.

Chad Keetch: One of the foundational elements of our consistent performance has been to insist that the prices we pay are commensurate with the historical operational performance, which will result in a cost structure that allows us to achieve healthy returns over a long period of time. As we've shown again this quarter, we continue to prioritize growth in our established geographies as it allows our clusters to work together and with their acute care partners to provide comprehensive solutions to their healthcare needs. We're also excited to build clusters in new states or in markets where we have significant room to add more density and expect additional growth in some of our newer markets in the next several months.

One of the foundational elements of our consistent performance has been to insist that the prices. We pay are commensurate with the historical operational performance, which will result in a cost structure that allows us to achieve healthy returns over a long period of time.

As we've shown again this quarter, we continue to prioritize growth in our established geographies as it allows our clusters to work together and with their acute care partners to provide comprehensive solution to their health care needs.

Chad: We're also excited to build clusters in new states and markets, where we have significant room to add more density and expect additional growth in some of our newer markets in the next several months we.

Chad Keetch: We have and will continue to grow when we see deals that will be accretive to shareholders in both the near and long term.

We have and will continue to grow when we see deals that will be accretive to shareholders in both the near and long term.

Chad Keetch: We continue to provide additional disclosure on Standard Bearer, which is currently comprised of 117 owned properties. Of these assets, 88 are leased to Ensign-Affiliated Operator, and 30 are leased to 3rd Party Operator. All of these properties are subject to triple net long-term leases and generated rental revenue of $24.4 million for the quarter, of which $20.2 million was derived from Ensign Affiliated Operations. Also for the quarter, we reported $14.8 million in FFO, and as of the end of the quarter, had an EBITDAR to rent coverage ratio of 2.4 times.

Speaker Change: We've continued to provide additional disclosure on standard of care, which is currently comprised of 117 owned properties of these assets 88 are leased to ensign affiliated operator, and 30 are leased to third party operators. All of these properties are subject to triple net long term leases and generated rental revenue of $24 4 million for the core.

Speaker Change: Order of which $20 2 million was derived from ensign affiliated operations.

Speaker Change: Also for the quarter, we reported $14 8 million in <unk> and as of the end of the quarter had an EBITDAR to rent coverage ratio of two four times.

Spencer Burton: And with that, I'll turn the call over to Spencer, our COO, to add more color on operations. Spencer?

And with that I'll turn the call over to Spencer, our COO to add more color on operations Spencer.

Spencer Burton: Thanks, Chad, and hello, everyone. As Chad mentioned, we've continued to welcome acquisitions throughout the year, with a large concentration of the growth occurring in Colorado and the Midwest. In fact, newly acquired facilities now account for over 14.4% of the world's population. of our total service revenue. up from 8.6% a year ago.

Thanks, Chad and Hello, everyone.

Spencer: Chad mentioned, we've continued to welcome acquisitions throughout the year with a large concentration of the growth occurring in Colorado and the Midwest.

Spencer: In fact newly acquired facilities now account for over 14, 4% of our total service revenue.

Up from eight 6% a year ago.

Spencer Burton: Today I'd like to give you some insights into the tremendous work and transformation that occurs during the first quarters following an accident. To do that, the first facility I've chosen to highlight today is a recent acquisition in the state of Colorado. Rehab and Nursing Center of the Rockies, RMCR, located in Fort Collins, Colorado, is a 98-bed skilled nursing center. that was acquired August 1st of 2020. Upon transition, Todd Truax, an experienced CEO who was operating a successful Ensign-affiliated building nearby, transferred to RNCR and became the licensed administrator. They joined a facility leadership team with many talented and compassionate professionals.

Spencer: Today I'd like to give you some insights into the tremendous work and transformation that occurs during the first quarters following an acquisition.

Spencer: To do that the first facility I've chosen to highlight today is our recent acquisition in the state of Colorado.

Spencer: Rehab Nursing center of the Rockies are NCR located in Fort Collins, Colorado as a 98 bed skilled nursing facility that was acquired August 1st of 2023.

Spencer: Upon transition Todd <unk>, an experienced CEO, who is operating a successful ensign affiliated building nearby transferred to our NCR and became the license administrator.

Spencer: Joined the facility leadership team with many talented and compassionate professionals, including longtime Doe and Sarah case.

Spencer Burton: including longtime D.O.N. Sarah Kate. Sara and her team were intelligent and committed, but lacked the information and tools needed to manage some basic operating fundamentals. Following the transition, Todd, together with local cluster partners, including department leaders from nearby facilities, began to empower the RNCR team with increased education, data, and transparent access to daily, weekly, and monthly reports. team responded to the support. They went to work increasing occupancy and skilled mix while simultaneously right-sizing labor and controlling other variability.

Spencer: Sarah and her team were intelligent and committed <unk>.

Spencer: The information and tools needed to manage some basic operating fundamentals.

Spencer: Following the transition Todd together with local cluster partners, including Department leaders from nearby facilities began to empower the RNC our team with increased education data and transparent access to daily weekly and monthly reporting.

Spencer: The team responded to the support beautifully.

Spencer: They went to work increasing occupancy and skilled mix, while simultaneously right sizing labor and controlling other variable expenses the results have been remarkable.

Spencer Burton: The results have been remarkable. occupancy, which sat at 63% on transition. is now at 90 percent. During that same period, managed care census has increased by over 600. and major health plans have invited RNCR to join their narrow network. As occupancy and skilled mix have grown, the team has carefully managed expense growth, and as a result EBIT margins have increased by nearly 180%.

Spencer: Occupancy, which set at 63% on transition.

Now at 90%.

Spencer: During that same period managed care census has increased by over 600%.

Spencer: The major health plans have invited our NCR to join their narrowed network.

Spencer: As occupancy and skilled mix have grown the team has carefully managed expense growth and as a result, EBIT margins have increased by nearly 180%.

Spencer Burton: But the financial success is only a small part of the RNCR transition. Clinically, the facility has embraced additional training and education. Which in turn has led to RNCR recently having one of the best health inspection scores in the state, and achieving overall 5-star status from CMS. On the employee front, nursing turnover has plummeted since transition. Further, the facility recently opened its own CNA certification. And graduates are not only strengthening the staffing situation at RN-CR. but are also helping improve staffing at the nearby facilities which were recently acquired over the past few months.

Spencer: But the financial success is only a small part of the RNC our transition story.

Spencer: Clinically the facility's embraced additional training and education, which in turn has led to our NCR recently, having one of the best health inspection scores in the state.

Spencer: And achieving overall five star status from CMS.

Spencer: On the employee front nursing turnover has plummeted since transition.

Spencer: The facility recently opened its own CNA certification program and graduates are not only strengthening the staffing situation at our NCR.

Spencer: But are also helping improve staffing at the nearby facilities, which were recently acquired over the past few months.

Spencer Burton: While transforming acquisitions is an exciting part of Ensign's story, equally important is the enormous potential that can be unlocked as mature teams continue to innovate and meet the heightened clinical needs of their community.

While transforming acquisitions as an exciting part of the enzyme story equally important is the enormous potential that can be unlocked as mature teams continue to innovate and meet the heightened clinical needs of their communities.

Spencer Burton: Our second highlight comes from one of our more mature operations in the Phoenix, Arizona metro area. Peoria Post-Acute and Rehabilitation is a large 179-bed skilled nursing facility and sub-acute campus that was acquired back in 2018. Over the past six years, CEO Mark Glaser and COO Katherine Elisser, together with their team have consistently improved clinical and financial results and become their community's facility of choice. But despite the high bar already set, during the quarter the team at Peoria grew revenues by 20% and EBIT by 29% compared to the prior year quarter. Their formula is simple to understand, but hard to to start with finding, developing, and retaining incredible talent.

Spencer: Our second highlight comes from one of our more mature operations in the Phoenix, Arizona Metro area.

Spencer: ARIA post acute and rehabilitation is a large 179 bed skilled nursing facility and sub acute campus that was acquired back in 2018.

Spencer: Over the past six years, CEO, Mark Glazer, and CFO, Catherine <unk> together with their team.

Spencer: Consistently improved clinical and financial results and become their communities facility of choice.

Spencer: But despite the high bar already set during the quarter. The team at Peoria grew revenues by 20% and EBIT by 29% compared to the prior year quarter.

Spencer: Theyre Formula is simple to understand but hard to execute.

Spencer: Let's start with finding developing and retaining incredible talent.

Spencer Burton: This, in turn, allows the multidisciplinary team to commit to and relentlessly pursue quality. is evident in Peoria's five-star rating from CMS for health inspections, quality measures, and overall. The Strong Clinical Foundation has allowed Peoria to climb the acuity ladder and meet the needs of community physicians, health plans, and hospitals. In fact, in addition to traditional long-term and skilled care, today Peoria provides sub-acute services for patients needing ventilator care, advanced wound care, and bedside dialysis. This combination of high acuity and exceptional quality has made Peoria one of only a few facilities to attain preferred provider status with every major hospital system in Arizona.

Spencer: This in turn allows the multi disciplinary team to commit to and relentlessly pursue quality, which is evident in Peoria as five star rating from CMS for health inspections quality measures and overall excellence the.

Spencer: Our strong clinical foundation has allowed Peoria to climb the acuity ladder and meet the needs of community physicians health plans and hospitals. In fact in addition to traditional long term and skilled care today pure Harry provide sub acute services for patients needing ventilator care advanced wound care and bedside dialysis.

Spencer: Yes.

Spencer: This combination of high acuity and exceptional quality has made Peoria one of only a few facilities to obtain preferred provider status with every major hospital system in Arizona.

Spencer Burton: The result has been consistently strong demand for services, which is evidenced in skilled increases of 44% for Medicare days and 13% for managed care days from Q3 of last year. To address growing demand, a few years ago the facility expanded its license count by 51 beds and opened a completely remodeled subacute wing and dialysis facility. That new wing is now completely full, and the overall campus averaged 96% occupancy over the course of quarter- up 12 percentage points from the prior year quarter. Today, there is a long waiting list for admission.

Spencer: The result has been consistently strong demand for services, which is evidenced in skilled mix increases of 44% for Medicare days and 13% for managed care days from Q3 of last year.

Spencer: To address growing demand a few years ago. The facility expanded its license count by 51 beds and opened a completely remodeled sub acute wing and dialysis center.

Spencer: That new win is now completely full and the overall campus averaged 96% occupancy over the course of quarter three.

Spencer: Up 12 percentage points from the prior year quarter.

Spencer: Today, there is a long waiting list for admission to Peoria.

Spencer Burton: Facilities like Peoria demonstrate the enormous continued upside in same-store operations. that is being covered and accessed through the hard work, discipline, and of empowered local leaders, and the support and commitment of service center resources.

Spencer: Facilities like Peoria demonstrate the enormous continued upside in same store operations that is being recovered and access through the hard work discipline and vision of empowered local leaders and the support and commitment of service Center resource partners and with that I'll turn the time over to Suzanne snapper, our CFO for <unk>.

Suzanne Snapper: And with that, I'll turn the time over to Suzanne Snapper, our CFO, for more detail on our financial results. Thank you, Spencer, and good morning, everyone.

Suzanne Snapper: More detail on our financial results Suzanne.

Thank you Sarah and good morning, everyone.

Suzanne Snapper: ECOP financials for the quarter are contained in our TANQ and press release filed yesterday. Some additional highlights for the quarter compared to the prior year quarter include GAAP diluted earnings per share was $1.34, an increase of 20.7%. Adjusted diluted earnings per share was $1.39, an increase of 15.8 percent. consolidated GAAP revenue and adjusted revenues for both $1.1 billion, an increase of 15%. Gap Net Income was $78.4 million, an increase of 22.8%. Adjusted net income was $81.1 million, an increase of 17.7%. Other key metrics as of September 30, 2024, include cash and cash equivalent of $532.1 million and cash flow from operations of $246.7 million.

Suzanne Snapper: For the quarter are contained in our 10-Q and press release filed yesterday.

Suzanne Snapper: Additional highlights for the quarter compared to the prior year quarter include GAAP diluted earnings per share was $1 34, an increase of 27%.

Suzanne Snapper: Adjusted diluted earnings per share was $1 39, an increase of 15, 8%.

Suzanne Snapper: Holiday the GAAP revenue and adjusted revenues for about $1 1 billion, an increase of 15%.

Suzanne Snapper: GAAP net income was $78 4 million an increase of 22, 8%.

Suzanne Snapper: Adjusted net income was $81 1 million an increase of 17, 7%.

Other key metrics as of September 32024 include cash and cash equivalents at <unk>.

Suzanne Snapper: <unk> hundred $32 1 million in cash flow from operations of $246 7 million.

Suzanne Snapper: The company paid a quarterly cash dividend of $0.06 per share. We have a long history of paying dividends and have increased the annual dividend for 21 consecutive years. We also continue to de-lever our portfolio, achieving a record low lease adjusted net debt to EBITDA ratio of 1.88 times. Our ability to de-lever and even in periods of significant growth is particularly noteworthy and demonstrates our commitment to discipline growth as well as our belief that we can continue to achieve sustainable growth in the long run. In addition, we currently have approximately $572 million of availability under our line of credit, which, when combined with cash on our balance sheet, gives us over a billion dollars in dry powder for future investments.

Suzanne Snapper: The company paid a quarterly cash dividend of six cents per share we have a long history of paying dividends and have increased dividends for 21 consecutive years.

Suzanne Snapper: We also continued to delever our portfolio achieving a record low lease adjusted net debt to EBITDA ratio of 188 times.

Suzanne Snapper: Our ability to Delever, even just curious a significant growth is particularly noteworthy and demonstrates our commitment to disciplined growth as well as our belief that we can continue to achieve sustainable growth in the long run.

Suzanne Snapper: In addition, we have currently have approximately 572 million of availability under our line of credit which.

Suzanne Snapper: Which when combined with cash on our balance sheet gives us over $1 billion in dry powder for future investments.

Suzanne Snapper: We also own 122 assets, of which 117 are held by Standard Bear and 98 of which are owned completely debt-free and are gaining significant value over time, adding even more liquidity to help with our future growth. As Barry mentioned, we are increasing and narrowing our annual 2024 earnings guidance to between $5.46 to $5.52 per diluted share. We are also raising our annual revenue guidance to between $4.25 billion to $4.26 billion. We have evaluated multiple scenarios and based upon the strength in our performance, the positive momentum we've seen in occupancy and skilled mix, as well as the continued progress on agency management and other operational initiatives, we feel confident that we can achieve these results.

We also own a 122 assets of which 117 are held by standard there and 98 of which are Alan completely debt free and our gained significant value over time.

Even more liquidity to help protect future growth.

Barry Port: As Barry mentioned, we are increasing and narrowing our annual 2024 earnings guidance to between $5 and 46.

Barry Port: $5 <unk> per diluted share.

Barry Port: Also raising our annual revenue guidance to between $4 5 billion to $4 6 billion.

Barry Port: We have evaluated multiple scenarios and based upon the strength in our performance.

Barry Port: Positive momentum, we have seen and occupancy in skilled mix as well as the continued progress on agency management and other operational initiatives. Please feel confident that we can achieve these results.

Suzanne Snapper: Our updated 2024 guidance is based on deleted weighted average common shares outstanding of approximately $58.5 million, a tax rate of 25%, the inclusion of acquisitions closed and expected to close in 2024, the inclusion of management's expectations for Medicare and Medicaid reimbursement rates at a provider tax, and with the biggest exclusion coming from stock-based compensation. Additionally, other factors that could impact quarterly performance include variation in our reimbursement system, delays in changes in state budgets, seasonality and occupancy and skilled mix.

Barry Port: Our updated 2024 guidance is based on diluted weighted average common shares outstanding of approximately $58 5 million a tax rate of 25%.

Inclusion of acquisitions closed or expected to close in 2020 for the inclusion of management's expectations for Medicare and Medicaid reimbursement rates net of provider tax and what's the biggest exclusion coming from stock based compensation added.

Additionally, other factors that could impact quarterly performance include variations in reimbursement systems delays and changes in state budgets seasonality in occupancy and skilled mix the answer.

Suzanne Snapper: The Influence of General Economy on Census and Staffing, The Short-Term Impact of Acquisition Activities, Variations in Insurance Accruals, and Other Factors.

Barry Port: The general economy on census, and staffing the short.

Barry Port: Our term impact of acquisition activities variations in insurance accruals and other factors.

Barry Port: With that, I'll turn it back over to Barry. Thanks, Suzanne. As we wrap up, we'll end as we normally do, by reiterating how incredibly honored and grateful we are to work alongside our facility leaders, field resources, clinical partners, and service center team that are behind these record-setting results. We're in awe of their incredible industry-leading leadership as they focus on supporting our collective mission to dignify post-acute care in new and innovative ways for many generations to come. This commitment has blessed the lives of so many people, including our own. We're excited about our future and the opportunity to build an enduring legacy in the industry because of these amazing partners.

Speaker Change: I'll turn it back over to Barry Barry.

Barry Port: Thanks, Suzanne as we wrap up will end as we normally do by reiterating how incredibly honored and grateful we are to work alongside our facility leaders field resources clinical partners and service center team that are behind these record setting results.

Barry Port: They're incredible industry, leading leadership as they focus on supporting our collective mission to dignify post acute care in new and innovative ways for many generations to come.

Barry Port: This commitment has blessed the lives of so many people, including our own were excited about our future and the opportunity to build an enduring legacy in the industry because of these amazing partners. We work alongside people who truly care about one another first which is why we have the confidence that our model has stayed.

Barry Port: We work alongside people who truly care about one another first, which is why we have the confidence that our model has staying power and will have a long-term impact for good. We have complete faith in them and the culture they have collectively built and continue to improve.

Barry Port: Power and we will have a long term impact for good.

We have complete faith in them and the culture. They have collectively built and continued to improve and now we will turn it over to the Q&A portion of our call. Early can you. Please instruct our listeners on the Q&A procedure.

Barry Port: And now we'll turn it over to the Q&A portion of our call.

Operator: Ellie, can you please instruct the listeners on the Q&A procedure? Thank you.

Speaker Change: Thank you we are now opening the floor for a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad. Our first question comes from Sal <unk> from Macquarie.

Operator: We are now opening the floor for question and answer session. If you'd like to ask a question, please press star one on your telephone keypad.

Tao Qiu: Our first question comes from Tao Kui from Macquarie. You may now...

You may now.

Speaker Change: Ask your question.

Tao Qiu: Thank you. Good morning. So, the same-store occupancy is already above pre-pandemic levels. I think historically, the high point in terms of same-store occupancy was about 84%.

Speaker Change: Thank you good morning.

Speaker Change: So the same store occupancy is already above pre pandemic levels I think historically the high point in terms of same store occupancy was about 84% would you be able to number one give us idea of the distributional occupancy across our same store portfolio and second could you quantify for us the potential upside from here.

Barry Port: Would you be able to, number one, give us an idea of the distribution of occupancy across your same-store portfolio? And second, could you quantify for us the potential upside from here, given the strong demographic trend, you know, your initiative to increase high-acuity patient base and the managed care momentum we alluded to earlier? Thanks. Yeah, I think our our high watermark pre COVID was 80.1%. So yeah, we are we are above that. As far as limits, you know, it's why we are so excited about where our occupancy is today, albeit higher than where we've been. We just we know that there's so much potential for growth.

Speaker Change: Given the strong demographic trends.

Speaker Change: Your initiative to increase high acuity patient base and the managed care momentum you alluded to earlier thanks.

Speaker Change: Yes, I think our high watermark pre COVID-19 was 81%. So yes, we are we are above that.

Speaker Change: As far as limits.

Speaker Change: Why we are so excited about where occupancy is today, albeit higher than where we've been we just we know that.

Speaker Change: There is.

So much potential.

Speaker Change: For growth.

Barry Port: You know, as we look in our same store portfolio and look at even more mature operations in that bucket, you have operations that are well into the 90% range and that's happened over the course of many, many, many years and quarters and there's continued improvement even amongst our most mature operations, which is why we try to point out some of those stories and our examples in the script. You know, to speak to the skilled mix potential, Tao, you know, yes, there's great opportunity for us to continue to drive acuity, you know, it frankly is the basis of our model, which is to continue to deliver what our acute partners need, which is a sicker and sicker patient that needs care, and we're seeing that play out as time goes on, and we've, you know, broken past the kind of post-COVID norms into what is kind of a steady state of just ever-increasing acuity.

As we look at our same store portfolio looking even more mature operations in that in that bucket.

Speaker Change: You have operations that are well into the 90% range and Thats happened is over the course of many many many years and quarters and there is continued improvement even amongst our most mature operations, which is why we try to point to point out some of those stories in our examples in the script.

Speaker Change: Yes.

Speak to the skilled mix potential.

Speaker Change: Yes, there is.

Speaker Change: There is great opportunity for us.

Speaker Change: For us to continue to drive acuity.

Speaker Change: It frankly is the basis of our model, which is to continue to deliver what our acute partners need which is a.

Speaker Change: A sicker and sicker patients.

Speaker Change: That needs care, and we're seeing that play out as as as time goes on and we've broken past the kind of post COVID-19.

Speaker Change: Norms into what is kind of a steady state of just ever increasing acuity.

Barry Port: Our local leaders are tied in with our hospital partners and our managed care partners, they're in touch with what the needs are, and as... As Spencer pointed out in the example of Peoria, they continue to adapt by adding things like subacute services and bedside dialysis and other service lines to meet those ever-changing needs. And so that's what they'll continue to do as we stay aligned. And what you can see over, again, the course of many quarters since COVID is that our skilled mix does continue to gradually move higher and higher.

Speaker Change: Our local leaders are tied in with our hospital partners and our managed care partners. They are in touch with what the needs are.

Speaker Change: And as <unk>.

Speaker Change: Spencer pointed out in the example of Peoria.

Speaker Change: We continue to adapt by adding things like sub acute services and bedside dialysis and other other service lines to meet those ever changing needs and.

Speaker Change: And so that's what we'll continue to do as we stay aligned and.

Speaker Change: What you can see over again, the course of many quarters since Covid is that our our skilled mix does continue to gradually.

Speaker Change: Move higher and higher.

Tao Qiu: Got it.

Speaker Change: Got it.

Suzanne Snapper: Suzanne, could you give us an update on the timing and the amount expected from some of the state's supplemental payments, quality payment you're expecting in the next few months or quarters, and any information you could share in terms of the early discussion among your states on 2026 Medicaid rates? Sure, I think one of the things to note for us of how we look at supplemental payments, as you guys know, we recognize the supplemental payment in our Medicaid rate. So every quarter, we have supplemental payments embedded within the rates that we're disclosing. For every state that we're in, we actually estimate the amount of supplemental payment that we anticipate receiving for that particular quarter, based upon the days and the programs and the quality of the performance of the programs that we have.

Speaker Change: Suzanne could you give us update on the timing and amount of expected from some of the states supplemental payments quality payment you're expecting in the next few months or quarters and any information you could share in terms of the early discussion on longer stays around 2026 Medicaid rich.

Suzanne Snapper: Sure I think one of the things to note for us of how we look at supplemental payments and as you guys know we recognize the supplemental payment in our Medicaid rate. So every quarter, we have supplemental payments embedded within the rates that we are disclosing.

Suzanne Snapper: For every state that we're in we actually estimate the amount of supplemental payments that we anticipate receiving.

For that particular.

Suzanne Snapper: Quarter based upon the days and the programs and the quality of the performance of the programs that we have and so every every quarter every day, we actually have supplemental great embedded in the Medicaid rate that we're disclosing and how would you kind of look through changes in supplemental rate and as we talked about last year a lot of the F&I dollars went away.

Suzanne Snapper: And so every quarter, every day, we actually have supplemental rates embedded in the Medicaid rates that we're disclosing. As you kind of look through changes in supplemental rates, as we talked about last year, a lot of the FNAP dollars went away. A lot of those were replaced by a combination of raise and base rates, as well as supplemental rates. For the most part, all of those supplemental programs went into effect, with the last one really being, gosh, probably January of this year with California. And now it's just a matter of going through the normal course and the normal program.

Suzanne Snapper: Those were replaced by a combination of raise in base rates as well as supplemental rates for the most part all of those supplemental programs land test that was the last one really being cash.

Suzanne Snapper: January of this year with California, and now it's just a matter of going through the.

Normal course in the normal program. So most states update their supplemental program consistent with our base rate program year. So for example in the current quarter, We had Texas Theyre program years September 1st that rate, just update and answer that one and capex.

Suzanne Snapper: So most states update their supplemental program consistent with their base rate program year. So for example, in the current quarter, we had Texas. Their program year is September 1st. That rate just updated, and so that went into effect in September. And yeah, really, really good overall performance in all those. No real surprises. I think sometimes the timing of those true-ups, of the estimate of the approval changes, and when it changes, then we take that in the current quarter.

Suzanne Snapper: In September and.

Suzanne Snapper: Yes.

Suzanne Snapper: Good good overall performance in all of those.

Suzanne Snapper: No real surprises I think sometimes the timing of those true ups.

Suzanne Snapper: The estimate of external changes and when it changes then we can take that in the current quarter.

Suzanne Snapper: Great, that's very helpful.

Suzanne Snapper: Great. That's very helpful. Thank you.

Suzanne Snapper: Thank you.

Tao Qiu: Have a good weekend.

Suzanne Snapper: Yeah.

Tao Qiu: Thanks, Tao.

Thanks Tao.

Ben Hendrix: Your next question comes from Ben Hendrix from RBC Capital Markets, your line is now open. Great, thank you very much. A couple of M&A related questions, it seems like the pace of tuck-ins has kind of picked up a little bit. First, I just wanted to know if there's anything kind of structurally that's kind of driving the acceleration? Is there a change in among sentiment among sellers? Is there anything structurally, whether it be minimum staffing or anything that's got, is incenting more transaction fluidity in the market? Any comments you have there? I mean, yes to all of that.

Suzanne Snapper: Okay.

Speaker Change: Your next question comes from Ben Hendrix from RBC capital markets. Your line is now open.

Ben Hendrix: Great. Thank you very much a couple of M&A related questions.

Ben Hendrix: It seems like the pace of tuck ins has kind of picked up a little bit first I. Just wanted to know if theres anything kind of structurally thats kind of driving the acceleration is there a change in amongst sentiment among sellers is there something anything structurally whether it be minimum staffing or anything that Scott is incentive.

Ben Hendrix: More transaction fluidity in the market.

Ben Hendrix: Comments you have there.

Ben Hendrix: I mean, yes to all of that this is Chad I think all of those things are true.

Chad Keetch: This is Chad. I think all those things are true. I mean, I think, you know, it's, especially for smaller operators, it's much, much harder to, you know, keep up with all the constant changes. And that's the one thing that for sure we will have in this industry is constant change and, you know, minimum staffing, you know, we feel pretty confident that's not going to happen. But But nonetheless, we definitely hear sentiment from sellers of just like, you know, just kind of exhaustion with some of that stuff that's always out there. So that's part of it.

Ben Hendrix: Yes, I think.

Ben Hendrix: Yes.

Especially for smaller operators, it's much much harder to keep.

Ben Hendrix: Keep up with all the constant changes and that's the one thing for sure. We will have in this industry is constant change in minimum staffing.

Ben Hendrix: We feel pretty confident that's not going to happen, but nonetheless.

Ben Hendrix: We definitely hear sentiment from sellers of dislike.

Ben Hendrix: Yes.

Ben Hendrix: Just kind of exhaustion with with some of that stuff that's always out there. So that's part of it.

Chad Keetch: I'd say there's also maybe, you know, sort of post COVID. I think, you know, a lot of folks, you know, feeling like, you know, maybe we got through that. And now's the time where, you know, conditions are a little more stable, and maybe it's a good time, you know, maybe they were looking to sell before and then COVID came and they kind of had to push through it. And now it's now they're at a spot where they feel stable enough to, to see what they can get for their their businesses. So we're seeing a lot of that.

I'd say Theres also maybe.

Ben Hendrix: Sort of post Covid I think a lot of folks.

Ben Hendrix: Feeling like.

Ben Hendrix: Maybe we got through that then and now is the time where.

Ben Hendrix: Conditions are or a little more stable and maybe it's a good time, maybe they were looking to sell before and then Covid came in they kind of have been pushed through it and now they are at a spot where they fill stable enough to.

Ben Hendrix: See what they can get for their businesses. So.

Ben Hendrix: So we're seeing a lot of that but it's always true too bad because of over aggressive.

Chad Keetch: But you know, it's always true to Ben that there, you know, because of over aggressive, you know, real estate deals, there's definitely a large amount of distress opportunities for us where, you know, someone overpaid and, and, you know, they're not paying the rent, the rent payments aren't coming through now, right, and, and they're distressed and, and looking to find a replacement. And so lots of those too. So it's kind of a lot of all those factors. And, you know, we're just, you know, in terms of our pace of acquisitions, you know, because we have this local approach and lean heavily on our local teams, and, you know, we now have, you know, 30 markets across across the 14 states we're in.

Ben Hendrix: Real estate deals.

Ben Hendrix: There is definitely a.

Ben Hendrix: A large amount of distress opportunities for us where someone overpaid in.

Ben Hendrix: They're not paying the rent.

Speaker Change: Rent payments are coming through now right.

They are distressed and looking to find a replacement and so lots of those too. So it's kind of a lot of all of those factors.

Speaker Change: We're just.

Speaker Change: Our pace of acquisitions.

Speaker Change: Because we have this local approach and lean heavily on our local teams and we now have 30 markets across across the 14 states. We're in.

Chad Keetch: You know, we can grow very comfortably leaning on those local teams as they transition these operations. And as we grow, right, our capacity to grow also grows with it, right? So, you know, in terms of a percentage of, you know, growth, we've actually stayed pretty steady. But do expect that as we get bigger that our capacity to grow will grow with it.

Speaker Change: We can grow very comfortably.

Speaker Change: A leaning on those local teams as they transition these operations.

Speaker Change: And as we grow right our capacity to grow also grows with it right.

Speaker Change: So in terms of a percentage of <unk>.

Speaker Change: Growth, we've actually stayed pretty steady.

Speaker Change: But do expect that as we get bigger that our capacity to grow we will grow with it.

Ben Hendrix: Gotcha, and just to follow up on that, you know, is the profile of the acquisitions you're targeting changing at all? I know that you bought an LTAC a couple quarters ago, and then you mentioned like dialysis capabilities in Peoria, which we typically associate with higher level care like LTAC. Is there, and then also you're expanding in markets where you already have strong cluster presence.

Speaker Change: Got you and just to follow up on that is.

Is the profile of the acquisitions you are targeting changing at all I know that you bought in <unk> couple of quarters ago.

Speaker Change: And then you mentioned like dialysis capabilities in Peoria, which we typically associate with higher level of care like <unk>.

Speaker Change: Is there and then also youre expanding in markets, where you already have strong cluster presence. So I'm wondering if if maybe you're kind of broadening the scope into higher acuity in terms of some of these some of these opportunities.

Chad Keetch: So I'm wondering if maybe you're kind of broadening the scope into higher acuity in terms of some of these opportunities. That's a great question. I would say, you know, not really. I think, you know, the LTAC thing was a really unique set of circumstances. And, you know, so far that's going great. And maybe down the road, if we prove that model can work, that that's something we could look at. But for the most part, our targets are very similar to what they've been. A lot of the, you know, the efforts to, you know, move up the acuity chain happen sort of post-acquisition.

Speaker Change: That's a great question I would say.

Not really I think the <unk> thing was was.

<unk> unique set of circumstances.

Speaker Change: So far that's going great.

Speaker Change: And maybe down the road if we <unk>.

Speaker Change: Prove that model can work, but thats something we could look at but for the most part are our targets are very similar to what they've been.

Speaker Change: A lot of the.

Speaker Change: The efforts to two <unk>.

Speaker Change: Move up the acuity chain happened sort of post acquisition.

Chad Keetch: You know, and so I wouldn't say that we're necessarily targeting a different type of acquisition opportunity. I will say, though, that while our first preference is to grow in states we're in, that's kind of the lowest hanging fruit, and there's lots of room to continue to do that. You know, we definitely have opportunities in lots of new markets. And I think I said this in my prepared remarks, but you'll see some growth in the near future in newer markets that are states that we haven't been in for too long, and also even adding some new states.

Speaker Change: And so so I wouldn't say that we're necessarily targeting a different type of acquisition opportunity I will say, though that well our first preference is to grow in states. We're in.

Speaker Change: One of the lowest hanging fruit and theres lots of room to continue to do that.

Speaker Change: We definitely have opportunities in lots of new markets and I think I said this in my prepared remarks, but youll see youll see some growth in the near future and newer markets.

Speaker Change: That are states that we haven't been in for too long and also even adding some new states.

Chad Keetch: So that's also part of our, you know, kind of in terms of just the set of deals we're looking at, we are expanding the geographical footprint.

Speaker Change: So that's also part of our.

In terms of just the set of deals we're looking at it we are expanding the geographical footprint.

David MacDonald: Great, thank you very much. Your next question comes from David MacDonald from Truist. Your line is now open.

Speaker Change: Great. Thank you very much.

Speaker Change: Your next question comes from David Macdonald from tuition. Your line is now open.

David MacDonald: Good afternoon, everyone. A couple questions. Just want to follow up on Ben's question a little deeper on M&A and just ask, with regards to Colorado specifically, obviously a fair amount of activity there. Is there anything specific to the state that you guys would call out, or is that just kind of how those fell? And then, I guess, to follow up on the last answer that you gave, could you just provide an update on, you know, kind of Tennessee and how that's been going? Just any high-level thoughts there. Yeah, so, you know, as I said, I, you know, our priority is always to grow in markets we know, and that we know well, and we have a really strong track record.

Good afternoon, everyone. A couple questions just wanted to follow up on Ben's question, a little deeper on M&A.

David MacDonald: And just ask with regards to Colorado, specifically, obviously, a fair amount of activity. There is there anything specific to the state that you guys would call out or is that just kind of how those fell and then I guess to follow up on the last answer that you gave could you just provide an update on kind of Tennessee and housed how thats been going.

David MacDonald: Just any high level thoughts there.

Speaker Change: Yes so.

Speaker Change: As I said, our priority is always to grow in markets, we know and that.

Speaker Change: But we know well and we have.

Speaker Change: A really strong track record and Colorado is a perfect example of that.

Barry Port: And Colorado is a perfect example of that. And so, you know, it's a state that we've just been in for a while and have just an amazing team of leaders, both clinical and otherwise. We've recently kind of, as we've grown, we've divided it into two markets. So we, you know, and by that, that sort of gives our leadership more bandwidth. And that's been an important sort of structural thing we've done there to prepare for some of that growth. And that's typical of how we've grown in California and Texas and Arizona and other places too. And so it's kind of combining the strength of our team, the strength of our reputation there with, you know, deal opportunities that just come up, right, you know, opportunistically, we're just prepared to, to take some, some, you know, larger, I guess, acquisitions in Colorado.

Speaker Change: So it's a state that we've just been in for a while and have just an amazing team of leaders, both clinical and otherwise.

Speaker Change: We've recently kind of as we've grown we've divided into two markets. So we.

Speaker Change: And by that sort of gives our leadership.

Speaker Change: More bandwidth and Thats been an important sort of structural thing we've done there to prepare for some of that growth and thats typical of how we've grown in California, Texas, and Arizona and other places too.

And so is it kind of combining the strength of our team the strength of our reputation there.

With.

Speaker Change: Deal opportunities that just come up right Opportunistically, we're just prepared to to take some some.

Speaker Change: Larger I guess acquisitions in Colorado, So theres really nothing.

Barry Port: So there's really nothing, you know, super unique about Colorado other than it's a state we love. And there happened to be some some great deals that that that have come up and that we were prepared, prepared to take.

Speaker Change: Super unique about Colorado other than it's a state we love and there happen to be some some great deals.

Speaker Change: Have come up and that were prepared prepared to take so.

Barry Port: So in terms of Tennessee, you know, obviously, we're still new to the state, we have three buildings there, continue to prepare for future growth in that state. And, you know, that's, that's definitely one of the states I was alluding to earlier is one that we we plan to grow in, in the near future. But we haven't gotten to a point to announce anything there yet. But you'll, but you'll see something soon on that front. But really excited about the momentum we have in Tennessee. Our leadership team there, again, is just first class. And, you know, having three buildings is, you know, obviously just to start.

Speaker Change: In terms of Tennessee.

Speaker Change: Obviously, we're still new to the state we have three buildings there continue.

Speaker Change: Continuing to prepare for future growth in that state.

Speaker Change: That's definitely one of the states I was alluding to earlier is one that we plan to grow in the near future.

Speaker Change: But we haven't.

Speaker Change: Gotten to a point to announce anything there yet, but youll see something soon on that front.

Speaker Change: But really excited about the momentum we have in Tennessee.

Speaker Change: Our leadership team there again is just first class.

Speaker Change: Having three buildings is obviously just to start.

Barry Port: And as we continue to grow there, that will allow us to build extra resources and extra strength in that market. And, you know, also South Carolina and other parts of that part of the country that we're really excited about as well.

Speaker Change: And as we continue to grow there that will allow us to build extra resources in extra strength.

And that market and also South Carolina and other parts of that part of the country that we're really excited about as well one thing I would add to that David is we've got.

Spencer Burton: One thing I'd add to that, David, is we've got We have a new market leader program, which effectively prepares leaders that are experienced and have a good track record with us in leading in other states that have interest in other states. And we spent some time working with these leaders to look at preparation to enter new geographies that align with their interests and the interest of the organization. And that, combined with 60 plus AITs in the pipeline, we are prepared for growth in other states. It's not to say that we'll rapidly jump in. We take a pretty methodical approach to that, but don't be surprised if you see us entering some new geographies next year.

Speaker Change: We have a new market leader program, which effectively prepares leaders that are experienced and have a good track record with us and leading in other states that have interest in other states.

Speaker Change: And we spent some time working with these leaders to look at preparation to enter new geographies.

Speaker Change: That align with their interests and the interests of the organization.

Speaker Change: And that combined with 60 plus AI it is in the pipeline.

Speaker Change: We are prepared for growth in other states, it's not to say that we will.

Speaker Change: Rapidly jump and we take a pretty methodical approach to that but but don't be surprised if you see us entering some new geographies next year.

Barry Port: Okay, and just one other guys, look, I realize you obviously haven't put anything out for 2025. But I'm just curious, any high level kind of early comments about, you know, just the growth opportunities you see in front of you any potential 2025, you know, headwinds and tailwinds that you would point to and lay out, I guess, just, you know, any preliminary high level conversations about 2025. I think my last comment kind of speaks to that. I mean, we, we, you know. We certainly are excited about, you know, growth opportunities, acquisition opportunities. We, so much so that we've tried to make sure that both from a support perspective here at the Service Center, and, you know, building our bench of leadership talent in the field, that we've got solid preparation to be able to handle what we see as a pretty attractive environment for growth.

Speaker Change: Okay, and then just one other guys look I realize you obviously haven't put anything out for 2025, but I'm just curious any high level kind of early comments about just the growth opportunities you see in front of you any potential 2025.

Speaker Change: Headwinds in <unk> that you would point to and lay out I guess, just any preliminary high level conversations about 2025.

Speaker Change: I think my last comment it kind of speaks to that I mean, we.

Speaker Change: We certainly are excited about.

Speaker Change: Growth opportunities acquisition opportunities, we so much so that we've we've tried to make sure that both from a support perspective here at the service Center and.

Speaker Change: Building, our bench of leadership talent in the field that we've got.

Speaker Change: Solid preparation to be able to handle what we see is.

Pretty attractive environment for growth, but but that aside we also can't overemphasize enough how.

Barry Port: But that aside, we also can't overemphasize enough how pleased we are with the progress we're seeing in almost every market that we're in across the portfolio from a transitioning and same-store perspective. There's really solid growth fundamentals in all three of our buckets, but our same-store operations continue to improve nicely, which speaks to the fact that we're able to balance better than we ever have before. having growth along with solid organic opportunity as well and having those two things kind of go hand in hand. So we feel good about where we're headed for 2025. We don't want to be overly confident.

Pleased we are with the progress we're seeing in almost every market that we're in across the portfolio from a transitioning and same store perspective, there's really solid growth fundamentals in all three of our buckets, but but.

Our same store operations continue to improve nicely in which which speaks to the fact that we're able to balance.

Speaker Change: Better than we ever have before.

Speaker Change: Having growth along with solid organic opportunity as well and having those two things kind of go hand in hand, so we feel we feel good about where we're headed for 2025.

Speaker Change: We don't want to be overly confident theres certainly a lot of things we need to do to improve.

Barry Port: There's certainly a lot of things we need to do to improve always, but we feel pretty excited about the horizon.

Speaker Change: Always, but we feel pretty pretty excited about the horizon.

Scott Fidel: Okay, thanks very much. question comes from Scott Fidel from Stevens. Your line is now Oh, hi. Thanks, everyone. Hi.

Okay. Thanks very much.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Question comes from Scott Fidel from Stephens. Your line is now open.

Scott Fidel: Oh, hi, thanks, everyone.

Scott Fidel: First question, just as we sort of round out the rest of the year, just interested on any, any call outs you'd want to make just around from modeling considerations for the 4th quarter, you know, either from the P&L perspective, obviously, up the new Medicare rate coming in for FY 25, but any other call outs and then also from the cash flow perspective, any seasonal dynamics that you just want to highlight what modeling cash. Yeah, great, great question, Scott. As you mentioned, we have that Medicare rate coming in October 1st and it will be slightly above what the net market basket rate increases due to the states that we're in.

Scott Fidel: First question just.

As we sort of round out the rest of the year just interested on any any call outs you'd want to make just around for modeling considerations for the fourth quarter.

Scott Fidel: From the P&L perspective, obviously, the new Medicare rate.

Scott Fidel: Coming in for FY, 'twenty, five but any other.

Scott Fidel: All out and then also from the cash flow perspective, any seasonal dynamics that you just wanted to highlight when modeling cash flows.

Speaker Change: Yes, great. Great question. Scott you mentioned, we have that Medicare rates came in October 1st <unk> slightly above what the net market basket rate increases just the states that where and.

Suzanne Snapper: When we kind of look at the Medicaid rates, I think we're pretty in a pretty steady state there based upon where we ended up with the Q3 rate going into Q4 just because not a lot of change is happening in Q4. And some of the supplementals that I talked to a little bit, supplemental payments, the ebbs and flows are about even between Q3 and Q4. So that's a pretty steady state there. With regards to kind of margins and other things, we're looking really, really consistent as we model into Q4 as well. Obviously, we have a little bit seasonality coming into it with higher skilled mix usually and continued growth and occupancy is usually in there as well.

Speaker Change: When we kind of look at the Medicaid rate I think there were pretty in a pretty steady state there.

Speaker Change: Upon where we ended up with the Q3 range going into Q4, just because not a lot of changes happening in Q4, and some of the fundamentals that I'll touch on a little bit in supplemental payments and the ebbs and flows are about even between Q3 and Q4, so and that's a pretty steady state there.

With regards to kitchen of margins and other things were looking really really consistent as we model into Q4 as well, obviously, we have a little bit seasonality coming into it with higher skilled mix usually and.

Speaker Change: Continued growth in occupancy is usually in there as well and then just rounding out the quarter, we had a lot of acquisition or acquisitions at the end of Q3. So it is 12 acquisitions coming in for a full quarter in Q4, and then flipping to the cash flow.

Suzanne Snapper: And then just rounding out the quarter, we had a lot of acquisitions at the end of Q3, so those 12 acquisitions coming in for a full quarter in Q4.

Suzanne Snapper: And then flipping to the cash flow, just a reminder that we do have a large payment going out for the settlement that we did earlier in the year. We anticipate that going out towards the beginning of Q4. And then everything else is pretty steady state.

Speaker Change: Just a reminder, that we do have a large payment going out for the settlement that we did earlier in the year, we anticipate that going out towards the beginning of Q4.

Speaker Change: And then everything else is pretty steady state.

Scott Fidel: Okay, great. And then just my follow up question. I'm interested if you wanted to provide your thoughts on, you know, some of the discussion that's out in the marketplace, just around the trends around levels of insurer claims denials, you know, both in sort of commercial managed care and in Medicare Advantage. You know, most of the commentary has been from the acute hospital side. then the managed care companies have sort of been trading some barbs against the hospitals.

Speaker Change: Okay, Great and then just my follow up question.

Speaker Change: If you wanted to add.

Speaker Change: <unk> your thoughts on some of that discussion that's out in the marketplace just just around.

Speaker Change: The trends around levels of insurer claims denials.

Speaker Change: Paul.

Speaker Change: And sort of commercial managed care and in Medicare advantage.

Most of the commentary has been from the acute hospital side and then.

Speaker Change: The managed care companies at that sort of been trading some barb's against the hospitals.

Barry Port: So definitely would be interested just from your perspective more on the post-acute and the skilled nursing side, you know, how those trends have been in terms of engaging, you know, with the health insurers and sort of what you've been seeing in terms of, you know, prior authorization and claims denial type of interaction. Yeah, look, I think that, you know, the commentary you're hearing and the congressional reporting on on this topic is, is fairly indicative of what What the provider community at large generally, you know, deals with in that relationship, and not to say it's all entirely negative, there's a healthy back and forth when you're working with managed care providers on coding and length of stay and rate levels.

Speaker Change: So definitely would be interested just from your perspective more on the post acute in the skilled nursing side, how those trends have been in terms of engaging.

Speaker Change: The health insurers and sort of what you've been seeing in terms of.

Speaker Change: Prior authorization and claims denial type of interactions with them.

Speaker Change: Yes look I think.

Speaker Change: The commentary you're hearing and the congressional reporting on on this topic is fair.

Speaker Change: <unk> fairly indicative of what.

Speaker Change: Sure.

Speaker Change: What the provider community at large generally.

Speaker Change: Deals with them that relationship and not to say, it's all entirely negative.

Speaker Change: There is there is a healthy back and forth when you're working with managed care providers on coding and length of stay and rate levels and.

Barry Port: and authorizations. And that really, frankly, there's nothing new there, at least as far as how we work with our managed care partners. You know, our approach really has been to have a healthy embrace of that process and to make sure that we try to, you know, seek to understand what it is that they're looking for and how we kind of work within that structure and build trust so that when we are seeking changes to authorizations and levels and things like that, that there's a trust that's built mostly with a foundation based in outcomes. And look, I will tell you, sometimes it's really difficult to have those discussions because, you know, what they want and what we want for the patient are sometimes conflicting.

And authorizations.

Speaker Change: Really frankly.

Speaker Change: There's nothing new there.

Speaker Change: At least as far as how we work with our managed care partners.

Speaker Change: Our approach really has been to have a healthy embrace of that process and to make sure that we.

Speaker Change: We tried to seek to understand what it is that they're looking for and how we kind of work within that structure and build trust. So that when we are seeking changes two authorizations levels and things like that that there is a trust thats built mostly with a foundation based on outcomes.

Speaker Change: And look I will tell you, sometimes it's really difficult.

Speaker Change: To have those discussions because what what they want and what we want for the patient.

Speaker Change: Sometimes conflicting.

Barry Port: But that said, I think the spotlight that's kind of put on this lately is probably healthy. You know, there probably isn't quite as much accountability for the managed care providers as there are for us as providers. It tends to be somewhat one-sided conversation sometimes, and that shouldn't always be the case. So I think, look, the dialogue around this is healthy and helpful. I think there should be some checks and balances to, you know, how some of those inner workings play out in terms of, you know, the impact on the patient and the providers that are, you know, hands-on with the care.

Speaker Change: But that said I think the spotlight.

It's kind of put on this lately is probably healthy.

Speaker Change: There probably isn't quite as much accountability.

Speaker Change: For the managed care providers as there are for the for us as providers.

Speaker Change: It tends to be somewhat one sided conversation sometimes.

And that Shouldnt always be the case, so I think I think look the dialogue around this as healthy and helpful.

Speaker Change: Think there should be some checks and balances to.

How.

Speaker Change: How some of those inner workings play out in terms of the impact on the patient and the providers that are.

Speaker Change: That are hands on with the care. So look at the end of the day. There is probably no no meaningful impact to us because we feel confident about our relationships with managed care providers, but I think accountability in this space is always healthy and helpful.

Barry Port: So, look, at the end of the day, there's probably no meaningful impact to us because we feel confident about our relationships with managed care providers, but I think accountability in this space is always healthy and helpful.

Scott Fidel: Okay, appreciate the feedback there.

Speaker Change: Okay I appreciate the feedback there and thats it for me. Thanks.

Scott Fidel: That's it for me. Thanks.

Scott Fidel: Thanks Scott.

Operator: Thank you.

Speaker Change: Thank you that concludes our Q&A session. Thank you so much for attending today's call. You may now disconnect have a wonderful day.

Operator: That concludes our Q&A session. Thank you so much for attending today's call.

Operator: You may now disconnect. Have a wonderful day.

Speaker Change: Okay.