The Ensign Group Reports Second Quarter Results

Conference Call and Webcast scheduled for tomorrow, August 3, 2018 at 10:00 am PT

MISSION VIEJO, Calif., Aug. 02, 2018 (GLOBE NEWSWIRE) -- The Ensign Group, Inc. (Nasdaq:ENSG), the parent company of the Ensign™ group of skilled nursing, rehabilitative care services, home health, home care, hospice care and assisted living companies, today announced its operating results for the second quarter of 2018, reporting GAAP diluted earnings per share of $0.41 for the quarter with adjusted earnings per share of $0.44 for the quarter ⁽¹⁾.

Highlights Include:

• GAAP earnings for the quarter was up 78.3% over the prior year quarter to $0.41 per diluted share, and adjusted earnings per share was up 41.9% over the prior year quarter to $0.44 per diluted share⁽¹⁾⁽²⁾;
• Consolidated GAAP Net Income for the quarter was $22.0 million, and consolidated adjusted Net Income was $23.7 million, an increase of 47.3% over the prior year quarter⁽¹⁾⁽²⁾;
• Total Transitional and Skilled Services segment income was $43.2 million for the quarter, an increase of 36.3% over the prior year quarter;
• Same-store skilled nursing revenue was $286.3 million, an increase of 4.2% over the prior year quarter and same-store skilled mix revenue was $143.8 million, an increase of 3.1% over the prior year quarter⁽³⁾;  
• Transitioning skilled occupancy was 73.4%, an increase of 274 basis points over the prior year quarter and transitioning skilled nursing revenue was $98.7 million, an increase of 6.3% over the prior year quarter⁽³⁾;
• Transitioning skilled managed care revenue and managed care days were up 7.1% and 8.8%, respectively, over the prior year quarter⁽³⁾;  
• Total Assisted Living Services segment revenue was up 12.6% to $37.2 million and Assisted Living Services segment income was up 35.8% to $5.0 million, both over the prior year quarter; and
• Total Home Health and Hospice Services segment revenue was up 20.7% to $41.8 million and segment income was up 27.3% to $6.3 million, both over the prior year quarter⁽³⁾.

1. See "Reconciliation of GAAP to Non-GAAP Financial Information".
2. Adjusted earnings per share and Consolidated Adjusted Net Income increased by 22.2% and 26.6%, respectively, over the prior year quarter if we applied a 25% tax rate to both periods.
3. Excludes the impact of ASC 606.

Operating Results

Commenting on the quarter’s operating results, Ensign’s President and Chief Executive Officer Christopher Christensen said, “We are pleased to report that the improvements we experienced in the first quarter continued, resulting in a very strong second quarter, especially in our most mature operations.” Christensen added, “We are excited about the positive momentum in same-store skilled nursing revenue and same-store skilled mix revenue, which increased by 4.2% and 3.1%, respectively, over the prior year quarter.”  Noting that the Company expected to experience some typical second quarter seasonality, he highlighted the significant quarter over quarter improvement in adjusted earnings per share and consolidated adjusted net income, which increased by 41.9% and 47.3%, respectively, over the prior year quarter.

“We are reaffirming our 2018 annual earnings per share guidance to between $1.80 and $1.87 per diluted share.  Overall, the midpoint of this guidance represents a 31.1% increase over our annual earnings for 2017,” Christensen said.  He also remarked that even without the Company’s lower effective income tax rate, which was reduced from 35.5% in 2017 to an estimated 25.0% for 2018, the midpoint of management’s guidance represents a 15.7% increase over 2017 results. “We are very excited about the future and look forward to continuing to drive quality healthcare outcomes and corresponding financial results,” he said.

Christensen also stated that the Company’s operating subsidiaries in several states have renewed their focus on applying proven best-practices in every transition.  As a result of these efforts, during the quarter the Company’s 2017 and 2018 acquisitions collectively achieved an EBIT margin that is 760 basis points higher than its 2015 and 2016 acquisitions.  “These results not only show healthier transitions, but also demonstrate the enormous potential that remains in our overall portfolio.  We have great confidence that the combination of our locally-driven operating model, along with the backing of our world-class Service Center, will continue to create enormous organic growth in our newly acquired, transitioning and same-store buckets,” Christensen said.

“We are also pleased to report that Bridgestone Living LLC, Ensign’s assisted living and independent living portfolio company, which now consists of 51 stand-alone operations and 22 campuses in 12 states, grew its segment revenue and income by 12.6% and 35.8%, respectively, over the prior year quarter,” Christensen stated.  He also noted that Cornerstone Healthcare, Inc., Ensign’s home health and hospice portfolio subsidiary, grew its segment revenue and income by 20.7% and 27.3%, respectively, over the prior year quarter.  “Each segment’s leadership team has independently driven their respective businesses to achieve outstanding results. As they do so, we continue to evaluate ways in which we can enhance operational synergies while also ensuring that all of our affiliated operations will continue to create long-term shareholder value,” Christensen added.   

Chief Financial Officer Suzanne Snapper reported that, “Our liquidity remains strong with approximately $235 million of availability as of today on Ensign’s $450 million credit facility, which also has a built-in expansion option, and 48 unlevered real estate assets that add additional borrowing capacity.”  She also noted that the Company’s net-debt-to-EBITDAR ratio went down again this quarter to 4.0x in spite of additional borrowings incurred during the quarter to acquire certain real estate assets. She also indicated that cash generated from operations was $101.2 million in the six months ended June 30, 2018, which was primarily driven by an increase in operating results, stronger collections and lower taxes.

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 quarter ended June 30, 2018, which is expected to be filed with the SEC today and can be viewed on the company’s website at http://www.ensigngroup.net. 

Quarter Highlights

During the quarter, Ensign paid a quarterly cash dividend of $0.045 per share of its common stock during the quarter. Ensign has been a dividend-paying company since 2002 and has increased its dividend every year for 16 years.

In April, Ensign announced that Bandera Healthcare, Inc., the Company’s Arizona-based portfolio company, acquired the real estate and operations of Peoria Post Acute and Rehabilitation, a 128-bed skilled nursing facility located in Peoria, Arizona. The acquisition was effective April 1, 2018. The facility also included an adjacent 50-bed long-term acute care hospital that is currently operated by a third party under a lease arrangement.  “While we continue to evaluate many potential acquisition opportunities with extreme care and thought, this operation stood out as one that shows significant long-term potential while adding strength to our growing footprint in Arizona,” he added.

In May, Keystone Care LLC, the Company’s Texas-based portfolio company, acquired the real estate and operations of Grace Presbyterian Village, a 26-acre post-acute care and retirement campus located in Dallas, Texas. The acquisition was effective May 1, 2018. “This acquisition adds to our expanding footprint in the Dallas area and adds to our ability to accelerate the quality of care we can provide to our patients and their loved ones,” Mr. Christensen said.

In June, Bandera also acquired the operations of Sun West Choice Healthcare and Rehabilitation, a 140-bed skilled nursing facility in Sun City West, Arizona, and entered into a new long-term lease. The acquisition was effective June 1, 2018. “Sun West Choice is a perfect example of an off-market acquisition resulting from relationships built by our local operators over many years,” said Mr. Christensen.

In July, Ensign also announced that Pennant Healthcare, Inc., its Northwest-based portfolio subsidiary, acquired the real estate and operations of McCall Rehabilitation and Care Center, a 40-bed skilled nursing facility located in McCall, Idaho. “Our history and track record of successful acquisitions, together with the talented leaders and staff in Idaho that seek to be the provider of choice in their respective communities, give us the confidence to pursue opportunities in the state both big and small,” Christensen said. 

Ensign also recently announced during the quarter that a wholly-owned subsidiary acquired an office building located in San Juan Capistrano, California. “We are thrilled about our purchase of office space in nearby San Juan Capistrano to accommodate our growing Service Center team,” Christensen said. “With our existing lease in Mission Viejo set to expire in 2019, we diligently reviewed current market conditions as well as the Service Center’s short- and long-term real estate needs.  After considering dozens of possibilities over the last 18 months, we determined that owning the Service Center made the most sense financially and operationally,” he added.

Ensign reported that the commercial real estate property consists of approximately 115,517 square feet of usable office space, and that the building was 92% occupied by third-party tenants at the time of acquisition.  The Company closed with cash drawn from its revolver.

"We carefully selected this space based on the attractive and convenient location for our current and future team members, as well as our third-party tenants.  With this ownership, we not only expect to save millions of dollars in future rental increases for decades to come, but we are most excited about the ability this will give us to continue to attract and retain the best and brightest Service Center leaders,” he added. 

The Company expects Ensign Services to occupy a portion of the space upon termination of its existing office leases in 2019.  Ensign also expects to continue market-rate third-party leasing arrangements for any space not occupied by Ensign Services.

These additions bring Ensign's growing portfolio to 185 skilled nursing operations, 22 of which also include assisted living operations, 51 assisted and independent living operations, 22 hospice agencies, 21 home health agencies and five home care businesses across fifteen states.  Ensign owns the real estate at 68 of its 236 healthcare facilities.  Mr. Christensen reaffirmed that Ensign continues to actively seek transactions to acquire real estate and to lease both well-performing and struggling skilled nursing, assisted living and other healthcare related businesses in new and existing markets.

Conference Call

A live webcast will be held Friday, August 3, 2018 at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) to discuss Ensign’s second 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, August 31, 2018.

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, home health and hospice services and other rehabilitative and healthcare services at 236 healthcare facilities, 22 hospice agencies, 21 home health agencies and five home care businesses in California, Arizona, Texas, Washington, Utah, Idaho, Colorado, Nevada, Iowa, Nebraska, Oregon, Wisconsin, Kansas, South Carolina, and Oklahoma. 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 terms, are not meant to imply that The Ensign Group, Inc. has direct operating assets, employees or revenue, or that any of the operations, the home health and hospice businesses, 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.