Q1 2025 Ensign Group Inc Earnings Call

Water FY 'twenty 25 earnings conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

If you would like to ask question. During this time simply press star followed by the number one on your telephone keypad.

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Mr. Keetch: I would now like to turn the call over to Mr. Keetch. Please go ahead.

Mr. Keetch: Thank you operator, and thank you everyone. We filed our earnings press release yesterday and it is available on the Investor Relations section of our website at <unk> Dot net.

Mr. Keetch: Replay of this call will also be available on our website until five P. M Pacific on Saturday May 31, 2025.

Mr. Keetch: We want to remind anyone that maybe you're listening to a replay of this call that all statements made are as of today April 32025, and these statements have not been nor will be updated subsequent to today's call.

Mr. Keetch: 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 list.

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.

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.

Mr. Keetch: Changing circumstances or for any other reason.

Mr. Keetch: In addition, 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 and <unk>.

Mr. Keetch: <unk>, 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.

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

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

Mr. Keetch: For instance, herein to the consolidated company and its assets and activities as well as the use of 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 enzyme <unk>.

Mr. Keetch: Also we supplement our GAAP reporting with non-GAAP metrics when viewed together with 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.

Mr. Keetch: GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our Form 10-Q, and with that I'll turn the call over to Barry Port Our CEO Barry.

Barry Port: Thanks, Shannon and thank you everyone for joining us today, we are thrilled to announce another record setting quarter achieved by our local teams in spite of all the industry noise. Our results. This quarter demonstrate that we have never been stronger showing yet again that sound fundamentals, coupled with an incredible passion can forge consistency.

Barry Port: Even in an ever changing environment.

Barry Port: Our operators set several all time highs during the quarter, which are only made possible by strong clinical outcomes achieved by our dedicated team of caregivers in frontline staff.

Barry Port: During the quarter, we saw substantial growth across all of our buckets and in almost every market. We serve more specifically we achieved an all time high in same store and transitioning occupancy, which increased to 82, 6% and 83, 5% respectively over the prior year quarter.

Barry Port: We also saw skilled census increase for both our same store and transitioning operations by seven 6% and nine 9% respectively over the prior year quarter.

Barry Port: In addition, our managed care census grew by eight 9% and 15, 6% for our same store and transitioning operations, respectively over the prior year quarter.

Barry Port: All of these improvements are the result of many factors, including the relentless efforts by our local leaders to share and implement best practices that lead to stronger outcomes and earned the confidence from our residents acute care partners Acos and managed care networks.

Barry Port: While the quarter was strong we are even more excited about our results because they were achieved while simultaneously, adding 47, new operations is January of 2024 across almost every market. We serve some of which are already performing at or above our expectations.

Barry Port: The combination of improvements in occupancy and skilled mix in our more mature operations and the long term upside in our newly acquired operations shows the enormous organic growth potential in our existing portfolio.

Barry Port: We continue to attract and develop caregivers and leaders and are building a formidable bullpen of carrying and passionate partners who are determined to deliver mission dignified post acute care.

Barry Port: In addition, we continue to see improvements in turnover and limited use of agency staffing labor all of which are critical to maintaining our cultural values and continuity of care.

Barry Port: After such a strong first quarter, including some faster than expected contributions from some of our newly acquired operations. We are raising our annual 2025 earnings guidance to between $6 22.

Barry Port: And $6 38 per diluted share up from $6 16 to $6 34 per diluted share.

Barry Port: The new midpoint of this increased 2025 earnings guidance represents an increase of 14, 5% over our 2020 for results and has 32% higher than our 2023 results.

Barry Port: We're also increasing our annual revenue guidance to $4 89 billion to $4 94 billion up from 483 billion to $4 $91 billion to account for our current quarter growth.

And acquisitions, we anticipate closing during the first half of 2025.

Barry Port: We are excited about our start to the year and are confident that our partners will continue to manage and innovate while balancing. The addition of newly acquired operations. We are eager to continue to drive organic improvements and take advantage of the acquisition opportunities that we see on the horizon. When we consider the current health of our organization combined with our color.

Barry Port: Sure and proven local leadership strategy, we are well positioned to continue executing our operational model with all that said, we see so much more room for further improvement and we continue to optimize operational efficiencies expand services and create new partnerships all of which will drive further improvement.

Barry Port: And occupancy and skilled mix, we look forward to continuing to build on the momentum from the first quarter into the rest of the year as we continue to successfully unlock value and opportunity in the dozens of recently acquired operations.

Barry Port: This performance is not due to some large events or single transformative transactions, but instead is the result of steady and consistent growth and performance quarter after quarter, which comes from our collective belief and our commitment held by all of our partners to expand our mission and the theoretical and thoughtful.

Barry Port: Next I'll ask Chad to share some additional insight regarding our recent growth Chad.

Chad: Thank you Barry we continued our steady pace of growth by adding 19, new operations, including eight real estate assets during the quarter incentives.

Chad: These include the following one in Alabama, one in Oregon, and one in Washington, One in Texas two in Alaska, two in Arizona three in.

Chad: In California, and eight in Tennessee.

Chad: In total we added 1906, new skilled nursing beds, and 200 senior living units across eight states.

Chad: This growth brings a number of operations acquired during 2024 to 47.

Chad: We are very excited to add density to one of our newest markets in Tennessee and to add our first operation in Alabama.

When we enter into new states, we tend to see an uptick in opportunities in those geographies, we're seeing more opportunities to deepen our presence in the southeast and expect to do so over time.

Chad: We're also excited to grow in Oregon, and Alaska for the first time.

Chad: As with our other new states our entrance into these new markets have been driven by proven Ensign leaders, who are committed to and have a connection with the new geography.

Chad: As we've seen and said before.

Chad: 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. This.

Chad: This has played out time and time again with our most recent example, being Tennessee.

Chad: Footholds eventually lead to growth in the multiple clusters, which will eventually comprise the sizable market. We look forward to bolstering our presence in those markets over time.

Chad: In the meantime, we continue to prioritize growth in our established geographies as it allows our clusters to provide a comprehensive solution to the health care needs in those markets.

Chad: We continue to evaluate new states that fit our criteria, we will prioritize growth in our established geographies.

Chad: This not only allows us to deepen our commitment to those markets, but because of our transitions built rely on a centralized acquisition team our growth is not limited by a typical corporate bottlenecks. Instead, we look to the local cluster partners to implement the transition plans. So while our pace of growth remains strong the distribution of our growth occur.

Chad: <unk> many markets leaves us with significant bandwidth to grow in most of our markets.

Chad: We still see significant opportunity to continue to add meaningful density in the markets. We know best and are making progress on several additions and we expect to close in the next few months.

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 an opportunity to lead <unk>.

Chad: Still see evidence that many operators in this industry are struggling and we expect the operating environment will translate into many near term and long term opportunities to both lease and acquired post acute care assets.

Chad: However, we do not set arbitrary growth goals and will remain true to our disciplined acquisition strategy. We only grow when we have the right leaders in place and the pricing is right.

Chad: The scalability of our growth model, our healthy balance sheet combined with numerous opportunities you see in our existing footprint give us enormous potential to continue to apply our proven acquisition and transition strategies in 2025.

Chad: We anticipate the current rate of acquisitions to continue this year and remain committed to staying true to the proven deal criteria that allow us to grow in a healthy and sustainable way.

Chad: We continue to see more opportunities to acquire new operations and our focus is to carefully choose the acquisitions will be accretive to our shareholders. Both in the near and long term.

Chad: We're also providing additional disclosure on standard bear, which added 13, new assets during the quarter incidence and is now comprised of 137 owned properties of these assets are 104 at least to an ensign affiliated operator, and 34 leased to third party operators.

Chad: Going forward standard variable will continue to work together with its operating partners at Ensign to acquired portfolio is comprised of operations that ensign would operate and facilities that third parties are interested in operating under a lease <unk>.

Chad: Collectively standard-bearer generated rental revenue of $28 4 million for the quarter of which $23 9 million was derived from ensign affiliated operations.

The quarter standard bare reported a $17 1 million in <unk> as of the end of the quarter and had an EBITDAR to rent coverage ratio of two six times.

Chad: With that I'll turn the call over to Spencer, our COO to add more color around operations Spencer.

Spencer: Thanks, Chad and Hello, everyone today I'm excited to share two facility examples that illustrate the consistent operational momentum that we are seeing as local teams continue to respond to stakeholders in their communities.

Spencer: I hope that these real life. Examples can help explain why we feel so encouraged by our Q1 results and confident in the ability of our model to continue to produce exceptional results going forward, regardless of the external forces or challenges that may exist.

Spencer: The first example comes from our transitioning bucket.

Spencer: <unk> post acute care center located in the Los Angeles, California area, and led by Executive Director, Kyle Armstrong and director of nurses Carload Waco.

Spencer: <unk> 68 bed skilled nursing facility was acquired during Q1 of 2023.

Speaker Change: During the recently closed quarter <unk> revenues increased by 17, 7% and EBIT improved by an impressive 86, 4% compared to Q1 of 2024.

Over the same period occupancy grew by 2%, but the bigger story was the facilities strategic growth in skilled mix for.

Speaker Change: For example, Medicare days increased by 19, 8% and managed care days grew by 85, 7%.

Speaker Change: This growth in skilled census was made possible by the facility's commitment to quality, which is evident and it being the only skilled facility in a geography that carries a five star quality measures and five star overall ratings from CMS.

Speaker Change: The five star ratings of given the limited teams strong credibility with the health plans to hospitals and discharging facilities in their area.

Speaker Change: Another major factor in let me this financial success has been their ability to improve the continuity of care and reduce labor costs through improved staff retention.

Speaker Change: During Q1, lomita reduced its caregiver turnover by 36% compared to prior year quarter.

Speaker Change: This workforce stabilization directly decreased onboarding and overtime costs and in turn increase EBIT margin.

Speaker Change: But most importantly, it's resulted in a healthy work environment.

Speaker Change: <unk> can trust their co workers.

Speaker Change: Clinical competency and achieve great health care outcomes for the residents they serve.

Speaker Change: The second facility to highlight I wanted to share represents the exciting same store growth that continues to occur in facilities that have been part of the organization for a long time.

Speaker Change: Copper field healthcare and rehabilitation in Houston, Texas is a 124 beds that was acquired in 2016.

Speaker Change: During the period following transition Copperfield made steady clinical and financial progress. However, during the past year. The facility has truly transformed into the communities facility of choice under the leadership of <unk> Kapoor, CEO, and one depressed and director of nursing.

Speaker Change: For example, in Q1 copper field averaged 97% occupancy and increase of 11% over prior year quarter.

Speaker Change: I'll give some context the average occupancy for non affiliated Smith and the state of Texas is under 64%.

Speaker Change: During that same period skilled Medicare days grew by nearly 43% while the already healthy managed care census, improved by 14, 8%.

Speaker Change: As you would expect there's a clinical story behind the strong increases in skilled mix that copper field has achieved.

Speaker Change: And our medical hub like Houston Health plans and hospital systems demand quality from their post acute partners and copper fields ability to maintain CMS five star quality measures and overall ratings has provided the facility access to contracts that are close to most providers.

Speaker Change: Notably many of the Medicare lives in Houston are now being managed through Acos, which means that the hospital systems can be at financial risk if the patients. They discharge have poor health outcomes or have to return to acute hospitals.

Speaker Change: Similarly managed care plans in the area of narrow their networks and our guiding their members leading post acute care to providers like copper field that score high on quality outcomes.

Speaker Change: As acuity has increased copper fields multi disciplinary clinical team has partnered with and even received training from their acute hospital partners, which is empowered copper shield to confidently care for patients with medical conditions and equipment that would overwhelm most this level of care teams.

Speaker Change: As demonstrated by both lomita and copper field, it's a very exciting time to be in post acute care there.

Speaker Change: There continues to be strong demand for quality care and its facilities like lomita and copper filled demonstrate clinical competency and willingness to partner with hospitals and health plans are rewarded with higher occupancy improved payer mix and the ability to provide life changing outcomes for more and more patients and staff.

Suzanne: And with that I'll turn the time over <unk> to provide more detail on the Companys financial performance and our guidance and then we'll open up for questions Suzanne.

Suzanne: Thank you Spencer and good morning, everyone detailed financials for the quarter are contained in our 10-Q and press release filed yesterday and additional highlights include the following GAAP diluted earnings per share was $1 37.

Suzanne: At 15, 1%.

Suzanne: Adjusted diluted earnings per share was $1 52, an increase of 16, 9% consolidated GAAP revenue and adjusted revenues were above $1 2 billion, an increase of 16, 1%.

Suzanne: GAAP net income was $80 3 million an increase of 16, 6%.

Suzanne: Net income was $89 million an increase of 18%.

Suzanne: Other key metrics as of March 31st included cash and cash equivalents of $282 7 million in cash.

Suzanne: Cash flow from operations of $72 2 million.

Suzanne: During the quarter, we spent more than $190 million to execute on our strategic growth plan most of which have been in the works for months.

Suzanne: We made this investment from a position of strength.

Suzanne: As shown by our lease adjusted net debt to EBITDA ratio of 2.13 times after taking these investments into consideration.

Suzanne: Our continued ability to maintain low leverage even during periods of significant growth is particularly noteworthy and demonstrates our commitment to disciplined growth.

Suzanne: Well as I believe that we can continue to achieve sustainable growth in the long run.

Suzanne: In addition, we currently have approximately $517 million of available capacity under our line of credit, which when combined with cash and investments on our balance sheet gives us over $1 billion in dry powder for future growth.

Suzanne: We also own a 143 assets of which 137 are held by standard there.

Suzanne: Third 19 are completely debt free and are gaining significant value over time, adding even more liquidity to help with future growth.

Suzanne: The company paid a quarterly cash dividend of six and a quarter cents per common share.

Suzanne: We have a long history of paying dividends and have increased the annual dividend for 22 consecutive years.

Suzanne: In addition, as one of our many ways to deploy capital. We recently completed a $20 million stock repurchase program, we believe at attractive pricing.

Suzanne: As we've done in the past well always consider stock repurchases and we further market is undervalue our shares.

Barry Port: As Barry mentioned, we are increasing our annual 2025 earnings guidance to between $6 to $6.38 per diluted share and our app.

Barry Port: Annual revenue guidance for.

Barry Port: <unk> eight 9 billion to $4 94 billion.

Barry Port: Yes evaluated multiple scenarios and based on the strength in our performance and positive momentum, we have seen occupancy and skilled mix as well as the continued progress on Labor Agency management and other operational and we have confidence that we can achieve these calls.

Excellent 25 guidance is based on diluted weighted average common shares outstanding of approximately $59 5 million a tax rate of 25% the inclusion of acquisitions closed or expected to be late second quarter of 2025, the inclusion of management's expectations on Medicare and Medicaid reimbursement rates.

Barry Port: Net of provider tax with the primary exclusion coming from stock based compensation. Additionally, other factors that can impact quarterly performance include variations in reimbursement systems delays and changes in state budgets.

Barry Port: Seasonality in occupancy and skilled mix the influence of our general climbing in census, and staffing the short term impact of our actions.

Barry Port: It can be variations in insurance accruals and other factors with that I'll turn it back to Gary Gary.

Gary: Thanks, Suzanne as we wrap up.

Speaker Change: I can't emphasize how again incredibly honored and grateful we are to work alongside our operational leaders are field resources, our clinical partners and.

Gary: In our service center team that are behind these record setting results.

Gary: We never cease to be amazed by their impressive resiliency innovation and passion.

Gary: Their commitment is less the lives of so many including our own and we're excited about our future because of these amazing partners, we have complete faith in them.

Gary: And then the culture that they have collectively built.

Now, we'll take some questions Kate can you instruct us on the Q&A procedure.

Gary: At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad, 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 with RBC capital markets. Please go ahead.

Ben Hendrix: Great. Thank you very much guys.

Speaker Change: Thank you for the color on <unk> and copper.

Ben Hendrix: Copper field.

Ben Hendrix: To follow up on a couple of points. There specifically the comments you made around managed care contracting and the narrowing of networks. If maybe you can give us an overview of what you're seeing broadly in terms of the appetite for value based and outcome based contract.

Ben Hendrix: And how that's helping you guys.

Ben Hendrix: Came a little confidence in supporting this guidance rate.

Ben Hendrix: Great question.

Ben Hendrix: We really have had a long history of that tier managed care isn't going to kill us I think.

Speaker Change: A lot of others might have shied away from managed care, but we had a price difference there and I think Glenn you really try and strike a partnership with EMC.

Speaker Change: Great at different level of relationship local rate because we have a local leadership and allows us to have different connections and then allows us to actually drive.

Speaker Change: And create the ability to have success together with them and so we think there's examples that our shares are really just what we're trying to use throughout the organization of having that partnership at a deeper level.

Speaker Change: Make it a win win for both the mcl as well as our local facilities and as we go through that.

Speaker Change: How it works and it's really that that discussion is on a local level. How can we help each other really get their members our patients in a better spot clinically and then when you go without clinical Falcon. The financial return usually typically comes along with that and so that's what we strive for and having those relationships.

Speaker Change: Continues to develop and enhance with our resources from the managed care team and that.

Speaker Change: SCR seem really pushing on that as well is that local partnership with the facilities.

Speaker Change: And I think just just to add a tiny bit more color on that as well.

Speaker Change: What's important is that.

Speaker Change: You combine all of that.

Speaker Change: The relationships that drive the understanding of the market and the environment with sophisticated back office that allows leaders to see real time metrics.

Speaker Change: Sure some of those metrics with their partners and work in collaboration with them to achieve the outcomes.

Speaker Change: The members that they are driving and hoping for.

Speaker Change: It creates an opportunity where.

Speaker Change: You have a partnership between local leaders in those managed care plans that ultimately drives volume because of their ability to take.

Speaker Change: A sicker patient profile and achieve what's expected.

Speaker Change: Yeah.

Speaker Change: Great. Thank you for that and then just.

Speaker Change: In light of the guidance raise or we just get lots and lots of questions on your positioning against policy. So forgive me for the requisite policy question, but just how are you guys.

Speaker Change: Just thoughts on what could come out of Washington, How you are positioned and.

Speaker Change: Specifically around the <unk>.

Speaker Change: Potential for supplemental Medicaid cuts thanks.

Speaker Change: Yes, no problem, we're we're totally.

Speaker Change: Transparent and open about our thoughts on this we are approaching this in very much the same way, we did with the staffing minimum.

Speaker Change: Issue that we've dealt with over the last year or so which is to say that we are actively involved in the advocacy process.

Speaker Change: <unk> met with leadership in both the house and the Senate are association has been <unk>.

Speaker Change: <unk> efficient and effective at setting up.

Speaker Change: Meeting to educate members of Congress and help them understand.

Speaker Change: The implications of.

Speaker Change: Any potential changes or discussions around certain funding aspects, whether it be provider tax related or are directed payments to states.

Speaker Change: And they've been great great meetings, there has been some light bulb moments, where we've had members of Congress come.

Speaker Change: Come into a new understanding of how some of these programs that have been around for 30 plus years that have that have been.

Speaker Change: CMS approved every rate cycle.

Speaker Change: How they work and why they work the way they do there is certainly opportunity for change in the Medicaid program.

Speaker Change: And we know that and they know that.

Speaker Change: But our approach right now is to make sure they're fully educated and understanding of.

Speaker Change: <unk>.

Speaker Change: What was good for funding to the industry and what is potentially harmful because we don't always necessarily see how everything trickles down and functions.

Speaker Change: And they've been incredibly receptive.

Speaker Change: I highlight that president Trump has been very direct about.

Speaker Change: As.

Speaker Change: Both view of the Medicaid program is protection of it I think members of Congress, we are hearing that loud and clear.

Speaker Change: As we sit here today.

Speaker Change: What we feel like as far as the direction things are headed is that theres more of a focus on the expansion population. Even news you heard about yesterday on per capita caps and other ideas are all primarily targeted towards the expansion population.

Speaker Change: And not who the original recipients of the Medicaid program were intended for and Thats what.

Speaker Change: What we see the trends at least in the last week or two are positive. This will be done soon the reconciliation process will probably continue through July at least.

Speaker Change: We'll continue to stay very active and involved in the process and make sure that.

Speaker Change: We continue to make sure our voices are heard on all of these issues.

Speaker Change: As you remember we were not a big beneficiary of that expansion population, so that part of it as.

Speaker Change: Bodes well for us about the continued progress.

Speaker Change: Thanks, guys.

Speaker Change: Your next question comes from the line of <unk> with Macquarie Capital. Please go ahead.

Speaker Change: Thank you good morning.

Speaker Change: Our first question the $200 million of investment spend this quarter setting a record in company history, I think what's meaningful one health system. Southern there was another billion dollars portfolio transaction. In February are you seeing any changes in deal volume market dynamics. So any seller mentality changes in other words, how sustainable do you think the car.

Speaker Change: Our pace of investment is in the next 12 months and then if you could comment on kind of the mix between real estate versus lease deals and new investment pipeline.

Speaker Change: Yes, Thanks, Tal so it certainly was.

Speaker Change: A strong quarter for from a perspective of putting capital to work for sure.

Speaker Change: Yes.

Speaker Change: In terms of the the deal flow I would say, it's really just a continuation of what we've seen over the last year to 18 months and.

Speaker Change: And Thats just.

Speaker Change: A lot of stuff for sale.

Speaker Change: All the time.

Speaker Change: There's more deals out there that we could ever do and so.

Speaker Change: So we're as I said in my prepared remarks for sticking to our principles and our disciplined approach there.

Speaker Change: We remain very selective in the deals that we.

Speaker Change: Underwriting and ultimately consummate.

Speaker Change: The $200 million ish and investment in the quarter was mostly driven by the fact that a lot of our of our deals were real estate and as you know and those that have been following us know well.

Speaker Change: If we have a.

Speaker Change: A wishlist, our first desire would be to own the real estate and operate it with an ensign affiliated operator.

Speaker Change: Our second priority would be to.

Speaker Change: <unk>.

Speaker Change: They are into a lease and have an enzyme affiliated operator operator.

Speaker Change: And then the third would be to buy the real estate and then have a third party.

Speaker Change: Enter into a lease with with our real estate entity and I think the deal flow and so if you look through our press release, you'll kind of see how those priorities lay out.

Speaker Change: This particular quarter there was more real estate than then I would say as usual.

Speaker Change: But we're but we're always trying to achieve that so.

Speaker Change: Certainly our cash gross cash position.

Speaker Change: Ed.

Speaker Change: The amount of liquidity, we have from from.

Speaker Change: Suzanne mentioned, our revolving line of credit.

Speaker Change: We have tons of dry powder to continue on that pace.

Speaker Change: We'll say that.

Speaker Change: The deals that we have the.

Speaker Change: The remainder of the year at least the ones that we have visibility into right now.

Speaker Change: More lease focused than than real estate.

Speaker Change: And again, we're just opportunistic about how that mix plays out but.

Speaker Change: Certainly excited about the opportunities that are in front of us.

Speaker Change: <unk>.

Speaker Change: The real focus on the real the real question is making sure that we have.

Speaker Change: Our leadership pipeline, that's ready to go to take on these operations.

Speaker Change: It's still remains kind of are our most important.

Speaker Change: Important.

Speaker Change: Yes.

Speaker Change: The limiter on our growth is talent.

Speaker Change: And less so on capital.

Speaker Change: I appreciate the color.

Speaker Change: My second question is on staffing.

Speaker Change: Portfolio occupancy is at a record high I think it's 200 basis point above pre pandemic levels.

Speaker Change: Skill mix is also higher than 2019, but if we look at nursing facility to celestino broadly they haven't.

Speaker Change: We do recover and their intense competition with other health care settings, particularly particularly for skilled staff I'm wondering if you could comment on any number one whether theyre still staffing constraints pressure points there.

Speaker Change: Admissions, particularly around skilled patients and second where do you think occupancy would need to be.

Speaker Change: When we will see accelerating operating leverage assuming interest level being a relationship.

Tao: Yeah, It's a great question Tao.

Tao: From a macro perspective certainly.

Tao: When you look at the amount of workers that left.

Tao: Our sector during COVID-19.

Tao: Our sector itself has not fully recovered yet.

Tao: And there are fewer workers and post acute care than there were.

Tao: Specifically skilled nursing care than there were prior to the pandemic, while all other sectors have recovered and then some.

Tao: That said.

Tao: Yes.

Tao: We're probably an anomaly when it comes to that recovery.

Tao: While I would never say always.

Tao: <unk>.

Tao: Finished.

Tao: We are so somewhere near pre pandemic levels in agency staffing our turnover is consistently improving.

Tao: Our pace of wage inflation has moderated to pre pandemic levels.

Tao: And we.

Tao: And I would say.

Tao: Referring to our operators leaders in the field.

Tao: They have been very successful staying ahead of the curve when it comes to.

Tao: Finding talent and recovering it enough to be able to.

Tao: Do what <unk> been doing which is to continue to see occupancy rise without any compromise in how they staff they have been able to fill.

Tao: <unk> in order to do so and we have a high level of confidence that they'll continue to be able to remain on that path without having to compromise in some way by adding agency staffing.

Tao: And we feel confident in that.

Tao: What the trends have been over the last many months, which is to say that agency staffing continues to decrease while our overall occupancy continues to increase so.

Tao: Youre right to point out that the demand is there I wouldn't say, we're limiting admissions because of staffing because our leaders have found ways to fill positions and keep the flywheel moving.

Tao: If I may just.

Tao: On the second part of my question I know that some senior living operators they call it 85% occupancy kind of a magic number.

Tao: Whether we'll see increasing the operating leverage I mean are you seeing is there a magic number in skilled nursing and your experience.

Tao: No no we don't see some magic number.

Tao: In fact.

Tao: Think we see the organic.

Tao: Upside is something that has always been.

Tao:

Tao: An opportunity that we've.

Tao: Then <unk>.

Tao: Deliberate and explaining to folks that even if we had to stop growing through acquisitions because of pricing or where leadership concerns.

Tao: We see.

Tao: We see facilities with with all of that upside.

Tao: To take advantage of that to keep our growth.

Tao: Moving.

Tao: For.

Tao: Several years even.

Tao: So no we don't we don't see a cap we don't see a sweet spot we see facilities that continuously move if you were to take our same store operations and examine them closely you would see.

Tao: A pathway.

Tao: <unk> movement.

Tao: To higher and higher occupancy over many many many years.

Tao: And.

Tao: So that's why we have that confidence because we see we see how that's played out over the course of our history.

Tao: The leveraging question I think we have seen cannot let that Bobby.

Tao: And I think to turn Calgary, we're playing catch up first was trying to ask for agency <unk> been trying to right size.

Tao: The wages were at on EBITDA basis, and I think you saw that last year in all of our commentary through last year was hey, we're still having to have ever Ronnie. After later this year, what we're saying is that we see.

Tao: And so I think stability after stability become fidelity to last for a doctor on that fund deleveraging points inside let's say right now we're in stability phase.

Tao: And then I think there is an ability for us to continue to leverage, especially if there's a recession right. One of the things that happens for US is when there's a recession, we keep definitely see more opportunity on the on the nursing front and other things where people come back into the workforce.

Tao: Even more leverage ability and that cost of service group.

Speaker Change: That's super helpful. Thank you.

J Rice: Your next question comes from the line of a J rice with UBS. Please go ahead.

Speaker Change: Oh.

Speaker Change: Thanks, Hi, everybody.

Speaker Change: Maybe just first to ask about.

Speaker Change: A little further on your deal activity seem like your enthusiasm level for the what Youre seeing in the pipeline at all is even a little increase I wonder two aspects to that.

Speaker Change: Is the competitive landscape from your perspective.

Speaker Change: You're seeing when Youre looking at properties is it somehow easing.

Speaker Change: Are you seeing a little less competition for deals right now and then you mentioned moving into some new markets, particularly noted the southeast I know the payment rates are generally for Medicaid lowered down there but.

Speaker Change: Yeah.

Speaker Change: Labor rates are also lower can you get the same economics in some of those newer markets that you guys historically.

Speaker Change: And some of your more established markets.

Speaker Change: Yeah, Great question. So in terms of the competition for deals I would tell you that we havent really seen that change.

Speaker Change: It's kind of the same usual suspects that we keep bumping into and most of that I would say is probably.

Speaker Change: Private.

Speaker Change: Private equity.

Speaker Change: No.

Speaker Change: Other sort of family based funds and groups like that that are that are frequently.

Speaker Change: Looking to buy in our space.

<unk>.

Speaker Change: This last deal that.

Speaker Change: They involve the eight buildings in the northwest as an example.

Speaker Change: A process that the Providence health system was very very selective in choosing who the buyer would be.

Speaker Change: Of course, the economics, where part of it but they did several interviews and team to tour our buildings and met with our leadership team.

Speaker Change: And.

Speaker Change: And they selected us as the buyer.

Speaker Change: Because of our operational history and reputation.

Speaker Change: Our our track record on closing successfully especially deals from from nonprofit Safeway sellers. So.

Speaker Change: That's an example of one that.

Speaker Change: We tend to.

Speaker Change: <unk>.

Speaker Change: When the deals that.

Speaker Change: But we want them that we think are fair.

Speaker Change: So yes competition is really kind of the same I would say in terms of kind of the southwest or the southeast.

Speaker Change: Yes, we're really excited about the market there and certainly labor dynamics play into that in and that's where it was very was talking about earlier.

Speaker Change: Earlier, having a local operators.

Speaker Change: On the boots on the ground in those markets, having their input and their heavy involvement in underwriting all of these acquisitions is really the key to how we evaluate these.

Speaker Change: Those dynamics.

Speaker Change: The Bill labor environment.

Speaker Change: The rate environment, and really all of it which is so unique by market.

Speaker Change: We don't have to be the experts on that necessarily here because they are they are the experts in their particular market.

Speaker Change: So with those folks out.

Speaker Change: That have kind of gone to the southeast to help plant a flag there.

Speaker Change: Leading the way.

Speaker Change: Fully expect that we can.

Speaker Change: Accomplish there what we have in some of our most mature states.

Speaker Change: Okay, and maybe just one follow up.

Speaker Change: I appreciate your comments earlier about all the noise out of Washington.

Speaker Change: And how to think about that I wondered in your.

Speaker Change: Discussions with states right now and what Youre hearing with regard to rate updates.

Speaker Change: So forth on the Medicaid side is any of that discussion.

Our overhang of what's going on in Washington, Seeping into those discussions do you have a thought on what you are.

Speaker Change: Anticipate a composite Medicaid rate update across your portfolio might look like.

Speaker Change: I know theres a lot of midyear updates.

Speaker Change: How are they thinking about contingency planning for the discussion around all of these variables provider taxes et cetera that are under review of Washington.

Speaker Change: Well, it's a great question and there is an assumption there that the States Act proactively when it comes to discussions around Medicaid funding.

Speaker Change: I think for the most part.

Speaker Change: We have not heard any proactive discussions nor had an invitation to be involved in any and I think that is justified.

Speaker Change: This environment around <unk>.

Speaker Change: Medicaid discussions in Washington, It changes literally daily.

Speaker Change: And where their focus and attention is changes almost daily.

Speaker Change: And because of that I don't I think people are pretty slow to want to overly anticipate or overly react to <unk>.

Speaker Change: Nerve or another that may or may not be included in the reconciliation process. So to answer your question generally no there really hasnt been any meaningful discussion with the states and nor do I feel like many of them are doing a whole heck of a lot to make adjustments until they have more clarity.

Speaker Change: What could be the potential.

Kansas for them.

Speaker Change: As for rate visibility.

Speaker Change: Most of our rate cycles are kind of determined ahead of the year and so throughout this year, we've got really good visibility into where things are headed regardless of what happens.

Susanne: So susanne.

Susanne: When you talk about that.

Susanne: He is actively involved.

Susanne: About what's happening at freight setting year continuously educating them on what's going on at our level.

Susanne: And kind of the pressures that we have our dot had on particular markets and I think that's a continuous process.

Susanne: In Boston at the state level.

Susanne: Green Dot com.

Susanne: Are the key three unlike Q3.

Susanne: But those discussions are ongoing.

Susanne: They're all very well.

Susanne: Helping size.

Susanne: I understand the environment.

Susanne: Okay. Thanks, a lot.

Susanne: Okay.

Susanne: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Operator: to the Ensign Group Inc.

Chad Keetch: First Quarter FY 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask questions during this time, simply press star followed by the number one on your telephone. If you would like to withdraw your question, press star 1 again. Thank you.

Questions in one.

Washington, It changes literally daily.

And where their focus and attention is changes almost daily and it depends because of that I I don't I think people are pretty slow to want to overly anticipate or overly react to one area or another that may or may not be included in the reconciliation process. So okay.

Answer your question generally no there there really hasn't been any meaningful discussion with the states and nor do I feel like many of them are doing a whole heck of a lot to make adjustments until they have more clarity on what what could be the potential.

Chad Keetch: I would now like to turn the call over to Mr. Keetch, please go ahead. Thank you, operator. Welcome, everyone. We filed our earnings press release yesterday and it is available on the investor relations section of our website at EnsignGroup.net. A replay of this call will also be available on our website until 5pm Pacific on Saturday, May 31st, 2025.

Claims for them.

As for rate visibility.

Luckily most of our rate cycles are kind of determined ahead of the year and so throughout this year.

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, April 30, 2025, 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 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 under-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.

We've got really good visibility into where things are headed regardless of what happens.

So to me.

When you talk about that.

Right.

Bob was talking about what's happening in that same.

Anything you can say educating them on what is going on I don't know.

Hum.

The pressures that we have are not patents I think that I'm not out some stats I think that's a continuous process.

And at the state level.

At that time.

And my Kids are they came to me and my team and I saw like those discussions I'm doing overall very well.

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

Okay.

And the environment.

Okay. Thanks, a lot.

Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

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 the service center, provide accounting, payroll, human resources, information technology, legal, risk management, and other services to the other independent subsidiaries through contractual relationships. 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 Bear Healthcare REIT, Inc., which is a captive real estate investment trust that invests in healthcare properties and enters into lease agreements with certain independent subsidiaries of Ensign, as well as third-party tenants that are unaffiliated with the Ensign Group.

Yeah.

[music].

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, Standard Bearer Healthcare Reef, 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 words we, us, and our, in 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.

Chad Keetch: Also, we supplement our GAP reporting with non-GAP metrics. Together with Gap Results, we believe that these measures can provide a more complete understanding of our business. that they should not be relied upon to the exclusion of GAP report. 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. Thanks, Chad, and thank you, everyone, for joining us today. We are thrilled to announce another record-setting quarter achieved by our local teams. In spite of all the industry noise, our results this quarter demonstrate that we've never been stronger, showing yet again that sound fundamentals, coupled with an incredible passion, can forge consistency even in an ever-changing environment. Our operators set several all-time highs during the quarter, which are only made possible by strong clinical outcomes achieved by our dedicated team of caregivers and frontline staff.

Barry Port: During the quarter, we saw substantial growth across all of our buckets and in almost every market we serve. More specifically, we achieved an all-time high in same-store and transitioning occupancy, which increased to 82.6% and 83.5% respectively over the prior year quarter. We also saw skilled census increase for both our same store and transitioning operations by 7.6% and 9.9% respectively over the prior year quarter. In addition, our managed care census grew by 8.9% and 15.6% for our same store and transitioning operations respectively over the prior year quarter. All of these improvements are the result of many factors, including the relentless efforts by our local leaders to share and implement best practices that lead to stronger outcomes and earn the confidence from our residents, acute care partners, ACOs, and managed care networks.

Barry Port: While the Corps was strong, we're even more excited about our results because they were achieved while simultaneously adding 47 new operations since January of 2024, across almost every market we serve, some of which are already performing at or above our expectations. The combination of improvements in occupancy and skilled mix in our more mature operations and the long-term upside in our newly acquired operations shows the enormous organic growth potential in our existing portfolio. We continue to attract and develop caregivers and leaders and are building a formidable bullpen of caring and passionate partners who are determined to live our mission to dignify post-acute care.

Barry Port: In addition, we continue to see improvements in turnover and limited use of agency staffing labor, all of which are critical to maintaining our cultural values and continuity of care.

Barry Port: After such a strong first quarter, including some faster-than-expected contributions from some of our newly-acquired operations, we are raising our annual 2025 earnings guidance to between $6.22 and $6.38 per diluted share, up from $6.16 to $6.34 per diluted share. The new midpoint of this increased 2025 earnings guidance represents an increase of 14.5% over our 2024 results and is 32% higher than our 2023 results. We're also increasing our annual revenue guidance to $4.89 billion to $4.94 billion, up from $4.83 billion to $4.91 billion to account for our current quarter growth and acquisitions we anticipate closing during the first half of 2025.

Barry Port: We are excited about our start to the year and are confident that our partners will continue to manage and innovate while balancing the addition of newly acquired operations. We are eager to continue to drive organic improvements and take advantage of the acquisition opportunities that we see on the horizon. When we consider the current health of our organization combined with our culture and proven local leadership strategy, we are well positioned to continue executing our operational model. With all that said, we see so much more room for further improvement, and we continue to optimize operational efficiencies, expand services and create new partnerships, all of which will drive further improvements in occupancy and skilled management.

Barry Port: We look forward to continuing to build on the momentum from the first quarter into the rest of the year as we continue to successfully unlock value and opportunity in the dozens of recently acquired operations. 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 a collective belief and a commitment held by all of our partners to expand our mission in a methodical and thoughtful way.

Chad Keetch: Next, I'll ask Chad to share some additional insights regarding our recent growth. Thank you, Barry. We continued our steady pace of growth by adding 19 new operations, including eight real estate assets during the quarter and sentence. These include the following, one in Alabama, one in Oregon, one in Washington, one in Texas, two in Alaska, two in Arizona, three in California, and eight in Tennessee. In total, we added 1,906 new skilled nursing beds and 200 senior living units across 8 states. This growth brings the number of operations acquired during 2024 cents to 47. We're very excited to add Density to one of our newest markets in Tennessee and to add our first operation in Alabama.

Chad Keetch: When we enter into new states, we tend to see an uptick in opportunities in those geographies. We are seeing more opportunities to deepen our presence in the Southeast and expect to do so over time. We're also excited to grow in Oregon and Alaska for the first time. As with our other new states, our entrance into these new markets have been driven by proven ensign leaders who are committed to, and have a connection with, the new geography. As we have seen and said before, 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 Keetch: This was played out time and time again, with our most recent example being Tennessee. These footholds eventually lead to growth into multiple clusters, which will eventually comprise a sizable market. We look forward to bolstering our presence in those markets over time. In the meantime, we continue to prioritize growth in our established geographies as it allows our clusters to provide a comprehensive solution to the healthcare needs in those markets. While we continue to evaluate new states that fit our criteria, we will prioritize growth in our established geography. This not only allows us to deepen our commitment to those markets, but because our transitions don't rely on a centralized acquisition team, our growth is not limited by a typical corporate bottleneck.

Chad Keetch: Instead, we look to the local cluster partners to implement the transition plan. So while our pace of growth remains 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 the markets we know best and are making progress on several additions that we expect to close in the next few months. 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 an opportunity to lead.

Chad Keetch: We still see evidence that many operators in this industry are struggling, and we expect the operating environment will translate into many near-term and long-term opportunities to both lease and acquire post-acute care assets. However, we do not set arbitrary growth goals and will remain true to our discipline acquisition strategy. We only grow when we have the right leaders in place and the pricing is right. The scalability of our growth model, our healthy balance sheet, combined with 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 Keetch: We anticipate the current rate of acquisitions to continue this year and remain committed to staying true to the proven deal criteria that has allowed us to grow in a healthy and sustainable way. We continue to see more opportunities to acquire new operations, and our focus is to carefully choose the acquisitions that will be acclaimed by our shareholders, both in the near and long term.

Chad Keetch: We are also providing additional disclosure on Standard Bearer, which added 13 new assets during the quarter and since, and is now comprised of 137 owned properties. Of these assets, 104 are leased to an Ensign-affiliated operator, and 34 are leased to third-party operators. Going forward, Standard Bear will continue to work together with its operating partners at Ensign to acquire portfolios comprised of operations that Ensign would operate and facilities that third parties are interested in operating under a lease. Collectively, Standard Bear generated rental revenue of $28.4 million for the quarter, of which $23.9 million was derived from Ensign-affiliated operations.

Chad Keetch: For the quarter, Standard Bear reported a $17.1 million in FFO as of the end of the quarter and had an EBITDAR to rent coverage ratio of 2.6 times.

Spencer Burton: And with that, I'll turn the call over to Spencer, our COO, to add more color around operations. Thanks, Chad. And hello, everyone. Today, I'm excited to share two facility examples that illustrate the consistent operational momentum that we are seeing as local teams continue to respond to stakeholders in their communities. I hope that these real-life examples can help explain why we feel so encouraged by our Q1 results and confident in the ability of our model to continue to produce exceptional results going forward, regardless of the external forces or challenges that may exist.

Spencer Burton: The first example comes from our transitioning budget. Lomita Post-Acute Care Center, located in the Los Angeles, California area, and led by Executive Director, Kyle Armstrong, and Director of Nurses, Carla Linfueco. This 68-bed skilled nursing facility was acquired during Q1 of 2020. During the recently closed quarter, Lomita saw revenues increase by 17.7% and EBIT improved by an impressive 86.4% compared to Q1 of 2024. Over the same period, occupancy grew by 2%, but the bigger story was the facility's strategic growth in skilled. For example, Medicare days increased by 19.8% and managed care days grew by 85.7%. This growth in skilled census was made possible by the facility's commitment to quality, which is evident in it being the only skilled facility in its geography that carries a five-star quality measures and five-star overall rating from CMS. The five-star ratings have given the Lomita team strong credibility with the health plans, the hospitals, and discharging facilities in their area.

Spencer Burton: Another major factor in Lomita's financial success has been their ability to improve the continuity of care and reduce labor costs through improved staff retention. During Q1, Lomita reduced its caregiver turnover by 36% compared to prior year quarter. This workforce stabilization directly decreased onboarding and overtime. and in turn increase EBIT margin. But most importantly, it's resulted in a healthy work environment where caregivers can trust their co-workers, build clinical competency, and achieve great health care outcomes for the residents they serve.

Spencer Burton: The second facility highlight I want to share represents the exciting same store growth that continues to occur in facilities that have been part of the organization for a long Copperfield Healthcare and Rehabilitation in Houston, Texas is a 124-bed SNF that was acquired in 2016. During the period following transition, Copperfield made steady clinical and financial progress. However, during the past year, the facility has truly transformed into the community's facility of choice under the leadership of Ruhi Kapoor, CEO, and Wanda Preston, director of For example, in Q1, Copperfields averaged 90.7% an increase of 11% over prior year quarter.

Spencer Burton: To give some context, the average occupancy for non-affiliated SNFs in the state of Texas is under 64%. During that same period, skilled Medicare days grew by nearly 43%. Well, the already healthy managed care census improved by 14.8%. As you would expect, there's a clinical story behind the strong increases in skilled mix that Copperfield In a medical hub like Houston, health plans and hospital systems demand quality from their post-acute partners. And Copperfield's ability to maintain CMS 5-star quality measures and overall ratings has provided the facility access to contracts that are closed to most providers. Notably, many of the Medicare lives in Houston are now being managed through ACOs, which means that the hospital systems can be at financial risk if the patients they discharge have poor health outcomes or have to return to acute hospital.

Spencer Burton: Similarly, managed care plans in the area have narrowed their networks and are guiding their members needing post-acute care to providers like Copperfield that score high on quality outcomes.

Spencer Burton: As acuity has increased, Copperfield's multidisciplinary clinical team has partnered with and even received training from their acute hospital partners, which has empowered Copperfield to confidently care for patients with medical conditions and equipment that would overwhelm most SNF-level care teams. As demonstrated by both Lomita and Copperfield, it's a very exciting time to be in post-acute care. There continues to be strong demand for quality care, and as facilities like Lomita and Copperfield demonstrate clinical competency and willingness to partner with hospitals and health plans, they are rewarded with higher occupancy, improved payer mix, and the ability to provide life-changing outcomes for more and more patients.

Suzanne Snapper: With that, I'll turn the time over to Suzanne to provide more detail on the company's financial performance and our guidance, and then we'll open up for questions. Suzanne? Thank you, Spencer, and good morning, everyone.

Suzanne Snapper: Detailed financials for the quarter are contained in our 10-Q and press release filed yesterday. Some additional highlights include the following. GAAP diluted earnings per share with $1.37, an increase of 15.1%. Adjusted diluted earnings per share was $1.52, an increase of 16.9%. Consolidated GAAP revenue and adjusted revenues were both $1.2 billion, an increase of 16.1%. Gap net income was $80.3 million, an increase of 16.6%. Adjusted net income was $89 million, an increase of 18%. Other key metrics as of March 31st include cash and cash equivalents of $282.7 million and cash flow from operations of $72.2 million.

Suzanne Snapper: During the quarter, we spent more than $190 million to execute our strategic growth plan, most of which has been in the works for months. We made this investment from a position of strength, as shown by our least adjusted net debt to EBITDA ratio of 2.13 times after taking these investments into consideration. Our continued ability to maintain low leverage, even during periods of 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. In addition, we currently have approximately $572 million of available capacity under our line of credit, which when combined with cash and investments on our balance sheet, gives us over a billion dollars in dry powder for future growth.

Suzanne Snapper: We also own 143 assets, of which 137 are held by Standard Bear, and 119 are owned completely debt-free and are gaining significant value over time, adding even more liquidity to help with future growth.

Suzanne Snapper: The company paid a quarterly cash dividend of $0.0625 per common share. We have a long history of paying dividends and have increased the annual dividend for 22 consecutive years. In addition, as one of our many ways to deploy capital, we recently completed a $20 million stock repurchase program. We believe at attractive prices. As we've done in the past, we'll always consider stock repurchases when we feel the market is undervaluing our shares.

Suzanne Snapper: As Barry mentioned, we are increasing our annual 2025 earnings guidance to between $6.22 to $6.38 per diluted share, and our annual revenue guidance to $4.89 billion to $4.94 billion. We have evaluated multiple scenarios, and based on the strength in our performance and positive momentum we have seen in occupancy and skilled mix, as well as the continued progress on labor, agency management, and other operational initiatives, we have confidence that we can achieve these goals. Act 2025 guidance is based on deleted weighted average common shares outstanding of approximately $59.5 million, a tax rate of 25 percent, the inclusion of acquisitions closed or expected to be closed through the second quarter of 2025, the inclusion of management's expectations on Medicare and Medicaid reimbursement rates, net of provider tax, with the primary exclusion coming from stock-based compensation.

Suzanne Snapper: Additionally, other factors that can impact the quarterly performance include variations in reimbursement systems, delays and changes in state budgets, seasonality and occupancy in skilled NICs. influence on our general economy and census and staffing, the short-term impact of our activities, variations in insurance and other factors.

Barry Port: With that, I'll turn it back to Barry. Thanks, Suzanne. As we wrap up, we can't emphasize how again, incredibly honored and grateful we are to work alongside our operational leaders, our field resources, our clinical partners. and our Service Center team that are behind these record-setting results. We never cease to be amazed by their impressive resiliency, innovation, and passion. Their commitment has blessed the lives of so many, including our own. And we're excited about our future because of these amazing partners. We have complete faith in them and in the culture that they have collectively built.

Barry Port: Now we'll take some questions.

Operator: Kate, can you instruct us on the Q&A procedure? At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster.

Ben Hendrix: Your first question comes from the line of Ben Hendrix with RBC Capital Markets. Please go ahead. Great. Thank you very much, guys. And thank you for the color on Momita and Copperfield. I wanted to follow up on a couple of points there, specifically the comments you made around unmanaged care contracting and the Naringham Network.

Barry Port: Just maybe you can give us an overview of what you're seeing broadly in terms of the appetite for value-based and outcome-based contracts and how that's helping you guys gain a little confidence in supporting this guidance rate. Thanks. Great question. We really have had a long history of this, you know, managed care isn't new to us. I think a lot of others might have shied away from managed care, but we've embraced it from the get go. And I think when you really try and strive to have partnerships with the NCOs and create a different level of relationship locally, because we have local leadership, it allows us to have a different connection to them, allows us to actually drive and, you know, create the ability to have success together with them.

Barry Port: And so I think those examples that Spencer shared are really just what we're trying to do throughout the organization of having that partnership at a deeper level for us to make it a win-win for both the NCO as well as our local facilities. And as we go through that, that's how it works. It's really that discussion at a local level. How can we help each other really get their members, our patients, in a better spot clinically? And that then when you go with that clinical focus, the financial return usually typically comes along with that. And so that's what we strive for and having those relationships continue to develop and enhance with our resources from the managed care team and the SDR team really pushing on that as well as that local partnership with the facilities.

Barry Port: And I think just to add a tiny bit more color on that is that, you know, what's important is that You combine all of that The relationships, the drive, the understanding of the market and the environment with a sophisticated back office that allows leaders to see real-time metrics. and share some of those metrics with their partners and work in collaboration with them to achieve the outcomes for the members that they're driving and hoping for. It creates an opportunity where you have a partnership between local leaders and those managed care plans that ultimately drives volume because of their ability to take, you know, a sicker patient profile and achieve what's expected.

Ben Hendrix: Great, thank you for that.

Ben Hendrix: And then just in light of the guidance raised, we just get lots and lots of questions on your positioning against policy.

Barry Port: So forgive me for the requisite policy question, but just how are you guys, what are your latest thoughts on what could come out of Washington, how you're positioned, and specifically around the potential for supplemental Medicaid cuts? Yeah, no problem. We're, we're, we're totally, you know, transparent and open about our thoughts on this. We are approaching this in very much the same way we did with the staffing minimum issue that we've dealt with over the last year or so, which is to say that we are actively involved in the advocacy process. I've personally met with leadership in both the House and the Senate.

Barry Port: Our association has been enormously efficient and effective at setting up meetings to educate members of Congress and help them understand the implications of any potential changes or discussions around certain funding aspects, whether it be provider tax related or, or directed payments to states. And they've been great, great meetings. There's been some lightbulb moments where we've had members of Congress. come into a new understanding of how some of these programs that have been around for 30 plus years that have been, you know, that are CMS approved, every rate cycle, how they work and why they work the way they do, there's certainly opportunity for change in the Medicaid program and we know that and they know that, but our approach right now is to make sure that they're fully educated and understanding of, of, of, of, of, of, of, of, of, of, of, What's good for funding to the industry and what is potentially harmful, because they don't always necessarily see how everything trickles down and functions, and they've been incredibly receptive.

Barry Port: I'd highlight that, you know, President Trump has been very direct about his both view of the Medicaid program and his protection of it. I think members of Congress are hearing that loud and clear. As we sit here today, you know, what we feel like as far as the direction things are headed is that there's more of a focus on the expansion population. Even news you heard about yesterday on per capita caps and other ideas are all primarily targeted towards the expansion population and not who the original recipients of the Medicaid program were intended for. And that's what we see, you know, the trends at least in the last week or two are positive.

Barry Port: This won't be done soon. The reconciliation process will probably continue through July at least. And we'll continue to stay very active and involved in the process and make sure that we continue to make sure our voices are heard on all of these issues. As you remember, we were not a big beneficiary of that expansion population. So that part of it, you know, goes well for us if that's the continued focus.

Ben Hendrix: Thanks, guys.

Tao Qiu: Your next question comes from the line of Tao Qiu with Macquarie Capital. Please go ahead. Thank you, good morning. First question, the $200 million investment spent this quarter sets a record in company history. I think what's made from one health system seller, there was another billion dollar portfolio transaction in February. Are you seeing any changes in deal volume, market dynamics, or any seller mentality changes? In other words, how sustainable do you think the current pace of investment is in the next 12 months? And then if you could comment on kind of the mix between real estate versus lease deals in your investment pipeline.

Chad Keetch: Yeah, thanks, Tao. So it certainly was a strong quarter for from a perspective of putting capital to work for sure. You know, in terms of the, the deal flow, I would say it's really, you know, just a continuation of what we've seen over the last year to 18 months. And, and that's just a lot of stuff for sale all the time. So, you know, there's more deals out there than we could ever do. And so we're, as I said, in my prepared remarks for sticking to, you know, our principles and our disciplined approach there and remain, you know, very selective in the deals that we underwrite and ultimately consummate.

Chad Keetch: You know, the 200 million ish in investment in the quarter was mostly driven by the fact that a lot of our of our deals were real estate. And, as you know, and those that have been following us know, well, you know, we, you know, if we have a wish list, you know, our first desire would be to own the real estate and operate it with an enzyme affiliated operator. Our second priority would be to enter into a lease and have an Ensign Affiliated Operator operate it. And then the third would be to buy the real estate and then have a third party enter into a lease with our real estate entity.

Chad Keetch: And I think the deal flow, and as you look through our press release, you'll kind of see how those priorities lay out. This particular quarter, there was more real estate than I would say is usual, but we're always trying to achieve that. Certainly, our cash position and the amount of liquidity we have from, as Suzanne mentioned, our revolving line of credit, we have tons of dry powder to continue on that pace. I will say that the deals that we have for the remainder of the year, at least the ones that we have visibility into right now, are probably more lease focused than real estate.

Chad Keetch: And again, we're just opportunistic about how that plays out. But certainly excited about the opportunities that are in front of us. And the real focus and the real question is making sure that we have a leadership pipeline that's ready to go to take on these operations.

Chad Keetch: And that still remains kind of our most important, I guess, limiter on growth is talent, less so on capital. appreciate the color.

Tao Qiu: My second question is on staffing, you know, your portfolio occupancy is at a record high. I think it's 200 basis point above pre-pandemic levels. Skill mix is also higher than 2019. But if we look at nursing facility jobs, you know, broadly, they haven't, you know, fully recovered. And there are intense competition with other healthcare settings, particularly, particularly for skilled staff. I'm wondering if you could comment on number one, whether there are still staffing constraints or pressure points that limit admissions, particularly around skilled patients. And second, where do you think occupancy will need to be when we will see accelerating operating leverage, assuming it is not a linear relationship?

Barry Port: Yeah, it's a great question, Tao. And I, you know, from a macro perspective, certainly, you know, when you look at the amount of workers that left our sector during COVID, it's our sector itself is not fully recovered yet. And there are fewer workers in post acute care than there were in specifically skilled nursing care than there were prior to the pandemic, while all other sectors have recovered and then some. That said, I, you know, we're probably an anomaly when it comes to that. Our recovery, while I would never say it's always, you know, completely, you know, finished, we're somewhere near pre-pandemic levels in agency staffing.

Barry Port: Our turnover is consistently improving. Our pace of wage inflation has moderated to pre-pandemic levels. And we, and I say we, you know, referring to our operators and leaders in the field, have been very successful at staying ahead of the curve when it comes to, you know, finding talent and recovering enough to be able to do what they've been doing, which is to, you know, continue to see occupancy rise without any compromise in how they staff. They've been able to fill positions in order to do so. And I, you know, we have a high level of confidence that they'll continue to be able to, you know, remain on that path without having to compromise in some way by adding agency staffing.

Barry Port: And we feel confident in that, just in seeing what the trends have been over the last many months, which is to say that agency staffing continues to decrease while our overall occupancy continues to increase. So you're right to point out that the demand is there. I wouldn't say we're limiting admissions because of staffing, because our leaders have found ways to fill positions and keep the flywheel moving.

Barry Port: Um, if I may just, um, you know, on the second part of my question, you know, I know that some senior living operator, they call 85% occupancy kind of a magic number, where they will see increasing operating leverage. I mean, are you seeing, is there a magic number in skilled nursing in your experience? No, no, we don't see some magic number. In fact, you know, I think we see the organic, you know, upside is something that has always been you know, an opportunity that we've been deliberate in explaining to folks that even if we had to stop growing through acquisitions because of pricing or leadership concerns, you know, we see we see facilities with with all of that upside to take advantage of that could keep our growth, you know, moving for, you know, several years, even.

Barry Port: So, no, we don't we don't see a cap. We don't see a sweet spot. We see facilities that continuously move. If you were to take our same store operations and examine them closely, you would see a pathway or a movement kind of to higher and higher occupancy over many, many, many years. And so, so that's why we have that confidence because we see we see how that's played out over the course of our history. Yeah, and on the leveraging question, I think we have and seen kind of like that stability. And I think during COVID we were playing catch up.

Barry Port: First, with trying to ask for agency. Second, was then trying to right size where the wages were at on an individual basis. And I think you saw that through last year and all of our commentary through last year was, hey, we're still having to have and we're running after wages. This year, what we're saying is that we see stability now. And so I think stability after stability becomes ability to leverage after on the on the leveraging points. And so I would say right now we're in stability phase. And then I think there's an ability for us to continue to leverage, especially if there's recession, right.

Tao Qiu: One of the things that happens for us is when there's recession, we definitely see more opportunity on the nursing front and other things where people come back into the workforce, which creates even more leverage ability and that process service point. super helpful.

AJ Rice: Thank you. If your next question comes from the line of AJ Rice with UBS, please go ahead. Thanks. Hi, everybody. Maybe just first to ask about a little further on your deal activity, seemed like your enthusiasm level for what you're seeing in the pipeline and all is even a little increased. I wonder two aspects to that. Is the competitive landscape, from your perspective, who you're seeing when you're looking at properties, is it somehow easing? Are you seeing a little less competition for deals right now? And then you mentioned moving into some new markets, particularly noted the Southeast.

Barry Port: I know the payment rates are generally for Medicaid lower down there, but the labor rates are also lower. Can you get the same economics in some of those newer markets that you've gotten historically in some of your more established markets? Yeah, great question. So in terms of the competition for deals, I would tell you that we haven't really seen that change. It's, it's kind of the same usual suspects that we keep bumping into. And most of that I would say is, is probably, you know, private, private equity and, you know, other sort of family based funds and groups like that, that are that are frequently looking to buy in our space.

Barry Port: So, you know, this last deal that involved eight buildings in the Northwest, as an example, you know, that was a process that the Providence Health System was very, very selective in choosing who the buyer would be. And of course, the economics were part of it, but they did several interviews and came to tour our buildings and met with our leadership team and, and, you know, and they selected us as the buyer. Because of our operational history and reputation and, you know, our, our, our track record on closing successfully, you know, especially deals from from nonprofit faith based sellers.

Barry Port: So that's an example of one that, you know, we tend to, to, you know, win the deals that, that, that we want and that we think are fair. it's really a key to, to, you know, how we evaluate these, those dynamics of the, you know, labor environment, and, you know, the rate environment, and really, you know, all of it, which is so unique by market, we don't have to be the experts on that necessarily here, because they are, they're the experts in their particular market. And, and so, you know, with those folks out in, you know, that have kind of gone to the Southeast to help plant a flag there.

AJ Rice: You know, leading the way, I fully expect that we can, you know, accomplish there what we have in some of our most mature states. Okay, and maybe just one follow up. I appreciate your comments earlier about all the noise out of Washington. And how to think about that. I wondered in your discussions with states right now, and what you're hearing with regard to rate updates and so forth on the Medicaid side. Is any of that discussion. Or overhanging of what's going on in Washington seeping into those discussions. Do you have a thought on what your anticipated composite Medicaid rate update across your portfolio might look like?

Barry Port: I know there's a lot of mid year updates and. You know, how are they thinking about contingency planning for the discussion around all these variables, provider taxes, et cetera that are under review and why. Well, it's a great question. And there's an assumption there that the states act proactively when it comes to discussions around Medicaid funding. And I think for the most part, you know, we have not heard any, you know, proactive discussions, nor had an invitation to be involved in any. And I think most of that is justified. This environment around, you know, Medicaid discussions in Washington, it changes literally daily.

Suzanne Snapper: And where their focus and attention is changes almost daily. And because of that, I don't, I think people are pretty slow to want to To answer your question, generally, no, there really hasn't been any meaningful discussion with the states. And nor do I feel like many of them are doing a whole heck of a lot to make adjustments until they have more clarity on what could be the potential changes for them. As for rate visibility, luckily, most of our rate cycles are kind of determined ahead of the year. And so throughout this year, we've got really good visibility into where things are headed, regardless of what happens.

Suzanne Snapper: So, Suzanne, anything you want to add to that? Like, when you start talking about the state, we're always actively involved in talking to them about what's happening in their next rate setting year, continuously educating them on what's going on at our local facilities and kind of the pressures that we have or don't have in particular markets. And so I think that's a continuous process that we're actively involved in at the state level, the state rates that come early Q3 and late Q3. But I feel like those discussions are going overall very well. It's helping folks understand the environment.

AJ Rice: Okay, thanks a lot.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.