Q4 2024 Ensign Group Inc Earnings Call
Hello, and thank you for standing by my name is Bella and I will be your conference operator today.
Speaker Change: This time I would like to welcome everyone to the Ensign Group Q4 earnings call. All lines have been placed on mute to prevent any background noise. After.
Speaker Change: The speakers remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question. During this time simply press. The Star then the number one on your telephone keypad.
Speaker Change: To withdraw your question press the Star one again.
Mr. Keetch: I would now like to turn the conference over to Mr. Keetch, you may begin.
Mr. Keetch: Thank you operator and welcome everyone.
Mr. Keetch: Our earnings press release yesterday, and it is available on the Investor Relations section of our website at Ensign group Dot net.
Mr. Keetch: Replay of this call will also be available on our website until five P. M Pacific on Friday February 28 2025.
Mr. Keetch: We want to remind anyone that might be listening to a replay of this call that all statements are made as of today February six 2025, and these statements have not been 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.
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 listeners should not place undue reliance on forward looking statements and are encouraged to review our SEC filings for complete discussion of factors that could impact our results, except as required by federal Securities laws.
Mr. Keetch: And its independent subsidiaries.
Mr. Keetch: Undertake to publicly update or revise any forward looking statements.
Mr. Keetch: It changes arise as a result of new information future events changing circumstances or for any other reason.
The Ensign Group, Inc. Is a holding company with no direct operating assets employees or revenues 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.
Mr. Keetch: 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 liabilities enzyme.
Mr. Keetch: And then also on standard bearer health care REIT, Inc, which is a captive real estate investment trust and invest in health care properties and if there is under the lease agreements with certain independent subsidiaries of enzyme as well as third party tenants that are unaffiliated with the Ns anchor.
Mr. Keetch: The words enzyme company, we our and.
Mr. Keetch: 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 a separate independent companies that have their own management employees and assets.
Mr. Keetch: References herein to the consolidated company and its assets and activities as well as the use of the words, we us and 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 end of anger.
Mr. Keetch: Also we supplement our GAAP reporting with non-GAAP metrics when viewed 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-K, and with that I will turn the call.
Barry Port: All over to Barry Port our CEO, Barry Thanks, Shannon and thank you all for joining us today.
Barry Port: Our leaders and their teams across the organization once again posted record clinical and financial results.
Barry Port: We need to build remarkable momentum in each market across our portfolio.
Barry Port: Success is entirely due to the efforts and commitment of those leadership teams caregivers field resources and service Center partners.
Barry Port: One of our most important priorities is to support those who care for our patients every day that core value of customer second is something our teams across the organizations face as we attract and develop <unk> and leaders.
Barry Port: We are building a formidable bullpen of caring and passionate partners, who are determined to live our mission to dig to five post acute care.
Barry Port: After another record year each quarter, we're excited about the many opportunities continue to grow this effort by capturing the enormous upside in our portfolio as we relentlessly focus on fundamentals across the organization.
Barry Port: We are pleased to see same store and transitioning occupancy increased by two 7% and four 1% for the year and grow by two 3% and four 7% over the prior year quarter, respectively.
Barry Port: We also saw skilled days increased by three 8% for our same store and 10, 9% for transitioning operations over the prior year quarter.
Barry Port: In addition, our managed care census grew by six 6% and 27, 7% for our same store and transitioning operations, respectively over the prior year quarter.
Barry Port: These results demonstrate the exciting momentum even in our more mature operations. We are very pleased with these results, but even more excited about these outcomes because they were achieved while simultaneously, adding 57, new operations across almost every market we serve.
Barry Port: When we look at the combination of organic growth and new acquisitions, we see a very bright future ahead.
Barry Port: We're very humbled by what we were able to accomplish in 2024, and we are eager to continue to drive organic improvements and take advantage of the acquisition opportunities that we see on the horizon for <unk>.
Barry Port: Issuing our 2025 earnings guidance of $6 16 to $6 34 per diluted share.
Barry Port: And the annual revenue guidance of $4 83 billion to $4 $91 billion.
Barry Port: The midpoint of this 2025 earnings guidance represents an increase of 13, 8% over 2024 results.
Barry Port: 31% higher than our 2023 results.
Barry Port: We look forward to 2025 with confidence that our partners will continue to manage and innovate while balancing. The addition of newly acquired operations.
Barry Port: This annual guidance comes on top of the extraordinary growth we experienced in the last few years.
Barry Port: To put this performance in perspective over the last five years, our total revenue increased by $2 2 billion or 109, 2%, representing a 15, 9% compound annual growth rate.
Barry Port: While our diluted GAAP earnings per share grew by $3 48 in 2019.
Barry Port: $5 12 in 2024, representing a 25, 6% compounded annual growth rate.
Barry Port: In addition, since we spun out the pennant group in 2019, we have seen adjusted EPS grew by 209% with a CAGR of 25, 3%.
Barry Port: This performance is not due to some large event or single transformative transaction, but instead is the result of steady and consistent growth and performance quarter after quarter, which comes from our collective belief and commitment held by all of our partners to expand our mission in a methodical and thoughtful way.
Barry Port: We look forward to the upcoming year and are confident that our partners can reach new heights in clinical and financial performance as they apply our proven locally driven model and.
Barry Port: And as we evaluate our expanding portfolio. We are very excited about the continued growth in occupancy and skilled mix that we experienced last year, which is continuing so far into the first quarter of this year.
Barry Port: There are so many opportunities in front of us to optimize operational efficiencies and drive occupancy and skilled mix as we continue to successfully unlock value and the opportunity in the dozens of recently acquired operations are.
Barry Port: Our leaders are poised to again showcase our ability to find acquire and transition performing.
Barry Port: Performing operations by applying proven ensign principles developed over 25 years.
Barry Port: Next I'll ask Chad to add some additional insights regarding our growth Chad.
Chad: Thank you Barry.
Chad: As we expected we continue to add to our growing portfolio and are thrilled with the 12 new operations. We added during the quarter and sets. These include the following one in Alabama, and Tennessee, one in Wisconsin, one in Texas and one in Nebraska.
Chad: In total we added 1147, new skilled nursing beds in 16 senior living units across five states of.
Chad: Of these new operations six of them included the real estate assets, which were acquired by standard bearer at least to an ensign affiliated operator. This growth brings a number of operations acquired in 2023 MSA to 64 38 of which were acquired since January 2024.
Chad: We are excited to add density in one of our newest markets in Tennessee and look forward to deepening our relationships in the health care community and building upon the foundation of our strong local leadership.
Chad: We are also eager to see our first operation in Alabama gained strength and look forward to bolstering our presence in that state over time.
Chad: As we've talked about before entering new states is a significant undertaking that for us must be driven by a proven ensign leader, who is committed to and has a connection with the new geography.
Chad: As most of you know the foundational principle of our entire strategy is a recognition that post acute care as a locally driven business and the success or failure of any operation is largely determined by the quality of the leadership and the vision of the team leading each unique multimillion dollar business and.
Chad: In addition, having the support of local resources and experts from nearby States has also proven to be a successful model and opening a new market.
Chad: Lastly, when we go into a new state, we typically look to start with one or two buildings. So we can establish a solid launching point for more growth.
Chad: With Alabama, we were able to check all those boxes and have an outstanding enzyme leader, who has relocated to direct our efforts there in our first building with the support of our talent in Tennessee, and South Carolina.
Chad: Over time as we gain strength in our first operation, we will look to add additional facilities to establish our first Alabama cluster as we've seen recently with Tennessee. Eventually this will grow into multiple clusters, which will eventually comprises a sizeable market.
Chad: Can't wait to watch, Alabama become another reflection of the template of growth and development, we've seen across our footprint over the last 25 years.
Chad: Remind you that we are now only in 15 states and have significant bandwidth to grow and the other 35 states.
Chad: Looking forward, we have already announced a new transaction, which we expect to close in the next few months that includes two new states Alaska in Oregon.
Chad: As with Alabama each of these new states is driven by an enzyme leader and will represent a small investment with plans to build overtime.
Chad: With all that being said during 2024, and we added new operations in all but two of our existing 15 states spreading out the growth across many markets. While we will continue to evaluate new states that fit our criteria, we will prioritize growth in our established geographies. This not only allows us to deepen our commit.
Chad: Most of these markets, but because of our transitions do not rely on our centralized acquisition team our growth is not limited by typical corporate bottlenecks instead.
Chad: Instead, we look through our local cluster partners to implement the transition plans. So while our rate of growth. This year was strong the distribution of our growth across many markets leaves us with significant bandwidth to grow in most of our markets. We still see significant opportunity to continue to add meaningful density in our markets, We know best and our <unk>.
Progress on several additions that we expect to close in the next few months.
Chad: While we expect the current rate of acquisitions to continue this year, we remain committed to staying true to the proven deal criteria that have allowed us to grow in a healthy and sustainable way, we continue to see more and more opportunities to acquire new operations and our focus is to carefully choose the acquisitions that'll be accretive to shareholders.
Chad: Our local leaders continue to recruit future Ceos for Ensign affiliated operations and we have a deep bench of Ceos in training that are eagerly preparing for their opportunity to lead <unk>.
Chad: We still see evidence that many operators in this industry are struggling and we expect that the operating environment will translate into many near and long term opportunities to both lease and acquire post acute care assets.
Chad: However, we do not set arbitrary.
Chad: And we will remain true to our disciplined acquisition strategy, we only grow when we have the right leaders in place at a pricing is right.
Chad: The scalability of our growth model, our healthy balance sheet combined with the numerous opportunities we see in our existing footprint give us enormous potential to continue to apply our proven acquisition and transition strategies in 2025.
Chad: We are also providing additional disclosure on standard bearer, which added 13, new assets during the quarter in <unk>.
Chad: And is now comprised of 129 owned properties.
Chad: These assets, 97% leased to an enzyme affiliated operator, and 33 year lease to third party operators.
Chad: 10 of these 13, new real estate assets are operated by an ensign affiliated operator and three of these properties are senior living assets that are operated by our high quality third party tenants under Triple net long term lease.
Going forward standard-bearer continues to work together with its operating partners at enzyme to acquire portfolios comprised of operations that enzyme would operate and facilities are third parties that are interested in operating under a lease.
Chad: In addition over the coming months standard-bearer also anticipates announcing more acquisitions of real estate that will be operated by third party operators.
Chad: Collectively standard-bearer generated rental revenue of $25 1 million for the quarter of which $20 7 million was derived from ensign affiliated operations for the quarter enzyme reported $15 3 million and <unk> and as of the ended the quarter at an EBITDAR to rent coverage ratio of two five times and with <unk>.
Chad: That I will turn the call over to Spencer, our CLO to add more color around operations Spencer. Thank.
Spencer: Thank you Chad and Hello, everyone.
The incredible results that we experienced this past quarter and year were fueled by a combination of innovation and solid growth fundamentals in our more mature operations, along with exciting improvements being made in our newer acquisitions the.
Spencer: The first example comes from our same store category.
Spencer: Victoria healthcare and rehabilitation, a 79 bed skilled nursing facility located in Costa Mesa, California.
Spencer: Came in Ensign affiliate back in 2003.
Spencer: And it has been a consistent performer every year for the past two decades.
Spencer: <unk> consistency is driven in part by committed stable leadership.
Spencer: CEO Michael you Haas has led the facilities since completing his AIP program in 2015.
Joyce: And Joyce <unk> the CFO.
Joyce: <unk> been part of Victoria since joining as a frontline are in 18 years ago.
Joyce: Since then she has systematically worked through most clinical leadership roles at the facility, including director of nursing.
Joyce: However, despite a legacy of excellence 2024 was undeniably a breakout year for Victoria to.
Joyce: The Victoria team grew overall occupancy from an already strong 93% in Q4 of 2023 to 95, 9% in Q4 of 2024.
Joyce: Skilled revenue mix increased to an astonishing 75, 2% during that same period in.
Joyce: An improvement of 420 basis points.
Joyce: This performance was fueled by strong growth both in Medicare and managed care days.
Joyce: Costa Mesa is a highly complex and competitive environment.
Joyce: With deep saturation of managed care and hospital based health plans. So Victoria census growth was only made possible by our consistent achievement of outstanding clinical outcomes.
Joyce: Victoria is currently rated five star by CMS for health inspections quality measures and overall.
Joyce: Even more impressive despite operating in a very rigorous state regulatory region, Victoria State Survey scores are 14 times better than the California average.
Joyce: As you would expect these clinical and occupancy results have led to growth in the business.
Joyce: Revenues increased 14% in Q4 over prior year quarter, and EBIT skyrocketed during that same period.
Joyce: Victoria is a prime example of the ongoing potential and legacy operations that can be capped a strong experienced teams build clinical excellence.
Joyce: Our second example comes from our transitioning facilities group.
Joyce: Boulder Canyon health and rehabilitation and Boulder, Colorado is a 140 bed Smith that was acquired in 2021.
Joyce: It demonstrates how our turnaround occurs as local leaders apply proven ensign principles to their unique and often difficult circumstances.
Joyce: Like many of our acquisitions.
Joyce: As of the transition date Boulder Canyon was a one star facility with occupancy below 60%.
Joyce: The facility was losing money and was deeply dependent on nursing agency just to meet basic patient needs.
Speaker Change: Despite these challenges CEO Ray Larson.
Speaker Change: So geralyn Lindsay and their team went to work.
Speaker Change: Methodically established a culture of love and high achievement and actively recruited the top clinical talent in their area.
Speaker Change: They built an impressive leadership team and focused on elevating the experience of their frontline employees.
Speaker Change: As a result in 2020 for the facility completely eliminated nursing agencies, despite growing their workforce to care for increased acuity and occupancy.
Speaker Change: While quality transformations were happening inside the facility the Colorado resource team worked alongside facility leaders in cluster partners to transform Boulder Kenyans external reputation.
Speaker Change: Including winning over local hospital systems and key managed care organizations.
Speaker Change: Recently, one of Colorado's largest narrow network plans added Boulder Canyon as a preferred provider.
Speaker Change: Just on the changes in the facilities quality metrics and the trust that they had built working with our sister facility over the years.
Speaker Change: Today's Boulder Canyon enjoys a newly remodeled physical plant great quality metrics and an overall five star rating from CMS.
Speaker Change: Total occupancy for Q4 of 2024 averaged 84, 4% with skilled Medicare days, increasing by 70% and managed care days growing by over 200% compared to Q4 of 2023.
Speaker Change: This stability in labor and growth in Sensus has resulted in a 23% increase in net revenue and a 131% growth in EBIT over the prior year quarter.
Speaker Change: And if you ask the team of Boulder Canyon. They are just scratching the facility's potential.
Speaker Change: With that I will turn the time over to Suzanne to provide more detail on the company's financial performance and our guidance and then we will open up for questions. Suzanne. Thank you Victor and good morning, everyone detailed financials for the year end of quarter are contained in our 10-K and press release filed yesterday. Some additional highlights include the following for the year.
Speaker Change: GAAP diluted earnings per share was $5 in 12 months.
Speaker Change: An increase of 43% adjusted diluted earnings per share was $5 and thank you Ben and thanks, Chris.
Speaker Change: Two 3%.
Speaker Change: <unk> GAAP revenues and adjusted revenues were $4 3 billion an increase of 14.
Speaker Change: 2%.
Speaker Change: GAAP net income of $298 million, an increase of 42, 3%.
Speaker Change: Adjusted net income was $325 million, an increase of 17, 2% for the quarter.
Speaker Change: GAAP diluted earnings per share was $1 36, an increase of 257, 9% adjusted diluted earnings per share of $1 49, an increase of 16, 4%.
Speaker Change: Validators GAAP revenue and adjusted revenues were both $1 1 billion, an increase of 15, 5%.
Speaker Change: GAAP net income was $79 7 million an increase of 267, 4%.
Speaker Change: Adjusted net income was $87 6 million an increase of 18, 9%.
Speaker Change: Other key metrics as of December 31, 2024 include cash and cash equivalents of $464 6 million and cash flow from operations of 347.
Speaker Change: During the quarter the company increases given the 22nd consecutive year and paid a quarterly cash dividend of six and a quarter cent per common share.
Speaker Change: We have a long history of paying dividends.
Speaker Change: Now as the company's liquidity remains strong we plan to continue its long history of paying dividends to the future.
Speaker Change: Also continued to Delever, our portfolio exceeding our record well lease adjusted net debt to EBITDA ratio of one nine times.
Speaker Change: Alright, there'll be de lever even during periods of significant growth is particularly noteworthy and demonstrates our commitment to disciplined growth and that was I believe that we can continue to achieve sustainable correct in the long run.
Speaker Change: In addition, we currently have 572 million of available capacity on our <unk>.
Speaker Change: Your line of credit when when combined with our cash on our balance sheet, because that's over $1 billion in dry powder for future investment.
Speaker Change: We also own a 134 assets.
Speaker Change: With 129 I have thank you.
Speaker Change: Thank you Darren and 110 are completely debt free and are gaining significant value over time, even adding more liquidity to help with future growth.
Speaker Change: As Barry mentioned, we are providing our annual 2025 earnings guidance between $6 16, and $6.34 per diluted share.
Speaker Change: Annual revenue guidance between $4, eight 3 billion and $4 91 billion yes.
Speaker Change: We have evaluated multiple scenarios and based on the strength of our performance and the positive momentum we've seen in occupancy and skilled mix.
Speaker Change: Well as the continued progress on agency management and other operational and this okay.
Speaker Change: That we can achieve with Stifel.
Speaker Change: Our 2025 guidance is based on diluted weighted average common shares outstanding of 59, five room at tax rate of 25% the inclusion of acquisitions closed and expected to close in the second quarter of 2025, the inclusion of management's expectations for Medicare.
Medicaid reimbursement rates net of providers with.
Speaker Change: With the primary exclusion coming from stock based compensation.
Speaker Change: Additionally, other factors that could impact quarterly performance include variations in reimbursement system delays and changes in state budget seasons.
Speaker Change: Seasonality occupancy and skilled mix.
Speaker Change: Influence of the general economy consensus and staffing the short term impact of our acquisition activities.
Speaker Change: Reagent and insurance accruals and other factors and with that I'll turn it back over to Gary Gary.
Gary: Thanks Suzanne.
Speaker Change: As we wrap up I must reemphasize.
Speaker Change: We emphasize as I always do how incredibly honored and grateful that we all are to work alongside our operational leaders feel resources clinical partners and service center team that are behind these record setting results.
Speaker Change: We are completely amazed by their impressive resiliency as they focus on elevating.
Speaker Change: Clothing, everyone around them their collective commitment is truly a blessing.
Speaker Change: Our future is bright and we're excited for a busy year ahead and with that I will now turn it over to the Q&A portion of our call Bella can you. Please instruct the audience on the Q&A procedure.
Speaker Change: At this time I would like to remind everyone in order to ask a question press star.
Speaker Change: Then the number one on your telephone keypad.
Speaker Change: We will pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Ben Hendrix from RBC Capital markets. Your line is now open. Please go ahead.
Speaker Change: Thank you very much guys and congratulations on the results I just wanted to get your latest thoughts on the Medicaid reimbursement backdrop. Clearly you guys have had great luck bridging from the Covid era F map payments through the end of the public health emergency.
Speaker Change: But looking forward are there any specific programs or aspects of program supplemental quality incentive or otherwise that you are exposed to that might be at particularly high risk for cost savings cuts under the new administration versus others. Thanks.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Look.
Speaker Change: It's hard to know exactly where things are going to go during the kind of reconciliation process.
Speaker Change: What will actually become a priority with.
Speaker Change: In terms of legislation.
Speaker Change: Can tell you that.
Speaker Change: We are prepared.
Speaker Change: Through our industry Association and our lobbyists there to help educate members of Congress on any one of the scenarios that might be further explored.
Speaker Change: Our association.
Speaker Change: It's been really nimble and good at having.
Speaker Change: Language and legislative options prepared and really just a robust kind of education effort around impacts to.
Speaker Change: The Medicaid program as it relates to seniors, but.
Speaker Change: For us it's it's.
Speaker Change: It's not clear as to what will become a priority.
Speaker Change: All we can really do is just make sure that were part of the education process in the Meanwhile.
Speaker Change: We can also just kind of reiterate what we know about the Trump administration that there they're committed to the Medicaid program. He said that publically said as recently as Friday.
Speaker Change: And he's committed to the senior industry as well.
Speaker Change: Senior care industry. So.
We prepare for the worst as always but I think having Medicaid fee impact and a broad based way is going to be a pretty difficult task or Congress during the reconciliation process. So.
Speaker Change: But as for now no none of our programs are really at risk that we are aware of and I would just add typically an ever pelikan.
Speaker Change: <unk> controls you definitely have seen later regulations.
Speaker Change: There might be some things on the rate and says like as <unk> stated in the question, but really try to be nimble during these times and relate.
Speaker Change: We utilize that Theres regulatory relief there are some flexibility in our operating model and thoughts on that are involved in that at the state level and guaranteed.
Speaker Change: On the legislative side as well to tell the association that we have at each individual store.
Speaker Change: Thanks, a lot and if I could just follow up real quick specifically on Tennessee, just given your M&A acquisition. There I just wanted to get your thoughts on kind of the overall backdrop, both from a Medicaid perspective, but also just what youre seeing on the horizon in terms of opportunities for preferred provider relationships kind of like what you called out for Boulder Canyon.
Speaker Change: <unk>.
Speaker Change: Yes, so just taking a step back and looking at the overall, Tennessee markets.
Speaker Change: Obviously, the hot and I think there's a lot of noise from a process because of all the hospitals and the larger reimbursement announcement, all received Tennessee, obviously the amount of supplemental risk.
Speaker Change: Associated with our operations and substantially less than that and.
Speaker Change: And really this is carey.
Speaker Change: Carried all the way through enterprise all the way through on July <unk>. This year, and then Theyre Lucky in Q and working with.
Speaker Change: Questioned our internal team to actually continue that answer the latter portion of their patent relates to skilled nursing.
Speaker Change: It's not they're not that youre seeing with other large hospital with regard to networking obviously, we've been in that state and I think we talked about this when we can.
Speaker Change: We enter a new state we are hearing a lot of preparation the operator here.
Speaker Change: Can I have founded that state has been there for a very long time and has established great relationships great.
Speaker Change: The plan not only individual but others that we can have lots on from the acquisition and others that we actually had on resources and that still have great connections out there.
Speaker Change: Great. Thank you.
Scott: Our next question comes from the line of Scott <unk>.
Speaker Change: From Stephens. Please go ahead.
Speaker Change: Hi, This is Raj on for Scott I had a couple of modeling questions just first round.
Speaker Change: Quarterly EPS seasonality really.
Speaker Change: <unk>, two maybe 2024, even historically and whats kind of baked in guidance from an occupancy and skilled mix perspective.
Speaker Change: Yeah kind of down 20%.
Speaker Change: For seasonality first obviously Q4, historically on the occupancy and skilled mix in Q1 has been our <unk>.
Speaker Change: Last quarter, so, it's typically higher government higher occupancy than desktop at those quarters.
Speaker Change: When we look at this year's Q4, obviously, we saw something flat to Q3. The reason why it was flat with Q3 was so great and I think you saw during our earnings call and the subsequent conversations after that we had that heightened Q4 occupancy.
Speaker Change: Really retain that market share when we look at hospital occupancy we were able to keep all the market share and just really had a great Q3, which then continued into Q4 and is continuing into Q1.
Speaker Change: I'd mentioned Q1, historically has been our strongest occupancy and skilled mix seasonality and we see that same seasonality continuing in 2025.
Speaker Change: Okay.
Speaker Change: Thank you and then just as a follow up just around cash flow from operations and expectations, there anything you'd like to call out that would be unique to 2025.
Speaker Change: Other than the typical working capital seasonality.
Speaker Change: Yes.
Speaker Change: Yes, I think one of the things to keep in mind and this is just a.
Speaker Change: Every time, we have very heavy acquisitions as specifically right now we are seeing.
Speaker Change: As adjusted that licensing process and that change of ownership process. There have been substantial delays, we've seen slowdowns Pat the Medicaid offices on approval offices for licensing and so kind of that cycle that we're typically seeing it was probably draw out as we continue to do that this acquisition pathway.
Speaker Change: And until we actually see a little bit stretching on that that cash flow and the question around asset acquisitions to continue to come in and the slowdown from the Medicaid offices and other offices.
Speaker Change: A temporary phenomenon, while we're waiting to get that.
Speaker Change: Those Medicaid certifications and everything turned on.
But it can impact the cash flow in the short run and then other than that honestly Q4 saw a little bit of an unusual cash payment as we foreshadowed during the Q3 call. We did have that payment of the settlement that happened a year ago. So that was a little bit Jeff in the Q4 cash flow.
Speaker Change: Your next question comes from the line of a J rice with UBS.
Speaker Change: Yes.
Speaker Change: Hi, everybody.
Speaker Change: First question just to ask maybe a little bit about the lag.
Speaker Change: Labor cost trends what are you seeing there and then what's been moving more favorable in the last year or so.
Where do you see as you move into 2005 and is there anything specific around the workforce standards program in California.
Speaker Change: Are you factoring into your outlook and how that might impact you.
Speaker Change: Just maybe starting with the general labor environment.
Speaker Change: We're not seeing massive changes, but we're seeing very gradual improvement that continues.
Speaker Change: Quarter to quarter recently, we expect that to continue some of that is just environmental.
Speaker Change: The labor markets have stabilized more and more since covered part of it is we're relentlessly working on new ways to attract labor retain the best versus the best CNA has the best frontline workers and and then also were looking for leadership development opportunities.
Speaker Change: Our business is very locally driven and if you have a great local leadership team that's really the key to having a healthy frontline workforce and so as we continue to do those things we think a combination of.
Speaker Change: Environmentally the markets are.
Speaker Change: Or a little bit better and as we get better that bodes well for 2025.
Speaker Change: And the California <unk> standard.
Speaker Change: Thanks again for the guidance for 2025, and we have already included that we also have this is going to be the second year that we're going to be going with that program.
Speaker Change: And so like we've got a better handle on expectations associated with that program based upon what the setup.
Speaker Change: Okay.
Speaker Change: Maybe just a follow up question be on the deal pipeline, what are you seeing or the <unk>.
Speaker Change: Turns on the deals that Youre doing.
Speaker Change: Changing in any way what is the competitive landscape.
Speaker Change: Around acquisitions look like right now.
Speaker Change: A great question.
Speaker Change: As we said in our prepared remarks, we're seeing a lot of deal flow and you know.
Speaker Change: We actually.
Speaker Change: We've acquired a lot just in the last 18 months.
Speaker Change: And we expect to continue kind of on the same pace.
Speaker Change: In 2025, so we've got a lot of deals lined up that will be closing over the next several months.
Speaker Change: As Ann mentioned earlier, we are seeing some.
Speaker Change: Delays that the change of ownership from the state and granting licenses and stuff like that that are.
Speaker Change: It really like the deals are blocked up we're just waiting to get those licenses. So so you'll see us start announcing more closings over the next few months.
In terms of the competitive landscape.
Speaker Change: There are way more deals on our desk and we could ever dream of doing so.
Speaker Change: We are able to be very very selective.
Speaker Change: We often talk about this disciplined growth.
Speaker Change: And then.
Speaker Change: That's a lot of things, making sure we have leaders in the markets leaders that are ready to go to.
Speaker Change: To assume.
Speaker Change: The responsibility to transition these buildings Thats, obviously, the first thing, but also the terms of the acquisitions.
Speaker Change: We're really particular about making sure if it's a lease but there is plenty of coverage.
Speaker Change: Not.
Speaker Change: Stretching and looking at pro forma results in establishing the rents were.
Speaker Change: <unk>.
Speaker Change: Firm on using the trailing 12 and not paying for performance that we're going to create.
Speaker Change: And when you are buying the real estate, we're really focused on price per bed and making sure. It's in line with kind of.
Speaker Change: What we see as sustainable prices that will allow us to have the balance sheet that we do.
Speaker Change: You can't grow as quickly.
Quickly as we have over time.
Speaker Change: And have a healthy balance sheet, if you overpay things so.
Speaker Change: That's all kind of how we look at it but.
Speaker Change: So with all that said there is many opportunities for us as we're going through that disciplined analysis on deals.
Speaker Change: We're.
Speaker Change: We tend to win the deals.
Speaker Change:
Speaker Change: Yes.
We want and that we're ready to move forward with and expect that to continue.
Speaker Change: Okay, great. Thanks.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Again, if you would like to ask a question press star one on your telephone keypad.
Speaker Change: That concludes our Q&A session, ladies and gentlemen.
Speaker Change: Thank you all for joining you may now disconnect.
Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.