The Ensign Group Reports Third Quarter Results

Raises 2020 Guidance and Announces 2021 Guidance

Conference Call and Webcast scheduled for tomorrow, October 29, 2020 at 10:00 am PT

SAN JUAN CAPISTRANO, Calif., Oct. 28, 2020 (GLOBE NEWSWIRE) -- The Ensign Group, Inc. (Nasdaq: ENSG), the parent company of the Ensign^(TM) group of companies, which provide skilled nursing services, senior living services, rehabilitative care services and other healthcare services, announced record operating results for the third quarter of 2020, reporting GAAP diluted earnings per share of $0.77 for the quarter with adjusted earnings per share of $0.78 for the quarter⁽²⁾.

Highlights Include:

• GAAP diluted earnings per share for the quarter was $0.77, representing an increase of 97.4%⁽¹⁾ over the prior year quarter and adjusted diluted earnings per share for the quarter was $0.78, an increase of 95.0%⁽¹⁾⁽²⁾ over the prior year quarter.
   
• Consolidated GAAP revenues for the quarter were $599.3 million, an increase of 17.0%⁽¹⁾ over the prior year quarter and adjusted revenues for the quarter were $598.4 million, an increase of $88.8 million or 17.4%⁽¹⁾⁽²⁾ over the prior year quarter.
   
• Same store skilled revenue increased by 18.5% over the prior year quarter and by 7.8% sequentially over the second quarter with an increase in Medicare days of 34.3% and  10.2%, respectively. 
   
• Transitioning skilled revenue improved by 26.8% over the prior year quarter with a 20.3% increase in transitioning managed care revenue and a 27.3% increase in Medicare revenue.
   
• GAAP net income was $43.1 million for the current quarter, an increase of 94.4% ⁽¹⁾ over the prior year quarter.
   
• Adjusted net income for the current quarter was $43.7 million, an increase of 94.5%⁽¹⁾⁽²⁾ over the prior year quarter.

(1)  Represents GAAP continued operations which excludes operating results for the October 1, 2019 spin-out of The Pennant Group, Inc. in accordance with discontinued operation guidance in GAAP.
(2) See "Reconciliation of GAAP to Non-GAAP Financial Information". All Non-GAAP financial results exclude operating results for the recently spun-out The Pennant Group, Inc. in accordance with discontinued operation guidance.

Operating Results

“We are announcing another record quarter despite the continued challenges arising from the global pandemic. With the second surge of COVID-19 that occurred during the third quarter in some of our largest states, including Texas, Arizona and California, our local teams were faced with an incredible challenge and have again demonstrated incredible agility and responsiveness to the evolving landscape.  True to form, they remain as committed as ever to the cause of quality outcomes and excellent patient care. As a result of their heroic efforts, our local operators and caregivers have translated their passion into record-breaking results,” said Ensign’s Chief Executive Officer Barry Port.  He emphasized that in early July the company returned all of the CARES Act Provider Relief Funds it received from the Government, and that the quarter’s results do not include any benefit related to those relief funds.  The Company joined other well-capitalized healthcare providers by returning $109 million in provider grants and announced today that it will also be returning approximately $23 million in the latest round of relief funds.   He continued, “Our local leadership teams continue to make clinical and operational improvements that are tailored to conditions they face in their local market and, with the continued support of a world-class Service Center, we remind you again that our local leaders and dedicated front-line staff are the reason we were able to report such a strong quarter."

Port noted that the strong results came from quarter over quarter improvements in skilled mix across the portfolio, improved admissions trends, availability of more frequent and broader COVID testing, increased managed care revenues, cost saving initiatives, improved collections, sequestration suspension and improved Medicaid rates in certain states.  He added, “Our operations have continued to see an increase in the number of higher acuity patients, including some COVID-19 positive patients and an increasing number of managed care patients.  With the surge of COVID-19 patients in many of the surrounding communities we serve, we continue to see state and county health leaders and local hospital systems turn to Ensign-affiliated operations to care for all varieties of high acuity patients that can safely be admitted to, or remain under our care.  As we expected, when positivity rates for COVID-19 occur in the surrounding community, we see occupancy decline and skilled mix increase.”  He noted that in July, the Company saw overall occupancy decline, particularly in areas of high COVID positivity rates like Texas, Arizona and California, while skilled mix remained strong.  When COVID-19 cases began to stabilize in August, occupancy began to recover, which continued in September and again in October.  “If there is another surge in COVID during fourth quarter or in 2021, we are confident that lower occupancies will be offset by higher skilled mix, highlighting the pivotal role that our post-acute operations play in the fluctuating healthcare landscape,” Port said. 

Chief Financial Officer, Suzanne Snapper, reported that the company’s liquidity remains strong with approximately $175.4 million of cash on hand and $342.4 million of available capacity under its line-of-credit facility, which also has a built-in expansion option, both as of September 30, 2020.  She also indicated that the company received approximately $104 million of Medicare advance payments from the Centers for Medicare and Medicaid Services (CMS) and approximately $132 million of the provider relief funds of rounds one, two, three and four of the CARES Act. The Company has, or plans to return, all of the provider relief funds received to date.  She also noted that the company also has 94 owned assets, 74 of which are unlevered and add additional liquidity.  Ms. Snapper also indicated that the Company expects to continue incurring COVID-19-related expenses in the fourth quarter and into 2021, including higher labor costs, the ongoing acquisition of unprecedented levels of PPE and other infection prevention equipment, especially costs related to more and more testing.

A discussion of the company's use of non-GAAP financial measures is set forth below. A reconciliation of net