ENSG
$47.53
The Ensign Group IN
($.26)
(.54%)
Earnings Details
3rd Quarter September 2019
Wednesday, October 30, 2019 4:10:00 PM
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Summary

Ensign Raises Guidance but Earnings Remain In-line with Estimates

The Ensign Group IN (ENSG) reported 3rd Quarter September 2019 earnings of $0.51 per share on revenue of $600.5 million. The consensus earnings estimate was $0.52 per share on revenue of $599.6 million. Revenue grew 16.7% on a year-over-year basis.

The company said it expects 2019 non-GAAP earnings of $2.24 to $2.31 per share on revenue of $2.35 billion to $2.40 billion. The company's previous guidance was earnings of $2.22 to $2.30 per share on revenue of $2.34 billion to $2.40 billion and the current consensus earnings estimate is $2.27 per share on revenue of $2.34 billion for the year ending December 31, 2019.

Ensign Group Inc offers skilled nursing & rehabilitative care services through the operation of 136 facilities, 12 home health & 11 hospice operations, located in Arizona, California, Colorado, Idaho, Iowa, Nebraska, Nevada, Oregon, Texas & Washington.

Results
Reported Earnings
$0.51
Earnings Whisper
-
Consensus Estimate
$0.52
Reported Revenue
$600.5 Mil
Revenue Estimate
$599.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

The Ensign Group Reports Third Quarter Results, Raises Guidance

SAN JUAN CAPISTRANO, Calif., Oct. 30, 2019 (GLOBE NEWSWIRE) -- The Ensign Group, Inc. (Nasdaq: ENSG), the parent company of the Ensign(TM) group of companies, which provide skilled nursing and assisted living services, physical, occupational and speech therapies and other rehabilitative and healthcare services, announced its operating results for the third quarter of 2019, reporting a GAAP diluted earnings per share of $0.48 for the quarter with adjusted earnings per share of $0.55 for the quarter (1).

Highlights Include:

  • GAAP earnings per share for the quarter was $0.48, an increase of 26.3% over the prior year quarter, and adjusted earnings per share was $0.55, up 19.6% over the prior year quarter (1);
  • Consolidated GAAP Net Income for the quarter was $27.2 million, an increase of 30.2% over the prior year quarter, and adjusted Net Income was $30.9 million, an increase of 24.0% over the prior year quarter(1);
  • Consolidated EBITDA for the quarter was $52.6 million, an increase of 26.1% over the prior year quarter, and adjusted EBITDA was $58.5 million, an increase of 20.9% over the prior year quarter(1);
  • Total Transitional and Skilled Services segment revenue was $485.9 million, an increase of 15.2% over the prior year quarter, and segment income was $56.8 million for the quarter, an increase of 22.6% over the prior year quarter(2);
  • Same store skilled services occupancy was 80.0%, an increase of 210 basis points over the prior year quarter, and skilled managed care revenue was up 11.2%;
  • Transitioning skilled services occupancy was 77.9%, an increase of 240 basis points over the prior year quarter; and skilled managed care revenue was up 19.9%;

(1) See "Reconciliation of GAAP to Non-GAAP Financial Information". 
(2) Segment income is defined and outlined in Note 7 on Form 10-Q.  Segment income excludes general and administrative expenses and interest expense, as well as the elimination of intercompany transactions.

Operating Results

“As we celebrate the completion of the spin-off of The Pennant Group, Inc. we are very pleased to announce one of our largest third quarter improvements in our history, with GAAP earnings per share for the quarter of $0.48, an increase of 26.3% over the prior year quarter, and adjusted earnings per share of $0.55, up 19.6% over the prior year quarter,” said Ensign’s Chief Executive Officer Barry Port.  He continued, “These extraordinary results are a testament to the quality outcomes that are being achieved by our local leaders and caregivers, as they continue to drive impressive increases to occupancy, and are even more noteworthy given that in third quarter of 2018 we had the largest quarter over quarter improvements in our history.”

Port noted that much of the improvement has come from strong quarter over quarter improvements in occupancy and skilled mix across all operations, including same store, transitioning and newly acquired operations.  He added, “We are excited about the momentum we continue to see in occupancy, as this is the second quarter in a row where we have experienced an increase of over 200 basis points in occupancy in both same store and transitioning operations. We believe these results demonstrate that even in a period where occupancies across the industry are down, and in what is historically one of our slowest quarters, we are able to consistently drive results across all payor types, including Medicaid, Medicare, managed care and private pay.”

Pointing to the enormous effort that went into consummating the spin-off of Pennant, Port added, “We are especially grateful to our Service Center partners who worked tirelessly to prepare for and complete the spin-off while simultaneously providing support to our local leaders.  While it would have been easy to allow the spin-off to become a distraction, our unique operating model of local leadership, combined with the support of a world class Service Center, has been proven once more.   The results also show, yet again, that our local approach to healthcare is scalable even in the midst of a transformational spin and acquisitions,” he said.  

For the second time this year, Ensign raised its pre-spin 2019 annual earnings guidance. “Because we are ahead of schedule on our results this year, we again increased our 2019 annual earnings guidance to between $2.24 and $2.31 per diluted share and annual revenue of between $2.35 billion and $2.40 billion.  Overall, the midpoint of this guidance represents an increase of 21.2% over Ensign’s 2018 annual earnings,” Port said.

“When adjusting for only the fourth quarter impact of the Pennant spin-off, this newly increased 2019 annual guidance translates to between $2.15 to $2.21 per diluted share and annual revenue of between $2.27 billion and $2.30 billion.  We are very excited about our performance so far this year and are confident that, even with the implementation of PDPM, which took effect October 1st, as our local leaders continue to adjust to local market conditions, we will carry this momentum into the fourth quarter and beyond,” Port added.

“We are also very pleased to give you our 2020 annual earnings guidance of between $2.22 and $2.30 per diluted share and annual revenue guidance of between $2.30 billion and $2.35 billion, which does not include any of the results from the spun-out Pennant businesses. We are very optimistic that with the continued upside that is inherent in our portfolio and the attractive acquisitions on the horizon, that we will be able to continue to meet or exceed our pre-spin growth rates.  To underline this confidence, the midpoint of our 2020 guidance represents an increase of 18.3% over the midpoint of our 2019 full-year spin-adjusted earnings guidance, which is between $1.88 and $1.94 per diluted share.” Port said.  He concluded, “We believe we are on a path to make up for all of Pennant’s 2019 earnings by the end of 2020.  We have not even come close to reaching our full potential, and to do so it will take a relentless commitment to our culture and the repetitious adherence to sound fundamentals.”  

Chad Keetch, Ensign’s Chief Investment Officer also highlighted Ensign’s unique entrepreneurial culture and its history of incubating other post-acute related healthcare businesses, including the home health, hospice and senior living businesses that were spun off as Pennant. “We have several other post-acute related new ventures we are growing and look forward to watching them follow the same path as our Pennant partners.  While these businesses are relatively small today, we are excited to support them in their growth as they apply proven Ensign leadership and operational principles to their respective businesses,” Keetch said.

Chief Financial Officer, Suzanne Snapper reported that the company’s liquidity remains strong with approximately $195 million of availability on its new $350 million credit facility, which also has a built-in expansion option, and 62 unlevered real estate assets that add additional liquidity.  Snapper also indicated that the company maintained a lease-adjusted net-debt-to-adjusted EBITDAR ratio of 3.72x at quarter end, even after continued acquisitions, which tend to temporarily raise the ratio while EBITDAR from new acquisitions catches up.  She also indicated that cash generated from operations was $137.6 million during the nine months ended September 30, 2019, which was primarily driven by an increase in operating results.

A discussion of the company's use of non-GAAP financial measures is set forth below. A reconciliation of net income to EBITDA, adjusted EBITDAR and adjusted EBITDA, as well as a reconciliation of GAAP earnings per share, net income to adjusted net earnings per share and adjusted net income, appear in the financial data portion of this release.  More complete information is contained in the company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2019, which is expected to be filed with the SEC today and can be viewed on the company’s website at http://www.ensigngroup.net.

Quarterly Growth

During the quarter, Ensign paid a quarterly cash dividend of $0.0475 per share of its common stock. Ensign has been a dividend-paying company since 2002 and has increased its dividend every year for 16 years.

Also during the quarter and since, Ensign’s affiliates acquired the following skilled nursing and healthcare campus operations:

  • Valley of the Moon Post Acute, a 27-bed hospital-based skilled nursing operation that is being operated under a management arrangement with Sonoma Valley Hospital in Sonoma, California;
  • The Terrace at Mount Ogden, a 114-bed skilled nursing operation in Ogden, Utah;
  • Surprise Health and Rehabilitation Center, a skilled nursing facility with 100 skilled nursing beds located in Surprise, Arizona;
  • Temple View Transitional Care Center, a 119-bed skilled nursing facility located in Rexburg, Idaho; and
  • St. Joseph’s Villa Independent Living, a 58-unit independent living operation in Salt Lake City, Utah.

Also during the quarter, our Pennant partners acquired the following operations:

  • Agape Hospice, a hospice agency providing services in Tucson, Arizona; and
  • Mainplace Senior Living, a 91-unit senior living center, located in Orange, California.

“Even though we’ve had a solid year on the acquisition front so far, we expect several acquisitions that we have been working on for months to close in the fourth quarter or early in the first quarter of next year,” Keetch said. “Our pipeline remains very healthy but we continue to be very selective and are keeping plenty of dry powder on hand for what we believe will be an increasingly more attractive buyer’s market,” he added.

These additions bring Ensign's growing portfolio to 202 skilled nursing operations, 27 of which also include senior living operations across fourteen states.  Ensign owns the real estate at 81 of its 260 healthcare facilities.  Keetch reaffirmed that Ensign continues to actively seek transactions to acquire real estate and to lease both well-performing and struggling skilled nursing, senior living and other healthcare related businesses in new and existing markets.

2019 Guidance

Management raised its 2019 annual earnings per share guidance and translated the guidance to include the fourth quarter impact of the spin-off of Pennant, to between $2.15 and $2.21 per diluted share and revenue to between $2.27 billion and $2.30 billion.  Snapper indicated that the 2019 guidance excludes the spin-off transaction costs, share-based compensation and costs incurred for start-up operations.  The guidance includes, among other things, self-insured healthcare costs, anticipated Medicare and Medicaid reimbursement rates, the implementation of the new Patient Driven Payment Model (PDPM) and acquisitions completed through the end of the year.

2020 Guidance

Management provided guidance for 2020, with annual earnings per share guidance of $2.22 to $2.30 per diluted share and annual revenue guidance of $2.30 billion to $2.35 billion.  The midpoint of this 2020 guidance represents an increase of 18.3% over the midpoint of Ensign’s 2019 full-year spin-adjusted earnings guidance, which is between $1.88 and $1.94 per diluted share.  Management’s guidance is based on diluted weighted average common shares outstanding of approximately 57.6 million and a 25% tax rate.  In addition, the guidance assumes, among other things, normalized health insurance costs, anticipated Medicare and Medicaid reimbursement rate increases, net of provider taxes, the implementation of the new Patient Driven Payment Model (PDPM) and acquisitions closed in the first half of 2020. It also excludes acquisition-related costs and amortization costs related to intangible assets acquired, share-based compensation and start-up losses.

Conference Call

A live webcast will be held Thursday, October 31, 2019 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign’s third quarter financial results. To listen to the webcast, or to view any financial or statistical information required by SEC Regulation G, please visit the Investors Relations section of Ensign’s website at http://investor.ensigngroup.net. The webcast will be recorded, and will be available for replay via the website until 5:00 p.m. Pacific time on Friday, December 6, 2019.

About Ensign

The Ensign Group, Inc.'s independent operating subsidiaries provide a broad spectrum of skilled nursing and assisted living services, physical, occupational and speech therapies and other rehabilitative and healthcare services at 212 healthcare facilities in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, South Carolina, Texas, Utah, Washington and Wisconsin.   Ensign’s new business venture operating subsidiaries also offer several other post-acute-related services, including mobile x-ray, lab, non-emergency transportation services and other consulting services also across several states. Each of these operations is operated by a separate, independent operating subsidiary that has its own management, employees and assets. References herein to the consolidated "company" and "its" assets and activities, as well as the use of the terms "we," "us," "its" and similar verbiage, are not meant to imply that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the facilities, the Service Center or the captive insurance subsidiary are operated by the same entity. More information about Ensign is available at http://www.ensigngroup.net.
  
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This press release contains, and the related conference call and webcast will include, forward-looking statements that are based on management’s current expectations, assumptions and beliefs about its business, financial performance, operating results, the industry in which it operates and other future events. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding growth prospects, future operating and financial performance, and acquisition activities. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to materially and adversely differ from those expressed in any forward-looking statement.

These risks and uncertainties relate to the company’s business, its industry and its common stock and include: reduced prices and reimbursement rates for its services; its ability to acquire, develop, manage or improve operations, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of operations; its ability to access capital on a cost-effective basis to continue to successfully implement its growth strategy; its operating margins and profitability could suffer if it is unable to grow and manage effectively its increasing number of operations; competition from other companies in the acquisition, development and operation of facilities; its ability to defend claims and lawsuits, including professional liability claims alleging that our services resulted in personal injury, and other regulatory-related claims; and the application of existing or proposed government regulations, or the adoption of new laws and regulations, that could limit its business operations, require it to incur significant expenditures or limit its ability to relocate its operations if necessary. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the company’s periodic filings with the Securities and Exchange Commission, including its Form 10-Q, for a more complete discussion of the risks and other factors that could affect Ensign’s business, prospects and any forward-looking statements. Except as required by the federal securities laws, Ensign does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release.

Contact Information

Investor/Media Relations, The Ensign Group, Inc., (949) 487-9500, ir@ensigngroup.net.

SOURCE: The Ensign Group, Inc.

THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
    
 Three Months Ended September 30, Nine Months Ended September 30,
   2019    2018     2019    2018  
Revenue$600,507 $514,364  $1,725,372 $1,502,884 
Expense     
Cost of services 477,805  413,723   1,364,807  1,200,098 
Return of unclaimed class action settlement -  -   -  (1,664)
Rent—cost of services 37,728  34,851   110,574  103,173 
General and administrative expense 31,710  24,601   95,295  72,091 
Depreciation and amortization 14,319  11,902   40,101  35,145 
Total expenses 561,562  485,077   1,610,777  1,408,843 
Income from operations 38,945  29,287   114,595  94,041 
Other income (expense):     
Interest expense (3,900) (3,989)  (11,513) (11,471)
Interest income 736  467   1,883  1,477 
Other expense, net (3,164) (3,522)  (9,630) (9,994)
Income before provision for income taxes 35,781  25,765   104,965  84,047 
Provision for income taxes 7,953  5,415   20,605  18,078 
Net income 27,828  20,350   84,360  65,969 
Less: net income/(loss) attributable to noncontrolling interests 669  (511)  1,220  (35)
Net income attributable to The Ensign Group, Inc.$27,159 $20,861  $83,140 $66,004 
      
Net income per share attributable to The Ensign Group, Inc.:     
Basic$0.50 $0.40  $1.55 $1.27 
Diluted$0.48 $0.38  $1.48 $1.22 
      
Weighted average common shares outstanding:     
Basic 53,941  52,139   53,470  51,870 
Diluted 56,364  54,632   56,054  54,176 
      


THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands)
    
 September 30, 2019 December 31, 2018
Assets   
Current assets:   
Cash and cash equivalents$44,396  $31,083 
Accounts receivable—less allowance for doubtful accounts of $3,707 and $2,886 at September 30, 2019 and December 31, 2018, respectively 308,093   276,099 
Investments—current 13,026   8,682 
Prepaid income taxes 2,536   6,219 
Prepaid expenses and other current assets 25,150   24,130 
Assets held for sale - current -   1,859 
Total current assets 393,201   348,072 
Property and equipment, net 708,224   618,874 
Right-of-use assets 1,062,219   - 
Insurance subsidiary deposits and investments 34,561   36,168 
Escrow deposits 50   7271 
Deferred tax assets 8,105   11,650 
Restricted and other assets 17,351   20,844 
Intangible assets, net 3,541   31,000 
Goodwill 96,199   80,477 
Other indefinite-lived intangibles 36,098   27,602 
Total assets$2,359,549  $1,181,958 
    
Liabilities and equity   
Current liabilities:   
Accounts payable$40,019  $44,236 
Accrued wages and related liabilities 132,659   119,656 
Lease liabilities—current 60,817   - 
Accrued self-insurance liabilities—current 26,707   25,446 
Other accrued liabilities 84,250   69,784 
Current maturities of long-term debt 10,177   10,105 
Total current liabilities 354,629   269,227 
Long-term debt—less current maturities 265,692   233,135 
Long-term lease liabilities—less current portion 974,496   - 
Accrued self-insurance liabilities—less current portion 58,958   54,605 
Other long-term liabilities 3,968   11,234 
Deferred gain related to sale-leaseback -   11,417 
Total equity 701,806   602,340 
Total liabilities and equity$2,359,549  $1,181,958 
    

THE ENSIGN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
The following table presents selected data from our condensed consolidated statements of cash flows for the periods presented:
 Nine Months Ended September 30,
   2019     2018  
Net cash provided by operating activities$137,593  $157,277 
Net cash used in investing activities (149,388)  (95,269)
Net cash provided by/(used in) financing activities 25,108   (58,688)
Net increase in cash and cash equivalents 13,313   3,320 
Cash and cash equivalents beginning of period 31,083   42,337 
Cash and cash equivalents end of period$44,396  $45,657 
    


THE ENSIGN GROUP, INC.
REVENUE BY SEGMENT
(Unaudited)
          
The following table sets forth our total revenue by segment and as a percentage of total revenue for the periods indicated:   
          
 Three Months Ended September 30, Nine Months Ended September 30,
   2019    2018     2019    2018  
 $%$% $%$%
 (Dollars in thousands) (Dollars in thousands)
Transitional and skilled services$485,97380.9% $421,76482.0%  $1,404,46981.4% $1,237,29882.3% 
Senior living services 43,7967.3  38,0587.4   126,5367.3  111,3357.4 
Home health and hospice services:         
Home health 25,9834.3  22,2604.3   74,6304.3  63,7654.2 
Hospice 29,1884.9  21,5774.2   76,8664.5  61,0794.1 
Total home health and hospice services 55,1719.2  43,8378.5   151,4968.8  124,8448.3 
All other (1) 15,5672.6  10,7052.1   42,8712.5  29,4072.0 
Total revenue$600,507100.0% $514,364100.0%  $1,725,372100.0% $1,502,884100.0% 
          
(1) Includes revenue from services generated in our other ancillary services.         


THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
(Unaudited)
     
The following tables summarize our selected performance indicators for our transitional and skilled services segment along with other statistics, for each of the dates or periods indicated:
     
 Three Months Ended September 30,  
  2019  2018 Change% Change
 (Dollars in thousands)  
Total Facility Results:    
Transitional and skilled revenue$485,973 $421,764 $64,20915.2% 
Number of facilities at period end 175  163  127.4% 
Number of campuses at period end* 27  22  522.7% 
Actual patient days 1,516,697  1,367,142  149,55510.9% 
Occupancy percentage — Operational beds 78.9%  77.3%  1.6% 
Skilled mix by nursing days 28.5%  28.3%  0.2% 
Skilled mix by nursing revenue 47.8%  47.9%  (0.1)% 
          
 Three Months Ended September 30,  
  2019  2018 Change% Change
 (Dollars in thousands)  
Same Facility Results(1):    
Transitional and skilled revenue$353,745 $329,461 $24,2847.4% 
Number of facilities at period end 127  127  --% 
Number of campuses at period end* 14  14  --% 
Actual patient days 1,066,467  1,032,002  34,4653.3% 
Occupancy percentage — Operational beds 80.0%  77.9%  2.1% 
Skilled mix by nursing days 30.4%  29.8%  0.6% 
Skilled mix by nursing revenue 49.9%  49.5%  0.4% 
          
 Three Months Ended September 30,  
  2019  2018 Change% Change
 (Dollars in thousands)  
Transitioning Facility Results(2):    
Transitional and skilled revenue$91,776 $82,535 $9,24111.2% 
Number of facilities at period end 33  33  --% 
Number of campuses at period end* 7  7  --% 
Actual patient days 313,858  302,868  10,9903.6% 
Occupancy percentage — Operational beds 77.9%  75.5%  2.4% 
Skilled mix by nursing days 25.1%  24.0%  1.1% 
Skilled mix by nursing revenue 44.1%  43.5%  0.6% 
          
 Three Months Ended September 30,  
  2019  2018 Change% Change
 (Dollars in thousands)  
Recently Acquired Facility Results(3):    
Transitional and skilled revenue$40,452 $9,768 $30,684NM 
Number of facilities at period end 15  3  12NM 
Number of campuses at period end* 6  1  5+NM 
Actual patient days 136,372  32,272  104,100NM 
Occupancy percentage — Operational beds 73.4%  75.0%  NM 
Skilled mix by nursing days 21.5%  19.5%  NM 
Skilled mix by nursing revenue 37.0%  32.0%  NM 
     
*  Campus represents a facility that offers both skilled nursing and senior living services. Revenue and expenses related to skilled nursing and senior living services have been allocated and recorded in the respective reportable segment.
(1) Same Facility results represent all facilities purchased prior to January 1, 2016.   
(2) Transitioning Facility results represent all facilities purchased from January 1, 2016 to December 31, 2017. 
(3) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2018.
 
 Nine Months Ended
 September 30,
  
  2019  2018 Change% Change
 (Dollars in thousands)  
Total Facility Results:    
Transitional and skilled revenue$1,404,469 $1,237,298 $167,17113.5% 
Number of facilities at period end 175  163  127.4% 
Number of campuses at period end* 27  22  522.7% 
Actual patient days 4,395,864  4,012,169  383,6959.6% 
Occupancy percentage — Operational beds 79.2%  77.2%  2.0% 
Skilled mix by nursing days 29.1%  29.9%  (0.8)% 
Skilled mix by nursing revenue 48.7%  50.1%  (1.4)% 
          
 Nine Months Ended
 September 30,
  
  2019  2018 Change% Change
 (Dollars in thousands)  
Same Facility Results(1):    
Transitional and skilled revenue$1,046,925 $977,456 $69,4697.1% 
Number of facilities at period end 127  127  --% 
Number of campuses at period end* 14  14  --% 
Actual patient days 3,160,286  3,066,751  93,5353.0% 
Occupancy percentage — Operational beds 80.1%  77.9%  2.2% 
Skilled mix by nursing days 31.0%  31.3%  (0.3)% 
Skilled mix by nursing revenue 50.8%  51.4%  (0.6)% 
          
 Nine Months Ended
 September 30,
  
  2019  2018 Change% Change
 (Dollars in thousands)  
Transitioning Facility Results(2):    
Transitional and skilled revenue$269,559 $244,279 $25,28010.3% 
Number of facilities at period end 33  33  --% 
Number of campuses at period end* 7  7  --% 
Actual patient days 934,292  893,771  40,5214.5% 
Occupancy percentage — Operational beds 78.2%  75.0%  3.2% 
Skilled mix by nursing days 25.5%  25.5%  -% 
Skilled mix by nursing revenue 44.7%  45.6%  (0.9)% 
          
 Nine Months Ended September 30,  
  2019  2018 Change% Change
 (Dollars in thousands)  
Recently Acquired Facility Results(3):    
Transitional and skilled revenue$87,985 $15,563 $72,422NM 
Number of facilities at period end 15  3  12NM 
Number of campuses at period end* 6  1  5NM 
Actual patient days 301,286  51,647  249,639NM 
Occupancy percentage — Operational beds 73.8%  75.2%  NM 
Skilled mix by nursing days 20.8%  21.0%  NM 
Skilled mix by nursing revenue 35.3%  34.5%  NM 
     
*  Campus represents a facility that offers both skilled nursing and senior living services. Revenue and expenses related to skilled nursing and senior living services have been allocated and recorded in the respective reportable segment.
(1) Same Facility results represent all facilities purchased prior to January 1, 2016.   
(2) Transitioning Facility results represent all facilities purchased from January 1, 2016 to December 31, 2017. 
(3) Recently Acquired Facility (Acquisitions) results represent all facilities purchased on or subsequent to January 1, 2018.
     


THE ENSIGN GROUP, INC.
SKILLED NURSING AVERAGE DAILY REVENUE RATES AND
PERCENT OF SKILLED NURSING REVENUE AND DAYS BY PAYOR
(Unaudited)
         
The following table reflects the change in skilled nursing average daily revenue rates by payor source, excluding services that are not covered by the daily rate:  
         
 Three Months Ended September 30,
 Same FacilityTransitioningAcquisitionsTotal
  2019 2018 2019 2018 2019 2018 2019 2018
Skilled Nursing Average Daily Revenue Rates:        
Medicare$616.19$596.41$537.04$519.26$607.90$541.46$597.82$577.09
Managed care 468.06 462.02 417.52 406.74 433.30 420.98 455.48 450.07
Other skilled 488.46 479.57 488.95 546.70 336.04 241.31 482.68 480.62
Total skilled revenue 527.58 518.06 478.97 471.07 504.83 462.02 517.16 508.31
Medicaid 232.70 226.90 206.58 193.34 233.84 238.19 227.48 219.54
Private and other payors 233.36 223.74 198.26 195.44 249.94 238.54 225.04 216.49
Total skilled nursing revenue$322.89$313.78$274.02$260.46$294.25$281.90$310.18$301.19
         
 Nine Months Ended September 30,
 Same FacilityTransitioningAcquisitionsTotal
  2019 2018 2019 2018 2019 2018 2019 2018
Skilled Nursing Average Daily Revenue Rates:        
Medicare$614.39$597.81$534.36$518.26$579.11$534.74$594.51$577.88
Managed care 465.90 455.68 417.45 409.21 428.21 423.68 453.94 446.17
Other skilled 491.11 471.66 489.42 501.73 330.02 245.09 487.06 471.84
Total skilled revenue 528.59 515.54 478.03 471.49 489.11 462.37 517.24 506.68
Medicaid 230.69 222.86 202.51 190.61 236.25 231.45 225.10 215.68
Private and other payors 234.47 225.18 204.44 199.46 240.68 237.91 226.66 217.91
Total skilled nursing revenue$323.81$315.12$273.25$263.69$289.78$281.02$310.71$303.20
         


         
The following tables set forth our percentage of skilled nursing patient revenue and days by payor source for the three and nine months ended September 30, 2019 and 2018: 
         
 Three Months Ended September 30,
 Same FacilityTransitioningAcquisitionsTotal
 2019 2018 2019 2018 2019 2018 2019 2018 
Percentage of Skilled Nursing Revenue:        
Medicare21.7% 22.2% 24.3% 25.3% 20.6% 16.6% 22.1% 22.6% 
Managed care  18.4   17.6   18.1   16.4   14.0   14.2   18.0   17.3 
Other skilled  9.8   9.7   1.7   1.8   2.4   1.2   7.7   8.0 
Skilled mix  49.9   49.5   44.1   43.5   37.0   32.0   47.8   47.9 
Private and other payors  7.6   7.9   11.6   11.3   10.5   15.5   8.5   8.8 
Quality mix  57.5   57.4   55.7   54.8   47.5   47.5   56.3   56.7 
Medicaid  42.5   42.6   44.3   45.2   52.5   52.5   43.7   43.3 
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 
         
 Three Months Ended September 30,
 Same FacilityTransitioningAcquisitionsTotal
 2019 2018 2019 2018 2019 2018 2019 2018 
Percentage of Skilled Nursing Days:        
Medicare11.3% 11.6% 12.3% 12.6% 10.0% 8.6% 11.4% 11.8% 
Managed care  12.6   11.9   11.8   10.5   9.5   9.5   12.2   11.5 
Other skilled  6.5   6.3   1.0   0.9   2.0   1.4   4.9   5.0 
Skilled mix  30.4   29.8   25.1   24.0   21.5   19.5   28.5   28.3 
Private and other payors  10.9   11.5   16.4   15.2   12.7   18.4   12.2   12.5 
Quality mix  41.3   41.3   41.5   39.2   34.2   37.9   40.7   40.8 
Medicaid  58.7   58.7   58.5   60.8   65.8   62.1   59.3   59.2 
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 
         
         
 Nine Months Ended September 30,
 Same FacilityTransitioningAcquisitionsTotal
 2019 2018 2019 2018 2019 2018 2019 2018 
Percentage of Skilled Nursing Revenue:        
Medicare22.9% 23.8% 24.8% 27.4% 19.1% 18.2% 23.0% 24.4% 
Managed care  18.4   18.4   18.3   16.8   14.2   15.1   18.1   18.0 
Other skilled  9.5   9.2   1.6   1.4   2.0   1.2   7.6   7.7 
Skilled mix  50.8   51.4   44.7   45.6   35.3   34.5   48.7   50.1 
Private and other payors  7.5   7.7   11.4   11.8   11.7   14.8   8.5   8.5 
Quality mix  58.3   59.1   56.1   57.4   47.0   49.3   57.2   58.6 
Medicaid  41.7   40.9   43.9   42.6   53.0   50.7   42.8   41.4 
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 
         
 Nine Months Ended September 30,
 Same FacilityTransitioningAcquisitionsTotal
 2019 2018 2019 2018 2019 2018 2019 2018 
Percentage of Skilled Nursing Days:        
Medicare12.0% 12.5% 12.7% 13.9% 9.5% 9.6% 12.0% 12.8% 
Managed care  12.8   12.6   11.9   10.8   9.6   10.0   12.4   12.2 
Other skilled  6.2   6.2   0.9   0.8   1.7   1.4   4.7   4.9 
Skilled mix  31.0   31.3   25.5   25.5   20.8   21.0   29.1   29.9 
Private and other payors  10.8   11.1   15.4   15.7   14.4   17.5   12.0   12.2 
Quality mix  41.8   42.4   40.9   41.2   35.2   38.5   41.1   42.1 
Medicaid  58.2   57.6   59.1   58.8   64.8   61.5   58.9   57.9 
Total skilled nursing100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 
         


THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
(Unaudited)
      
The following tables summarize our selected performance indicators for our senior living services segment along with other statistics, for each of the date or periods indicated:
      
 Three Months Ended September 30,
   
   2019    2018  Change% Change 
 (Dollars in thousands)   
Resident fee revenue$43,796 $38,058 $5,73815.1% 
Number of facilities at period end 57  51  611.8% 
Number of campuses at period end 27  22  522.7% 
Occupancy percentage (units) 75.2%  76.0%  (0.8)% 
Average monthly revenue per unit$2,907 $2,855 $521.8% 
      
 Nine Months Ended
 September 30,
   
   2019    2018  Change% Change 
 (Dollars in thousands)   
Resident fee revenue$126,536 $111,335 $15,20113.7% 
Number of facilities at period end 57  51  611.8% 
Number of campuses at period end 27  22  522.7% 
Occupancy percentage (units) 75.3%  75.6%  (0.3)% 
Average monthly revenue per unit$2,917 $2,858 $592.1% 
      


THE ENSIGN GROUP, INC.
SELECT PERFORMANCE INDICATORS
(Unaudited)
      
The following tables summarize our selected performance indicators for our home health and hospice segment along with other statistics, for each of the date or periods indicated:
      
 Three Months Ended September 30,   
   2019   2018 Change% Change 
 (Dollars in thousands)   
Home health and hospice revenue     
Home health services$25,983$22,260$3,72316.7% 
Hospice services 29,188 21,577 7,61135.3% 
Total home health and hospice revenue$55,171$43,837$11,33425.9% 
      
Home health, hospice and home care agencies 63 49 1428.6% 
Home health services:     
Average Medicare revenue per completed episode$3,173$3,001$1725.7% 
Hospice services:     
Average daily census 1,788 1,379 40929.7% 
  
 Nine Months Ended
 September 30,
   
  2019 2018Change% Change 
 (Dollars in thousands)   
Home health and hospice revenue     
Home health services$74,630$63,765$10,86517.0% 
Hospice services 76,866 61,079 15,78725.8% 
Total home health and hospice revenue$151,496$124,844$26,65221.3% 
      
Home health, hospice and home care agencies 63 49 1428.6% 
Home health services:     
Average Medicare revenue per completed episode$3,072$2,968$1043.5% 
Hospice services:     
Average daily census 1,625 1,310 31524.0% 
      


THE ENSIGN GROUP, INC.
REVENUE BY PAYOR SOURCE
(Unaudited)
          
The following table sets forth our total revenue by payor source and as a percentage of total revenue for the periods indicated:     
          
 Three Months Ended September 30, Nine Months Ended September 30,
  2019  2018   2019  2018 
 $%$% $%$%
 (Dollars in thousands) (Dollars in thousands)
Revenue:         
Medicaid$218,72536.4% $188,48636.6%  $620,53936.0% $529,28035.2% 
Medicare 157,04626.2  133,55426.0   457,95326.5  409,68127.3 
Medicaid-skilled 34,0805.7  30,6846.0   96,3235.6  86,0245.7 
Total Medicaid and Medicare 409,85168.3  352,72468.6   1,174,81568.1  1,024,98568.2 
Managed Care 96,09516.0  80,19615.6   279,63316.2  244,06216.2 
Private and Other(1) 94,56115.7  81,44415.8   270,92415.7  233,83715.6 
Revenue$600,507100.0% $514,364100.0%  $1,725,372100.0% $1,502,884100.0% 
(1) Private and other payors also includes revenue from all payors generated in our other ancillary services for the three and nine months ended September 30, 2019 and 2018.         
          


      
THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
(Unaudited)
      
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME     
      
 Three Months Ended September 30, Nine Months Ended September 30,
   2019    2018     2019    2018  
Net income attributable to The Ensign Group, Inc.$27,159 $20,861  $83,140 $66,004 
      
Non-GAAP adjustments     
Results related to operations in the start-up phase(a) 63  500   390  3,347 
Return of unclaimed class action settlement -  -   -  (1,664)
Share-based compensation expense(b) 2,978  2,811   9,233  7,639 
Results related to closed operations and operations not at full capacity(c) 1,219  224   2,192  712 
Transaction-related costs(d) 139  228   748  338 
Depreciation and amortization - patient base(e) 110  48   296  150 
General and administrative - spin-off transaction costs(f) 3,261  -   7,908  - 
Gain on sale of/impairment charges to fixed assets(g) (1,402) -   (1,402) - 
COS - business interruption gains(h) -  -   -  (675)
COS - Goodwill and intangible assets impairment(i) -  3,177   -  3,177 
Provision for income taxes on Non-GAAP adjustments(j) (2,584) (2,890)  (10,478) (6,309)
Non-GAAP Net Income$30,943 $24,959  $92,027 $72,719 
      
Diluted Earnings Per Share As Reported     
Net Income$0.48 $0.38  $1.48 $1.22 
Average number of shares outstanding 56,364  54,632   56,054  54,176 
      
Adjusted Diluted Earnings Per Share     
Net Income$0.55 $0.46  $1.64 $1.34 
Average number of shares outstanding 56,364  54,632   56,054  54,176 
      
Footnotes:     
(a) Represents operating results for start-up operations.     
 Three Months Ended September 30, Nine Months Ended September 30,
   2019    2018     2019    2018  
Revenue$(73)$(17,011) $(325)$(49,577)
Cost of services 132  13,672   702  41,444 
Rent 4  3,596   13  10,750 
Depreciation and amortization -  243   -  730 
Total Non-GAAP adjustment$63 $500  $390 $3,347 
      
(b)  Represents share-based compensation expense incurred.     
 Three Months Ended September 30, Nine Months Ended September 30,
   2019    2018     2019    2018  
Cost of services$  1,853 $  1,533  $  5,371 $  4,170 
General and administrative   1,125    1,278     3,862    3,469 
Total Non-GAAP adjustment$  2,978 $  2,811  $  9,233 $  7,639 
    
(c) Represents results at closed operations and operations not at full capacity     
 Three Months Ended September 30, Nine Months Ended September 30,
   2019    2018     2019    2018  
Revenue$  (2,567)$  -  $  (4,427)$  - 
Cost of services   3,122    139     5,609    464 
Rent   295    76     478    225 
Depreciation and amortization   369    9     532    23 
Total Non-GAAP adjustment$  1,219 $  224  $  2,192 $  712 
      
      
(d)  Represents costs incurred to acquire an operation which are not capitalizable     
 Three Months Ended September 30, Nine Months Ended September 30,
   2019    2018     2019    2018  
Cost of services$  66 $  -  $  505 $  - 
General and administrative   73    228     243    338 
Total Non-GAAP adjustment$  139 $  228  $  748 $  338 
(e)  Included in depreciation and amortization are expenses related to patient base intangible assets at newly acquired skilled nursing and senior living facilities. 
(f)  Included in general and administrative expense are costs incurred in connection with the completed spin-off of our home health and hospice operations and substantially all of our senior living operations to a newly formed publicly traded company.
(g) Gain on sale of/impairment charges to fixed assets includes a gain recognized for the sale of land of $2.9 million, offset by impairment charges to fixed assets at two of our senior living operations of $1.5 million during the three and nine months ended September 30, 2019.
(h) Business interruption recoveries related to insurance claims of the California fires that occurred in the fourth quarter of 2017.    
(i) Impairment charges to goodwill and intangible assets for one of our other ancillary operations.     
 Three Months Ended September 30, Nine Months Ended September 30,
   2019    2018     2019    2018  
Cost of services$  -  $  3,653  $  -  $  3,653 
Non-controlling interest   -    (476)    -    (476)
Total Non-GAAP adjustment$  -    3,177  $  -    3,177 
 
(j) Represents an adjustment to the provision for income tax to our historical year to date effective tax rate of 25.0% for the three and nine months ended September 30, 2019 and 2018. This rate excludes the tax benefit of shared-based payment awards.
      


THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
      
The table below reconciles net income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR for the periods presented:     
      
 Three Months Ended September 30, Nine Months Ended September 30,
   2019    2018     2019    2018  
Consolidated Statements of Income Data:     
Net income$27,828 $20,350  $84,360 $65,969 
Less: net income/(loss) attributable to noncontrolling interests 669  (511)  1,220  (35)
Add:  Interest expense, net 3,164  3,522   9,630  9,994 
Provision for income taxes 7,953  5,415   20,605  18,078 
Depreciation and amortization 14,319  11,902   40,101  35,145 
EBITDA$52,595 $41,700  $153,476 $129,221 
              
Adjustments to EBITDA:     
Results related to closed operations and operations not at full capacity(a) 555  139   1,182  464 
Losses/(earnings) related to operations in the start-up phase (b) 59  (3,339)  377  (8,133)
Return of unclaimed class action settlement -  -   -  (1,664)
Share-based compensation expense 2,978  2,811   9,233  7,639 
Spin-off transaction costs(c) 3,261  -   7,908  - 
Acquisition related costs(d) 139  228   748  338 
Gain on sale of/impairment charges to fixed assets(e) (1,402) -   (1,402) - 
Impairment of goodwill and intangible assets(f) -  3,177   -  3,177 
Business interruption recoveries(g) -  -   -  (675)
Rent related to items above 299  3,672   491  10,975 
Adjusted EBITDA$58,484 $48,388  $172,013 $141,342 
Rent—cost of services 37,728  34,851   110,574  103,173 
Less: rent related to items above (299) (3,672)  (491) (10,975)
Adjusted rent—cost of services 37,429  31,179   110,083  92,198 
Adjusted EBITDAR$95,913   $282,096  
      
      
(a)  Results at closed operations and operations not at full capacity during the three and nine months ended September 30, 2019 and 2018.     
(b)  Represents results related to facilities currently in the start-up phase after construction was completed. This amount excludes rent, depreciation and interest expense.   
(c)  Costs incurred in connection with the completed spin-off  transaction of our home health and hospice operations and substantially all of our senior living operations to a newly formed publicly traded company.
(d)  Costs incurred to acquire operations which are not capitalizable.     
(e)  Gain on sale of/impairment charges to fixed assets includes a gain recognized for the sale of land of $2.9 million, offset by impairment charges to fixed assets at two of our senior living operations of $1.5 million during the three and nine months ended September 30, 2019.
(f)  Impairment charges to goodwill and intangible assets for our other ancillary operations during the three and nine months ended September 30, 2018, excluding the impact of non-controlling interest of $0.5 million. Including the impact of noncontrolling interest, goodwill and intangible assets impairment is $3.7 million.
(g)  Business interruption recoveries related to insurance claims with respect to the California fires that occurred in the fourth quarter of 2017.    
      


THE ENSIGN GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
              
The table below reconciles net income from operations to EBITDA and Adjusted EBITDA for each reportable segment for the periods presented:         
              
 Three Months Ended September 30, Nine Months Ended September 30,
 Transitional and Skilled
Services
Senior Living ServicesHome Health and
Hospice
 Transitional and Skilled
Services
Senior Living ServicesHome Health and
Hospice
  2019  2018  2019 2018  2019  2018   2019  2018  2019 2018  2019  2018 
              
Statements of Income Data:             
Income from operations, excluding general and administrative expense(a)$56,838 $46,350 $2,815$4,733 $8,424 $7,297  $172,254 $135,755 $12,674$14,361 $22,598 $19,623 
Less: net income attributable to noncontrolling interests -  -  - -  279  42   -  -  - -  629  413 
Depreciation and amortization 9,331  8,061  2,127 1,902  317  263   26,883  23,571  6,046 5,362  897  789 
EBITDA$66,169 $54,411 $4,942$6,635 $8,462 $7,518  $199,137 $159,326 $18,720$19,723 $22,866 $19,999 
              
Adjustments to EBITDA:             
Results related to operations in the start-up phase(b) -  (3,461) - 64  59  58   -  (8,469) - 243  377  93 
Results related to closed operations and operations not at full capacity(c) 190  139  - -  -  -   480  464  - -  -  - 
Share-based compensation expense 1,566  1,197  56 182  181  124   4,524  3,259  231 521  479  314 
Gain on sale of/impairment charges to fixed assets(d) (2,873) -  1,471 -  -  -   (2,873) -  1,471 -  -  - 
Transaction-related costs(e) -  -  - -  67  -   -  -  - -  505  - 
Business interruption recoveries(f) -  -  - -  -  -   -  (675) - -  -  - 
Rent related to items above 245  2,777  - 886  4  9   398  8,303  - 2,649  13  23 
Adjusted EBITDA$65,297 $55,063 $6,469$7,767 $8,773 $7,709  $201,666 $162,208 $20,422$23,136 $24,240 $20,429 
Rent—cost of services 30,285  28,088  6,471 6,015  725  583   88,504  82,698  19,280 18,324  2,137  1,671 
Less: rent related to items above (245) (2,777) - (886) (4) (9)  (398) (8,303) - (2,649) (13) (23)
Adjusted rent—cost of services$30,040 $25,311 $6,471$5,129 $721 $574  $88,106 $74,395 $19,280$15,675 $2,124 $1,648 
              
(a)  General and administrative expenses are not allocated to any segment for purposes of determining segment profit or loss.           
(b)  Represents results related to facilities currently in the start-up phase after construction was completed. This amount excludes rent, depreciation and interest expense.        
(c)  Results at closed operations and operations not at full capacity during the three and nine months ended September 30, 2019 and 2018.          
(d)  Gain on sale of/impairment charges to fixed assets includes a gain recognized for the sale of land of $2.9 million, offset by impairment charges to fixed assets at two of our senior living operations of $1.5 million during the three and nine months ended September 30, 2019.
(e)  Costs incurred to acquire operations which are not capitalizable.             
(f)  Business interruption recoveries related to insurance claims with respect to the California fires that occurred in the fourth quarter of 2017.          

Discussion of Non-GAAP Financial Measures

EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes and (c) depreciation and amortization. Adjusted EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) costs incurred for operations currently in start-up phase, excluding depreciation, interest and income taxes, (e) results of operations not at full capacity, excluding depreciation, interest and income taxes, (f) share-based compensation expense, (g) return of unclaimed class action settlement, (h) patient base and other acquisition-related costs, (i) spin-off transaction costs, (j) gain on sale of/impairment charges to fixed assets, (k) impairment of intangible assets and goodwill and (l) business interruption recoveries. Adjusted EBITDAR consists of net income before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) rent-cost of services, (e) costs incurred for facilities currently in start-up phase, excluding rent, depreciation, interest and income taxes, (f) results operations not at full capacity, excluding rent, depreciation, interest and income taxes, (g) share-based compensation expense, (h) return of unclaimed class action settlement, (i) patient base and other acquisition-related costs, (j) spin-off transaction costs, (k) gain on sale of/impairment charges to fixed assets, (l) impairment of intangible assets and goodwill and (m) business interruption recoveries. The company believes that the presentation of EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the company’s operating performance. Adjusted EBITDAR is a financial valuation measure that is not specified in GAAP. This measure is not displayed as a performance measure as it excludes rent expense, which is a normal and recurring operating expense. The company believes disclosure of adjusted net income, adjusted net income per share, EBITDA, adjusted EBITDA and adjusted EBITDAR has substance because the excluded revenues and expenses are infrequent in nature and are variable in nature, or do not represent current revenues or cash expenditures. A material limitation associated with the use of these measures as compared to the GAAP measures of net income and diluted earnings per share is that they may not be comparable with the calculation of net income and diluted earnings per share for other companies in the company's industry. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. For further information regarding why the company believes that this non-GAAP measure provides useful information to investors, the specific manner in which management uses this measure, and some of the limitations associated with the use of this measure, please refer to the company's periodic filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The company’s periodic filings are available on the SEC's website at www.sec.gov or under the "Financial Information" link of the Investor Relations section on Ensign’s website at http://www.ensigngroup.net.

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Source: The Ensign Group, Inc.