Yahoo Finance Ensign Group Inc (ENSG) Q1 2024 Earnings Call Transcript Highlights: Strong Performance and ...
Same-Store Skilled Mix Days Increase: 5.6% increase sequentially over the previous quarter.
Same-Store Skilled Mix Revenue Growth: 1.9% increase sequentially over the previous quarter.
Same-Store Occupancy Rate: Reached 81%, growing by 2.7% over the prior year quarter.
2024 Earnings Guidance: $5.29 to $5.47 per diluted share.
2024 Revenue Guidance: $4.13 billion to $4.17 billion.
GAAP Diluted EPS: Increased by 13.3% to $1.19.
Adjusted Diluted EPS: Increased by 15% to $1.30.
Consolidated GAAP and Adjusted Revenue: Both reached $1 billion, up by 13.9%.
GAAP Net Income: $68.8 million, up by 15%.
Adjusted Net Income: $75.4 million, up by 16.6%.
Cash and Cash Equivalents: $512 million as of March 31, 2024.
Cash Flows from Operations: $35.3 million.
Lease-Adjusted Net Debt-to-EBITDA Ratio: 1.98 times.
Standard Bearer Rental Revenue: $22.2 million for the quarter.
FFO (Funds from Operations): $14.1 million for the quarter.
EBITDAR to Rent Coverage Ratio: 2.5 times as of the end of the quarter.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Ensign Group Inc reported another record quarter with strong and consistent performance across its portfolio.
Same-store occupancy reached 81%, surpassing pre-pandemic levels for the first time since Q1 2020, demonstrating recovery and growth.
Skilled mix days and revenue increased, indicating a growing demand for skilled post-acute services.
The company successfully reduced the use of third-party nursing agencies by 59% since December 2022, showing improved internal staffing capabilities.
Ensign Group Inc reaffirmed its annual 2024 earnings guidance, projecting a significant increase over previous years and demonstrating confidence in continued growth.
Negative Points
The new CMS minimum staffing rule poses potential challenges, especially given the current nationwide shortage of nursing labor, which could impact the industry's ability to serve the growing long-term care population.
The rule is expected to have a more significant impact on smaller and thinly capitalized operators, potentially reducing the quality care options available to seniors.
Despite the company's strong performance, there is an ongoing need to focus on attracting and training great talent, which remains a critical challenge in maintaining service quality.
Regulatory uncertainties and potential changes could impact operational strategies and financial performance.
The company's growth and performance heavily rely on the successful integration and improvement of newly acquired operations, which poses inherent risks and challenges.
Q & A Highlights
Q: Congratulations on the quarter. Appreciate all the color around the minimum staffing rule and I appreciate that you're not expecting any impact assuming it goes through 2024. But next year, it seems like the bit associated with the nurse aid minimum goes into effect. And I know it seems like there would be opportunities there to shuffle some staffing mix to -- especially with your LPN utilization to kind of help offset that. Just wondering mechanically what that looks like, how feasible that is? Is it something that could be done on a financial neutral basis and on a star ratings neutral basis? Thanks. A: Thanks, Ben. It's a good question. Just to be very clear, the staffing ratios that are specific to overall RNs and CNAs wouldn't go into effect for three years from when the rule is registered in the Federal Register. So 2025, there would be really no need for us to do any shuffling quite yet either 2026, really the same but that's a year we'd probably start gearing up and preparing and doing a little bit more -- you probably hear a little bit more from us on what we'd be doing in preparation for that to go into effect in 2027.So we don't anticipate doing a whole lot different operationally in the next couple of years other than focusing on the things that we know we can control and get better at, which really include all the different dynamics around labor control and also being an employee-centric kind of customer second environment where we focus relentlessly on people systems and making sure we've got world-class orientation and training and support for our employees and also focus on eliminating registry as universally as we can, making sure that we're not relying on third-party staffing agencies for any staffing needs.And those are things that we can do a whole lot around to make sure that we're in a really strong and healthy place when and if those staffing ratios come into play.
Q: Thanks. Hi, everyone. First question, just wanted to talk about the deals you just announced and one nuance of them and then put it in a longer-term perspective. It was interesting how there was a bit of a higher mix of non-SNF beds that you acquired with some IL and AL and then even the LTACH, as Chad talked about. But that could have just been coincidence as well around some of the campuses that you acquired as part of this package. So my question is whether that was more of a coincidence or whether you are now looking to do more expansion in some of those adjacent lines of business outside of just SNF? A: Yeah. Thanks for that question. So I would say that it certainly wasn't something we set out to do this quarter and acquiring more senior living or independent living beds. We are always looking for what we call consider healthcare campuses, which are primarily skilled nursing operations that happen to have those other offerings on the campus. And I think in every case, that was what was going on.And so from that point of view, no, our strategy really hasn't changed. We've always liked those. We'll continue to seek those. It just happened to be that we had more of those kinds of deals this particular quarter. So I don't think you'll see us look to go acquire lots of stand-alone assisted living and independent living. As again, our focus would be on primarily SNF that has those service offerings on the campus.As for the LTACH, I mean, as I said, we're really excited about that service offering. It's only 43 beds. But operationally, we already operate sub-acutes and very high acuity skilled nursing facilities in many states. And so it doesn't feel very different from a lot of what we already do. There are clear differences though in the regulatory environment, some of the technical aspects of billing with the DRG kind of coding system and those sorts of things will be new to us.But this is what we call a small bullet type of investment that, again, is part of a larger skilled nursing campus and certainly, hope that it goes really well. And to the extent we can learn that business and show that Ensign operating principles apply and work, which we think they will in a beautiful way that's certainly something like we've done in other cases, right, in other lines of business certainly could expand it both LTACH and IRF but not saying that, that's like comprise a big chunk of our investment dollar. But it is something that as we learn and get good at, that we certainly can expand into.As for the diversification question, again, I would say that the staffing stuff really, if anything, it probably just creates even more opportunities for us to continue doing what we've done. And so I don't think that that will impact our overall strategy to the extent we do decide to go down some of these other paths, it will be much more driven by sort of the operational dynamics and the local dynamics in those healthcare markets that are responding to the needs of our acute partners in those areas. That will drive it much more than any sort of regulation would.
Q: Okay. Got it. Thanks, Chad. Next question, just wanted to get, I guess, sort of in the updated guidance, which is obviously reaffirmed, but now you have visibility into the first quarter. How you're thinking about both occupancy and skilled mix as sort of thinking about trending in the second quarter? And then in the back half of the year, just when considering things like historical seasonality, the fact that you have now eclipsed the pre-pandemic same-store occupancy but then you also have over 25% of operational beds in the transitional and new bucket where there's obviously a lot of opportunity to harvest improvements there. A: Yeah. Great question, Scott. I mean, we obviously feel pretty bullish about our occupancy trends as they've been really strong lately, certainly in the times we'd expect them to be, but even as we are looking at trends now, we feel like demand is really, really strong, and we feel like we're poised to in spite of seasonality have a pretty strong summer. Certainly, that can change. And as we get deep into the summer months, we could see a little bit more of a drop off, which is usually more evidenced in our skilled mix. And I think if there is some seasonality to be seen, it will probably be more evident there than it will be in our overall occupancy, which might just go sideways for a while.But as is typical, that should start picking up as we get it late into the third quarter and then starting into the fourth quarter. But we don't anticipate anything unusual or abnormal. And nor do we feel like getting to pre-pandemic occupancy as some kind of artificial ceiling or target, our expectation is that we continue to grow and the trends that we've seen are great indications of that.
Q: Okay, great. And then I'm going to just sneak one more question here, and that would be around -- if you could update us on the visibility that you feel you have now into rates over the course of
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
